Washington Insider -- Friday

USDA Trade Reorganization

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

House Passes Highway Bill 363-64

The House on Thursday passed HR 22, Surface Transportation Reauthorization & Reform Act, by a vote of 363-64 after days of debate that included consideration of more than 100 amendments. The bill melds the House’s six-year highway and transit reauthorization with other provisions from the Senate amendment, including the Senate’s offsets to cover Highway Trust Fund shortfalls for three years and a reauthorization of the Export-Import Bank.

Efforts to fully fund all six years of a reauthorization are expected to be made in conference between the two chambers. The House measure would fund highway and transit programs at baseline levels, while the Senate version provides for increases above the baseline.

House and Senate leaders hope to complete work on the bill by Thanksgiving. Because of the inability of Congress to reach agreement on a long-term measure, four short-term extensions have been enacted, with the latest due to expire on Nov. 20. The House chamber next week with find lawmakers home in their districts for a scheduled recess.

Besides the extension of program authorizations, Congress has also transferred roughly $71 billion, starting in 2008, from the general fund of the Treasury Department to the Highway Trust Fund in order to ensure that transportation projects do not run out of funding. Similarly, it has also transferred more than $3 billion from the Leaking Underground Storage Tank Trust Fund. According to the Joint Committee on Taxation (JCT), Congress would need to transfer between $11 billion and $23 billion every year through Fiscal 2025 in order to maintain funding for surface transportation programs at the average amounts provided in recent years.

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Very Low Odds for Approval of Newly Proposed Crop Insurance Reform Bill

On Thursday, Reps. Ron Kind, D-Wisc., and Jim Sensenbrenner, R-Wisc., along with Sen. Jeff Flake, R-Ariz., introduced a bill that aims to reform the program, including formalizing the budget’s 8.9% “rate of return” for insurance companies and limiting premium subsidies for farmers that bring in more than $250,000 in gross income.

“The current crop insurance system is extremely wasteful and in need of major reform,” Kind said in a statement. The bill will result in about $24.4 billion in savings from the program over 10 years “while still providing a strong safety net for family farmers,” he added. “These important reforms not only strike a better deal for taxpayers but will have no out of pocket expense to farmers.”

The bill would set a $40,000 limit per person on premium subsidies and cap administrative and operating expenses for insurance companies. The bulk of the savings -- $19 billion over 10 years -- would come from eliminating the Harvest Price Option, which are policies that cover the risk farmers take on when they use future markets to get a better price for their grain. President Obama in recent budget proposals has urged similar language.

Backing the measure are the Environmental Working Group (EWG), National Taxpayers Union, Taxpayers for Common Sense, R-Street Institute, Citizens Against Government Waste, and FreedomWorks, according to Kind’s office.

Crop insurance proponents in Congress and in farm country know that this latest attempt at their sector will certainly not be the last. The industry is gearing up for what they term a “facts and figures” discussion of a complex subject. This is particularly true regarding the very hard to explain -- and easy to abuse -- “rate of return” for crop insurance providers.

With farm-state lawmakers and other crop insurance proponents recently showing how they can flex their lobby muscle to defend the program relative to the proposed $3 billion cuts in the recent budget/debt limit hike package, congressional leaders in Congress will certainly not want to present any such bill for floor debate anytime soon. But the battle will continue.

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Washington Insider: USDA Trade Reorganization

In a somewhat unusual development, an independent, congressionally-chartered think tank recently recommended that USDA separate its trade functions from the domestic farm service functions, according to a recent report by Inside US Trade.

The report by the National Academy of Public Administration urges the department to hold off a major reorganization until a new president takes office, but also pushes for “beginning planning efforts as soon as possible,” under congressional supervision.

The idea, NAPA says, is to change the nature of some of USDA’s top jobs. For example, the trade function would be elevated into a separate portfolio for trade and market development that would include the entire Foreign Agricultural Service, all trade-related components of the Agricultural Marketing Service and the Federal Grain Inspection Service. It would be managed by an undersecretary.

FAS is currently grouped with domestic agricultural agencies and managed by the undersecretary for farm and foreign agricultural services.

The NAPA plan would put domestic functions, such as the Farm Service Agency and Packers & Stockyards Program, under the undersecretary for farm services and risk management. And, it recommends a portfolio of health and safety headed by an undersecretary who would focus on Food Safety and Inspection and the Animal and Plant Health Inspection Service. These two agencies now report to the undersecretary for marketing and regulatory programs.

The NAPA report made clear that experts believe APHIS and FSIS with their related safety and science missions should not be included in the trade and market development portfolio with its focus on trade promotion. Combining the three agencies would risk the impression that US sanitary and phytosanitary measures are being driven by trade consideration rather than by science, the report says.

The five-member NAPA panel began work after USDA missed a Congressional deadline for sending to Congress its own study on how to reorganize its various trade-related agencies. A USDA spokeswoman said USDA will issue a separate report in 2016 to address issues not covered by the NAPA report including the feasibility of implementing some NAPA recommendations before the end of the Obama administration.

Agriculture Secretary Tom Vilsack has said that he does not support an immediate USDA reorganization made by an administration “that’s sort of in its last quarter” doing something that the next administration will be required to implement. The Secretary warned that such reorganizations take considerable time since they require a transfer of jurisdiction from several mission areas to a single, new entity.

Roger Kodat, a NAPA project manager who assisted in drafting the report told Inside US Trade that the panel did not encounter any partisan differences on the reorganization proposal, so it “should not cause a new administration’s views on USDA reorganization to differ depending on if the next president is a Democrat or Republican,” he said.

He did suggest that there would be “significant political opposition” to creating a new undersecretary position which would have driven up the number of undersecretaries to eight or to placing the food safety and health agencies within the same portfolio as FAS. He also noted that consolidating food safety agencies with those focused on trade was opposed by consumer groups.

The NAPA report also identifies qualifications that the panel believed to be necessary for each new undersecretary position, an unsurprising list, based primarily on the need for experience and expertise in the main areas of responsibility in each position.

The report did opine that some stakeholders commented that “the creation of an [undersecretary] position with a detailed focus on trade might lead to conflict between USDA and USTR,” and that possibility might be mitigated by taking action to “further articulate this division of labor and formalize it,” the report says.

Cynics note that it is surprising that Kodat did not encounter any political tension about the possible reorganization, since it will affect thousands of employees, several office locations and potentially millions of clients. In addition, these agencies and many of the officials involved have long, proud traditions, and strong preferences, along with often differing views of what their jobs are and should be. Thus, reorganizations rarely achieve what they are expected to accomplish, and are always more difficult than expected.

On the other hand, they sometimes instill new vigor into old, staid groups. So, while this shuffle will be costly and take much longer than expected, the realignment seems, from the outside, to make a certain amount of sense. What it might look like as it moves into operation, should be examined and reexamined with care as it is formed and fitted, and watched carefully by producers as it evolves, Washington Insider believes.


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(GH/SK)