Automatic trigger vs. supercommittee deal

BRAINERD, Minn. -- An automatically triggered 9 percent cut to the agriculture budget probably would be better than any deal the congressional supercommittee works out on reducing deficit, House Agriculture Committee ranking member Collin Peterson, D-Minn., said Aug. 15 in a wide-ranging speech to the Minnesota Ag Leadership Conference, an event sponsored by Minnesota Corn, a growers' group.

Congress passed a debt ceiling-deficit reduction bill that requires a congressional supercommittee to come up with $1.5 trillion in cuts to the federal budget over 10 years by December or see automatic cuts of $1.2 trillion in military and domestic spending go into effect.

After the bill passed, Peterson said he thought that the cut would be 5 percent. But in his speech to the corn growers, Peterson said he thinks the automatic cut might be 9 percent or $18 billion over 10 years out of a projected $210 billion in spending on commodity and conservation programs.

That $18 billion cut would be higher than the $10 billion that the Simpson-Bowles commission proposed or the $11 billion that the Gang of Six senators proposed, but less than the $34 billion that Vice President Joe Biden's budget group proposed or the $48 billion that House Budget Committee Chairman Paul Ryan, R-Wis., included in the fiscal year 2012 budget bill that passed the House.

'Uncharted territory'

Peterson said the automatic trigger -- known in congressional budget circles as sequestration -- is more likely to occur than a deal in the super committee, but he added, "I can honestly tell you I have no idea what's going to happen."

"We are in unchartered territory," Peterson said. "There just is no consensus in Washington or in the country. The country is just absolutely divided . . . and the Congress is reflecting that. Somehow or another, this is going to be resolved by Christmastime."

He later added that the division is between "one camp that says don't raise taxes under any circumstances and the other that says don't touch entitlements under any circumstances."

Of the 12 members of the supercommittee, Peterson said he expects Senate Finance Committee Chairman Max Baucus, D-Mont., to be the one to stand up for agriculture. Peterson noted that during the budget debate Baucus called him three or four times to talk about what was happening on the House side. Baucus' "whole focus was trying to minimize the cuts to agriculture," Peterson said.

Peterson also repeated previous statements that the House Agriculture Committee will not have to comply with the Ryan budget cut in writing the 2012 farm bill. Under the way that the House Republican majority structured the budget bill, the baseline for the farm bill at the time of its rewrite theoretically will be available for the new bill, Peterson said, but added that "it's pretty unrealistic to think that we'll have the baseline" because there are so many pressures to cut federal spending.

Peterson noted that under sequestration, the supplemental nutrition assistance program known as SNAP or food stamps -- by far the largest item in the farm bill budget -- would not be cut, but predicted that food stamps would be an issue of big debate in the farm bill. Republicans, he said, are asking why so many people are on food stamps, while Democrats will defend the program.

If Republicans have a plan for how to proceed on agriculture with the supercommittee and the next farm bill, "I don't know what it is," Peterson said.

He said that House Agriculture Committee Chairman Frank Lucas, R-Okla., and House Majority Leader John Boehner, R-Ohio, have both "told me to my face" that they expect the agriculture committee to "do the work" on agriculture rather than leave it up to the super committee.

Under the debt ceiling-deficit reduction bill, authorizing committees such as agriculture can make recommendations to the super committee on cuts in their areas of jurisdiction by Oct. 14, but the super committee is unlikely to give each committee guidance on how much to cut, Peterson said, and the committees won't come forward with offers.

(A high-ranking congressional aide later confirmed that the supercommittee has no plan to provide guidance.)

"I want to get the budget under control," Peterson said, "but I won't go along with a process in which people get to satisfy their ideological views."

The Senate is likely to develop a farm bill first, Peterson said, adding that he has encouraged that development and that he thinks Lucas "is comfortable with that."

But he added that he is not sure a Senate-passed bill can pass the House. The House Agriculture Committee will be able to get a bill out of committee, he said, even though there are some Tea Party members and more leftist Democrats on the committee than in the past.

The problem for the farm bill will come on the House floor, where Tea Party Republicans and leftist Democrats might join together to defeat it, he said.

Peterson said he expects the farm bill to lower the number of acres that can be in the land-idling Conservation Reserve Program from the current 32 million acres because farmers have been taking land out of that program and that the money probably can be used for conservation programs for land that is in production.

"I would caution people that there is a lot of land in CRP that should not be farmed," Peterson warned, saying that if it is put back in production, it will cause problems with the crop insurance program and result in calls for disaster aid.

Peterson said he opposes calls to take land out of the CRP early, saying that "the system is working," with farmers taking out land that can be farmed and land that should not be farmed continuing to be enrolled.

(Brandon Willis, a senior policy adviser to Agriculture Secretary Tom Vilsack, confirmed during another session at the conference that the number of acres in the program is going down. This year, contracts on 4.3 million acres of CRP have expired, Willis said, with landowners offering only 3.75 million acres for enrollment and USDA accepting only 2.83 million of the 3.75 million acres as meeting the criteria for the program.)

Peterson said he does not expect the tax breaks for either ethanol or biodiesel to survive, even though he has introduced a bill to extend the biodiesel tax break. He noted that it is hard to get rid of the tax breaks for oil because they have been in place for so long.

The 'big picture'

Of the "big picture," Peterson said, the federal budget problem can't be solved by looking at discretionary spending.

"The American people are not being told the truth," he said. "You could eliminate discretionary and military spending and you'd still have a deficit. You've got to put entitlements and revenue on the table."

The U.S. government, he added, is spending 24.5 percent of GDP while raising 14 percent (in taxes), he said. The traditional pattern has been spending 20 percent of GDP and raising 19 percent in taxes, he said, noting that the country needs to "get back to balance."

Some of the balance will return as the stimulus spending bill winds down, and some of the reduction in tax revenue is due to the recession, he added.

Peterson also commented on other issues:

- The stimulus: The whole stimulus bill should have gone to infrastructure spending, Peterson said, but that the biggest problem with the stimulus package is "not spending, but undermining our ability to do anything in the future." He noted that almost half the stimulus went to tax cuts and asked, "Why would you cut taxes in this situation?"

He also said he is opposed to President Obama's suggestion that the payroll tax cut be extended.

- Unemployment benefits: Peterson also questioned whether unemployment benefits should be extended again. "People in my district say we can't hire people because they are on unemployment and have health care," he said.

- The World Trade Organization: "The WTO is dead in the water. I told (WTO Director General Pascal) Lamy three years ago they should drop this (Doha) round." People used to say that the farm bill had to be done a certain way because "the WTO is heading in this direction," but they don't say that any more, he said.

- Wall Street and the rating agencies: Noting that the rating agencies had given American International Group, the company that played a big role in the financial crisis a AAA rating, he said, the agencies are "pretty screwed up." Standard & Poor's downgraded the U.S. rating, but people still have purchased Treasury bills because "we got our problems, but we ain't Greece. We aren't going to default on our debt."

He added, however, that "the thing to watch" is whether investors continue to buy 30-year Treasury bonds.

"After spending three years working on the commodities and derivatives section of the Dodd-Frank financial services bill, I have no confidence that (the people in the investment business) have learned anything," Peterson said.

Investment bankers, he said, "are trying to do the same things" that they were doing before the 2008 financial crisis, including selling derivatives to states, counties and cities. They want to sell financial instruments "when no one knows what the counterparty risk is. They oppose transparency. They are just trying to make money for the guys that work for them. They don't know who owns what."

- Regulations: "If Obama would say that we're going to stop these regulations for two years (at the Environmental Protection Agency and the Food and Drug Administration), that would do more (for the economy) than a tax cut."

In a rare indication that being ranking member of the House Agriculture Committee rather than chairman frustrates him, Peterson, said he offered his comments in the context that "no one is asking my advice or listening to me."