Congress Passes (Excessive) Supplemental Spending Bill

Disaster Funding Congress Passes (Excessive) Supplemental Spending BillThe $19.1 billion package expands agricultural income subsidies for the favored few.

Agriculture, Budget & Tax,  | Analysis
Jun 4, 2019  | 8 min read | Print Article

The House of Representatives finally voted (354-58) to adopt the $19.1 billion “emergency” spending bill H.R. 2157 – its first act upon returning from a one-week Memorial Day recess. The Senate adopted this version on May 23 just hours after releasing final text and President Trump is expected to sign it immediately. Thus a months-long drama—the first version of this bill was voted down after the House passed a version of the bill on December 20, 2018—will come to an end.

While many lawmakers and agricultural special interests are lauding passage, this bill actually marks an unfortunate turn for both agriculture and taxpayers. The deficit-financed spending and policy changes made to USDA programs is the latest instance of Congress’ penchant for shoveling cash to favored interests. More concerning, however, is that H.R. 2157 marks the second year in a row Congress has chosen to layer billions of dollars in “ad hoc” disaster aid on top of the tens of billions worth of income subsidies that taxpayers direct to farming and ranching businesses through mandatory farm bill income entitlement programs. This layering of new subsidies on top of existing subsidies coupled with policy changes that increase taxpayer liabilities for previously privately managed risks, threatens efforts to develop a cost-effective, transparent safety net that works for all of agriculture rather than simply those already benefiting from the rigged subsidy system.

Several provisions in this bill undermine a more cost-effective agricultural safety net, harming not only taxpayers, but farming and ranching businesses that don’t have a seat at the favorites table.

Cost Escalation and Expansion of Scope

  • $3.005 billion in deficit-financed income subsidies is directed for losses of crops, livestock, trees, bushes, or vines in 2018 and 2019. The first version of this bill in December 2018 bore a price tag of $1.1 billion. A bipartisan bloc of, mostly, Southern legislators secured a $1.9 billion amendment on the House Floor.
  • The bill originally covered losses from hurricanes, typhoons, volcanic activity, and wildfires in 2018. States affected would mainly be in the Southeast due to hurricanes, California wildfires, and Hawaii. This final version expands eligibility to disasters that have (or will) occur in 2019 and specifically adds floods, tornadoes, and snowstorms, rolling in much of the Missouri River Valley and Great Plains. This funding is in addition to the $2.36 billion of deficit-financed spending that was enacted in March 2018 to cover 2017 losses due to hurricanes and wildfires.
  • Expansion of eligibility beyond crop and citrus producers (the primary beneficiaries of the 2018 emergency bill) to businesses that lost poultry, livestock, milk, private forests, harvested adulterated wine grapes, on-farm stored commodities, and crops prevented from planting in 2019.

The significant expansion to both more disasters and more crops, without an additional expansion of funding, means it is likely agricultural special interests will call for a second supplemental before year-end.

Increasing Role for and Reliance on Government Handouts

  • Directs ad hoc disaster aid to cover up to 70 percent of the losses for agricultural businesses that chose to not buy federally subsidized crop insurance even though it was available. They gambled and lost, but now the House (and Senate) YOU as a taxpayer, will pay out anyway.
  • Directs ad hoc disaster aid to cover up to 90 percent of the losses for agricultural businesses that did buy federally subsidized crop insurance. A sort of bonus for being responsible.
  • Federally subsidized crop insurance (which costs federal taxpayers on average $8.5 billion a year) was supposed to eliminate the need for ad hoc disaster aid. This is a claim crop insurance lobbyists and beneficiaries repeated ad nauseum in opposing every common sense reform. Yet this marks the second consecutive fiscal year (and three crop years) an ad hoc agricultural disaster bill has been enacted. It’s also less than half a year since an $867 billion farm bill was passed to supposedly provide a stable and predictable financial safety net for businesses involved in agriculture.
  • Makes federal taxpayers financially responsible for losses that are already covered by unsubsidized private insurance policies. Harvested crops stored on site (i.e. soybeans in silos) have never been covered by federal disaster programs. And they never should be because there is a robust private market covering these products. Farm businesses have ample opportunity to purchase private-sector insurance on their machinery, buildings, and crops that they harvest but then hold onto to sell at a later date. Many already do so. Their lack of planning does not constitute a federal emergency.
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WHIPping up Agricultural Disaster Spending Since 2017

Plants Special Interest Carveouts in this and Previous Disaster Supplementals

pecans

pecans via Flickr

  • Pecan growers receive special treatment. The Tree Assistance Program requires producers of every other kind of tree lose at least 15 percent of their trees before federal subsidies kick in. But the bill contains a provision making taxpayers responsible for salvage and replanting costs for pecan growers that lose only 7.5 percent of their trees. Not-so-irrelevant data point: Both Secretary of Agriculture Sonny Perdue and the Chairman of House Appropriations Committee Subcommittee on Agriculture, Rural Development, FDA, and Related Agencies, Rep. Sanford Bishop, Jr. (D-GA), both happen to herald from Georgia, the number one state for pecan production.
  • Retroactively amends the 2018 emergency supplemental to expand eligibility for additional disasters and crops. Specifically, this bill expands “hurricane” losses in the 2017 hurricane season to include 1) losses incurred from Tropical Storm Cindy, 2) losses of peach and blueberry crops in calendar year 2017 due to extreme cold, and 3) blueberry productivity losses in calendar year 2018 due to extreme cold and hurricane damage in calendar year 2017.
  • Expands eligibility under the Trump Administration’s first round of $9.5 billion in subsidies for producers that lost sales to China (Market Facilitation Program). Farming and ranching businesses with adjusted gross incomes exceeding $900,000 can now receive income subsidies, as long as at least 75 percent of their income comes from agriculture.

Passing this bill means Congress has so far directed $5.3 billion in un-budgeted agricultural income subsidies in just over one year. This in spite of farm bill apologists claiming passage of the aforementioned $867 billion farm bill, which with its expansion of federally subsidized crop insurance and other agricultural business income entitlement programs, would supposedly stave off the need for unbudgeted ad hoc disaster bills.

There are numerous federal programs to assist agriculture in times of need. Congress should let these programs run their course. But the new trend to pass annual ad hoc agricultural disaster bills while maintaining overly generous farm bill entitlement programs, makes it clear for some in agriculture, no amount of subsidy will ever be enough. And there is a limit to what American taxpayers can afford.