The echo of shrieking TV ads has died down. The November election has brought us a second-term president and lawmakers who are facing a “fiscal cliff.” The voting gave some clarity to both the current lame duck and the upcoming 113th Congress that begins in January. With the status-quo election results, both parties are aware that action must be taken on issues such as the looming fiscal cliff and the farm bill by Dec. 31. Without some action, consequences will be felt in the new year, and that reality likely will compel action — even if it’s incremental in the short-term.
The farm bill and the fiscal cliff
A failure to address the fiscal cliff will have a direct bearing on any chance to finalize a new five-year farm bill, which expired Sept. 30. However, in this unique situation, agricultural spending does not stop; it will revert to the laws that were in place in 1938 and 1949. The ultimate effect of those antiquated laws is that agricultural spending would massively increase and likely lead to greatly increased prices for consumers. Any programs that were not in place in the 1930s or 1940s would cease to exist — including nearly all fruit and vegetable policies.
“It is highly doubtful that Congress will allow this turmoil for agriculture to continue and therefore either an extension or a complete rewrite of the farm bill may be included in the fiscal cliff package that is currently being negotiated,” said Kam Quarles, director of legislative affairs for McDermott Will & Emery law firm in Washington, D.C. “Additionally, it is assumed that the $24 billion to $35 billion in reforms that the Senate and House are currently considering for a new farm bill will be valuable savings for Congress to use elsewhere in addressing our budgetary challenges.”
The 2012 Farm Bill was on its way earlier in the year, until the House and Senate disagreed on key provisions including the Supplemental Nutrition Assistance Program (food stamps) and Title I farm safety net programs. The full Senate did pass a version as did the House Agriculture Committee, but the full House has not dealt with a new bill.
The specialty crop industry will be affected in that if a one-year extension is adopted, the Senate and House Agriculture Committee’s 2012 versions with about $1 billion more in specialty crop programs will be null and void.
The Senate’s version of a new five-year bill would provide $70 million in annual investments in the Specialty Crop Block Grant program as well as $50 million annually for research, $150 million annually to help bring fresh fruits and vegetables into schools and other institutional settings, $200 million annually for the Market Access Program and about $72 million in annual assistance for pest and disease management.
Estate taxes could take a bite out of family farms
The failure to close the road to the fiscal cliff will also mean that many family farms will be subject to federal estate taxes if the existing exemption, $5 million, drops to $1 million and the maximum tax rate increased from 35 to 55 percent.
President Obama favors raising the tax on inheritances, which would force heirs of family farms to sell land and other assets that have been in the family for decades to pay the increased tax bill. He is proposing a 45 percent rate after the current 35 percent rate expires Jan. 1, 2013. He also favors excluding the first $3.5 million of an estate’s assets from the tax. Republicans, and even some Democrats who have parted ways with the president on the estate tax, favor no increase at all. If Congress takes no action, the rate will rise to 55 percent and tax assets above $1 million.
Capital gains taxes also will increase from 15 percent to 20 percent.
“The fiscal cliff that is comprised of the expiration of the Bush tax cuts and the automatic spending cuts mandated under last year’s Budget Control Act is likely to be addressed in a two-step process,” Quarles said. “The first step will be a short-term effort intended to avoid the most immediate impacts. Later in 2013, a larger package of tax and entitlement reform may be considered to achieve the necessary savings. Consideration of the estate tax and its impact on agriculture may be part of that reform effort next year.”
Climate may be changing for immigration reform
The election outcome affected the outlook for immigration as well. “Lots of attention is being given to immigration reform,” said Mike Carlton, FFVA’s director of labor relations. “The end result? We don’t know. Congress has to hear from us in the specialty crop industry. We have to let them know we need help.”
The climate seems to be favorable for a few new ideas as far as streamlining the guest-worker program. FFVA and other agriculture associations have been meeting with their congressional delegations to exchange ideas on how best to provide the industry with a dependable, legal workforce.
The agriculture industry has powerful moderate to conservative allies from religious organizations, lawyers and other employers. Those include former Florida Gov. Jeb Bush and his son, the U.S. Chamber of Commerce and many Florida Republican lawmakers, including Sen. Marco Rubio. Republicans have been reaching out to Hispanic voters after failing to connect with them in the election.
“The climate is better now for immigration reform and a possible guest-worker program that will work,” said Carlton. “Agriculture has made a very good case for itself, and I believe most members of Congress recognize the industry’s unique problems.”
Carlton said serious proposals are unlikely to be made before January, but he emphasized the importance of bringing them to the table in the next six months while priorities remain favorable.
“Though the election was status quo in terms of White House and congressional leadership, the path to victory has pushed the dormant immigration issue into the headlines again,” Quarles said. “For competitive reasons, many in the Republican party are saying that a more thoughtful approach to this issue is necessary in the future. That recognition comes at a particularly important time for agriculture, as the dwindling seasonal workforce is putting pressure on growers and their only legal program (the H2-A guest-worker program) grows most costly and inefficient by the day.”
Other issues of concern include regulations, health care, food safety
Water and other environmental concerns can take various paths depending on the nature of a presidential administration. The U.S. Environmental Protection Agency only weeks ago made a decision on its proposed numeric nutrient criteria for Florida waterways. The agency approved rules proposed by the state with certain exceptions.
“I most definitely think that EPA’s final decision was delayed due in large part to the election,” said Kerry Kates, FFVA’s director of water and natural resources. “Even if Obama hadn’t won re-election, he would have done what he wanted in his remaining months. EPA received [Florida’s] rule for approval on June 13 and, per the rules in the Clean Water Act, had 60 days to approve it or 90 days to not approve it. We know they ultimately did approve it, but it should have been done by mid-August at the latest (and mid-September if they weren’t going to approve it). They tripped the threshold by about 2½ months,” Kates said. “In order to not alienate any part of Florida’s voting demographic, it’s easy to understand why the EPA waited until after the election to make their final decision. So, yes, I do think the timing was politically motivated,” he added.
The November elections also gave some certainty that the Affordable Care Act (ACA) will be implemented in substantially its current form. Now efforts are turning toward the numerous individual regulations that make up the ACA. FFVA has been a leader in explaining the unique nature of agriculture to the agencies charged with this law’s implementation, namely Health and Human Services and the Internal Revenue Service.
“These organizations generally have little relationship to agriculture. An ongoing dialogue with them will be essential in order to minimize the negative consequences that could result in addressing an industry with so many seasonal workers and turbulent business cycles from year to year,” said Quarles.
The produce industry also is still awaiting the implementation of the Food Safety Modernization Act. That legislation was completed two years ago, and many of its draft rules are still awaiting publication for comment by the general public.
While the election brought a close to the campaign ads and the news coverage over who our representatives will be, it returned our attention to the real work that faces the federal government. Much of this work will directly impact FFVA’s members and drive the association’s agenda for the coming year.