Bill Huffman
Director - Government Relations

The Friday Report

July 23, 2010

Congress has been busy since returning from its July 4th vacation. The financial reform bill was completed and has been signed into law; they’ve extended unemployment benefits and have been working on FY 2011 appropriations among other legislation in addition to committee hearings and approval of bills that will be moving to the floor for final debate before they leave for the August recess.

Appropriations

The Senate Appropriations Committee completed work this week on the Agriculture and Food & Drug Administration appropriation for FY 2011. The Committee approved an appropriation of $131.9 billion to fund USDA & FDA this next year. Of that, $109 billion is for mandatory programs (such as Farm Bill programs) with about $22 billion for discretionary funding. Interestingly, this bill spends less money than last year for farm programs and FDA and is actually less money than requested by the Obama Administration in its FY 2011 budget request. It appears that Congress is trying to whittle away at the deficit. We noted there were several “recession” bills on the House floor this week whereby Congress was rescinding previously approved appropriations for previously authorized projects including some in defense and transportation.

We can expect more cuts to come. USDA Deputy Secretary Kathleen Merrigan announced Tuesday that USDA is asking the Office of Budget and Management (OMB) to allow the agency to cut $1.5 billion (administratively) from mandatory programs authorized by the 2008 Farm Bill. Earlier in the year, OMB ordered USDA to cut $1.5 billion from “discretionary programs”, but Ms. Merrigan said no one wants to cut child nutrition and other such programs, so the agency wants to cut some money from farm programs.

The Obama Administration earlier proposed further tightening of payment limits and cuts to direct payment, this may be an effort to administratively do that. Everyone should remember that 70% of USDA’s budget goes to nutrition and the Women’s, Infants and Children’s program and for school lunches and before and after school feeding programs.

It should also be noted that USDA has reached an agreement with the crop insurance industry that will cut $4 billion over ten years from crop insurance premiums. So the budget cutting has begun!

Child Nutrition

While some elements of Congress are busy cutting the deficit, California Congressman George Miller, Jr., D-Antioch, was successful in getting an $8 billion authorization bill approved by his House Education and Labor Committee that he says would reform and increase access and remove barriers to child nutrition programs and implement new school food safety guidelines. With Congressional “pay-go” rules in effect, it is unclear how Congressman Miller would offset the cost of this program should it become law. You can bet that he is looking to cut farm payment programs to fund this new social legislation. Miller’s bill comes at a time when billions were added during debate of the 2008 Farm Bill for nutrition programs including food stamps and school lunch programs.

2012 Farm Bill

House Agriculture Committee Chairman Collin Peterson is now saying he wants Congress to finish a new “Farm Bill” by late 2011 or early 2012 so that the bill can be implemented before the elections in November 2012. Peterson is concerned about “slow or delayed implementation” should there be a change in administrations in November 2012. The Chairman seems to be concerned that this might be a “one-term” Presidency.

Complicated?

USDA Undersecretary Jim Miller told the American Soybean Growers this week that “farm programs have gotten way too complicated”. Miller joins Chairman Peterson in echoing this thought. Miller said, “We have gotten to the point where programs are so complex that we don’t get the benefits we want”. He cited the ACRE program as being an example of how complicated farm programs have become. He also cited the new “permanent disaster program” which he noted makes payments late and does not seem to work in some parts of the country.

Mr. Miller should give credit to the corn growers and Senator Tom Harkin, the ACRE program and the permanent disaster program was their idea! That’s what happens when the farm bill is written by mid-western members of Congress where the only thing that counts is corn, ethanol and soybeans!

Rice Industry News

We should note that rice grower Paul “Jackie” Loewer of Louisiana was elected to be the next Chairman of the USA Rice Federation at the recent meetings in Dallas. Mr. Loewer succeeds Jaime Warshaw, a rice miller from Louisiana. Chairman Loewer previously was Chairman of the USA Rice Producers’ Group.

Glenn Nevis of Anheuser-Busch has been elected Chairman of the Rice Foundation succeeding rice grower Marvin Hare of Arkansas.

Final Thought

We’ve written a couple of times recently about the “estate tax”. There is no Federal Estate Tax this year because Congress did not renew the legislation. However, under law, the Federal Estate Tax returns January 1, 2011 at the pre-2001 rate of 55 percent.

When George Steinbrenner died this past week, his heirs escaped paying Federal Estate Tax because there is no tax this year. Had he died after January 1, 2011, his estate would have been taxed at 55 percent.

There is good news! (Or it might be bad news!) Senator Blanche Lincoln, D-Arkansas and Senator John Kyle, R-Arizona has teamed up to introduce a new Federal Estate Tax bill that would provide for a $5 million exemption per person with an index for inflation and would gradually drop the tax rate to 35 percent.

They hope to attach this bill to some other legislation before January 1 to avoid the scheduled increase in Federal Estate Taxes to 55 percent.

So where does this leave people today?  If you die before the end of this calendar year (December 31, 2010) there will be no Federal Estate Tax due. If you die after January 1, 2011, there will be estate due, we just don’t know at what level the Congress will establish the rate and that probably won’t be done until they figure out if they want to extend or sunset the “Bush Tax Cuts” of a few years ago.

I’ve decided to postpone my death. Paying some estate tax may not be a bad idea when the alternative is death.

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