No Change, But Plenty of Challenge
By Bruce Knight
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Fall may be in the air, but change is not. With the election behind us, we know that come January, we’ll have the same President and pretty much the same Congress. A few seats will change parties, with some folks retiring and some being retired. There will, however, be a large new freshman class of Representatives, many of whom will have a lot to learn when it comes to farm programs.
If it’s possible, completing the farm bill during the lame duck session would be the best course of action. Waiting until the next Congress could easily lead to bigger and deeper cuts in farm programs, in part because new folks may not fully understand their importance. And that would be particularly unfortunate for conservation since it’s all too likely that the funding currently allocated to help protect the land and the water could be diverted to avoid drastic cuts in other programs as we face the “fiscal cliff.”
Coined by Federal Reserve Chairman Ben Bernanke, the term “fiscal cliff” refers to the double financial whammy the Nation faces as 2013 begins. At the same time the Bush-era tax cuts are set to expire, raising taxes for almost everyone, automatic across-the-board spending cuts (also called sequestration) will take place as required by the Budget Control Act of 2011 (BCA). Congress passed, and the President signed, that law to establish a guaranteed mechanism to cut the deficit if they couldn’t reach agreement on a better approach. The BCA sealed the deal last year to raise the debt ceiling because it provided the assurance that the government would begin to whittle down the national deficit for certain at a future date. Time’s up, and either Congress and the President agree in the lame duck session on a strategy to reduce the deficit or funding for government programs will be sliced 8.2 percent in Fiscal Year 2013 from the levels appropriated for FY 2012.
Just as the tragedy of 9/11 defined President George W. Bush’s presidency, I believe negotiating the fiscal cliff will define President Obama’s second term. Dealing with the deficit is the challenge he and our national legislators must address. We’ve had plenty of political posturing. Now is the time to find out if those we’ve elected are willing to govern.
Some say, “Okay, let’s just go over the cliff—like Thelma and Louise in the movie, we’ll still be all right.” But nobody really knows for sure what happened to Thelma and Louise, although it was not likely to be a happy ending, and we’re unlikely to be satisfied with the results of blindly slashing government programs and significantly raising taxes. For example, the Congressional Budget Office has predicted that if we go over the cliff, U.S. unemployment could rise higher than 9 percent and economic growth could be stifled, slowing economic recovery. Our allies abroad have expressed their concern about this strategy and strongly urged us not to take this path.
Of course, as you know, FY 2013 actually began October 1, 2012. So if the sequestration funding cuts don’t actually take place until January 2013, they’ll be spread across nine months instead of twelve. The Office of Management and Budget (OMB) reported in September that if the sequestration cuts began in January 2013, they would amount to about 10.25 percent for discretionary programs (instead of 8.2 percent beginning in October 2012).
For USDA programs covered under the $22 billion 2012 appropriations, this would mean a reduction of about $2 billion. Some programs would be exempt—like the Supplemental Nutrition Assistance Program (SNAP, better known as food stamps) and child nutrition programs (but not the Special Supplemental Nutrition Program for Women, Infants and Children). The sequestration legislation also permits exemptions for programs involving contractual obligations, such as crop insurance, the Conservation Reserve Program and others. But what that means is that other programs, such as farm credit, agricultural research, rural development and conservation, will face deeper cuts to make up the difference.
Across-the-board cuts are not smart policy. It’s a slash and burn approach that leaves a lot of wreckage behind (like Hurricane Sandy) from which it could take a very long time to recover.
Unfortunately, the 2012 challenge is not the only fiscal cliff ahead. There will be others. The road out of the deep debt we’re in is long, and we’ll have more cliffs to face. All the more important that we handle this one with cooperation and finesse. It’s time for our national government, Republicans and Democrats, to find common ground before we find ourselves with no ground at all under our feet.
About the author: Bruce I. Knight, Principal, Strategic Conservation Solutions, was the Under Secretary for Marketing and Regulatory Programs at the U.S. Department of Agriculture (USDA) from 2006 to 2009. From 2002 to 2006, Knight served as Chief of Natural Resources Conservation Service. The South Dakota native worked on Capitol Hill for Senate Majority Leader Bob Dole, Rep. Fred Grandy, Iowa, and Sen. James Abdnor, South Dakota. In addition, Knight served as vice president for public policy for the National Corn Growers Association and also worked for the National Association of Wheat Growers. A third-generation rancher and farmer and lifelong conservationist, Knight operates a diversified grain and cattle operation using no-till and rest rotation grazing systems.
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