Ag Policy Wrap-up - Dr. Larry Sanders, Oklahoma State University

Ag Policy Update–24 Sep 02

(Sunup Program to be aired 26 Sep 02)

1. As President Bush pushes for support in Congress and the UN for a war with Iraq, not much is being said on what impact this will likely have on the economy, especially the agricultural sector. What are you telling farmers?

–First, I want to stress I’m making no professional judgments on whether it is right for us to attack Iraq. The President has information that none of the rest of us has.

–Having said that, it is likely that a new Iraqi war will destabilize markets in the region and our economy in general, at least in the short term.

–Mideast region instabiity will likely disrupt oil production/ flows, leading to erratic oil prices, likely trending up.

2. How does food come into play as a weapon of war?

–There could be some economic retaliation by countries who don’t support our effort, and this could spill over into our ag markets reducing export sales.

–While it is less likely, history suggests that the US might use food as a weapon of war and put selective embargoes in place.

3. How will this affect our government budget?

–Fighting wars on several fronts and subsequent market destabilization will likely worsen the US budget deficit, which could lead to more pressure on borrowed capital, leading to higher interest rates.

–The Fed will continue to keep interest rates relatively low, but may find its power reduced by the fiscal forces of government spending.

–The growing deficit and wartime priorities will likely make it more difficult for government funds to be available for emergencies in the ag sector.

4. Is this bad news for our weak economy in the US?

–Since the US economy has weakly rebounded from a recession last year, the war and economic instability could send the economy back into a recession, but that is a more difficult projection for the general economy.

–For the ag sector, disrupted markets, higher energy prices, possibly higher interest rates, less likely support from the government, all lead to the growing possibility of a serious economic downturn, at least short run.

5. You mentioned that Congress might have a tough time finding funds to help farmers if we go to war. Isn’t Congress about ready to wrap up business & hit the campaign trail?

–Some would say their business has been campaigning first and the people’s business second.

–Let’s throw some dates out for those like to follow this messy business of public policy making.

–Sep 30, just days from now, is the end of fiscal year, and Congress needs to have new spending bills approved for fy 2003–won’t happen.

–Oct 4 is the official projected date to end this second session of the 107^th Congress–won’t happen.

–Oct 11 is the latest estimate of when Congress might adjourn–will likely happen.

–Nov 5 is the general election–that’s the date uppermost in the minds of the Congress and the President, and reason there’s much rhetoric and little action on legislation.

–December is the next likely date for Congress to return in special session and complete at least some of its business.

–January is the start of the first session of the 108^th Congress, likely to begin with promises from all that the people’s business of governing will come first.

–If the Republicans retain the House and regain the Senate, Congress may not return to Washington in December, but wait until January.

6. So what is the status of the federal spending bills?

–My scorecard the viewers may get tired of me reminding them of each week: 13 spending bills and none have been sent to the President for signature. Here’s a status report:

–3 passed by both the House and Senate

–2 more passed by the House, but not the Senate

–The rest are in various stages awaiting Committee and floor votes.

–The Ag spending bill has been passed by both committees in the House and Senate but no floor votes.

–The $6 billion ag disaster aid amendment to the Senate Interior spending bill hasn’t gone to conference yet.

–The Republicans blame the Democrats and the Democrats blame the Republicans–surprise, surprise.

7. So no spending bills and lots to be done on them sounds like the Federal Government will be out of money come 1 Oct.

–Can you say “CR”–continuing resolution?

–This is a time-limited procedural technique to extend the work of the government on the current budget.

–The first CR to extend business thru 4 Oct or 11 Oct is already in the works.

–As in past years with both Democrats and Republicans in charge of Congress and the White House, it is way Congress muddles through.

–This year, CR’s will likely be the way government spending is covered through December at least.

–What a country!

8. Meanwhile, USDA continues to implement the new farm bill. What’s the latest?

–A reminder on dates:

--30 Sep participating producers will receive final 2002 PFC payments.

--Oct is signup for 2002/03 DCP payments.

–It is also the planned release of final 2002 DCP payments.

--It is also the planned release of advance 2002 CC payments; however given the price of wheat, there will likely be no advances.

–The Senate Ag Committee conducted a public hearing on the implementation of the farm bill recently and challenged Secretary Veneman’s claims that things were going well.

–While there are some legitimate concerns, much of was political hype.

–An incredible hearing also took place in a House Ag subcommittee looking at the crop insurance program.

–The remarkable conclusion by chair Chambliss was that the crop insurance program is doing pretty well, but more needs to be done for livestock.

–With the regular demands for federal emergency disaster assistance that’s become almost an entitlement, it is difficult to see how anyone could say the current crop insurance program is adequate.

–I also doubt we could find a group of farmers who are happy with the current crop insurance program.

9. Congress:

a. Recent activity:

–Congress has resumed its final weeks of this session.

–The Senate Ag Committee reviewed farm bill implementation (17 Sep).

–A House Ag subcommittee reviewed federal crop insurance.

b. Current/upcoming:

–House and Senate Budget & Appropriations Committees working on supplemental spending appropriations process.

–House Ag subcommittee reviews civil rights for farm program participants (25 Sep)

–House Ag subcommittee reviews tobacco buyout proposals (26 Sep)

c. 2002 Schedule:

–As of 30 Sep, there are 5 working weekdays in Washington this session.

–Target adjournment 4 Oct

–5 Nov is Election Day

d. Key issues:

–Bioterrorism & homeland security

–Healthcare reform

–Prescription drug benefits

–Merger activities, especially in agriculture

–Emergency assistance for agriculture

–Spending bills