Agenda for Congress

This is supposed to be a year of action. Unfortunately, there will likely be very little action in the area of regulatory reform. Over at The Hill‘s Congress blog, Wayne Crews and I make the case for reining in the regulatory state as a way to improve the federal government’s fiscal health. Here’s a taste:

Take the much-discussed annual federal deficits under presidents Bush and Obama. In recent years, the government has been spending a little less than a quarter of the nation’s GDP, but its revenues rarely top 20 percent of GDP. Given Congress’s and the president’s continuing unwillingness to reduce spending to match revenues, they could turn instead to regulatory reform as a budget balancer.

A deregulatory “stimulus” would help create the conditions for rapid economic growth. If government’s 20 percent slice comes from a much larger pie, revenue gains could cover most, if not all of the shortfall, eventually erasing deficits. This, of course, would require keeping spending in check, which may be wishful thinking. But it offers a solution, if politicians really want one.

Read the whole thing here.

The trade debate is heating up in the wake of President Obama’s nod to trade in his State of the Union address, the introduction this month of a Trade Promotion Authority (TPA) bill, and the on-going negotiation on two major trade deals.

A major schism among Democrats on trade broke out January 29, when Senate Majority Leader Harry Reid, D-Nev., said in an interview that he was against TPA, commonly known as “fast-track” legislation, which gives the president authority to negotiate trade agreements that are then voted on by Congress without amendments. Without fast-track, it’s difficult to negotiate final trade deals with other countries when they know Congress can change the terms. Reid was quoted as saying: “Everyone would be well-advised just to not push this right now.”

Reid’s opposition is in contrast to President Obama’s endorsement of fast-track authority in his State of the Union address earlier this week when he said:

We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment, and open new markets to new goods stamped “Made in the USA.” China and Europe aren’t standing on the sidelines. Neither should we.

Reid’s stance is at odds too with some leading Democrats, such as Senate Finance Committee Chairman Max Baucus, D-Mont., who joined with Ranking Member Orrin Hatch, R-Utah, and House Ways and Means Committee Chairman Dave Camp, R-Mich., to introduce a TPA bill on January 9. However, Baucus’ active leadership on TPA may be in question, since he was nominated to be Ambassador to China.

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Post image for New Farm Bill Will Deliver the Pork to Farmers

Last night House and Senate conferees agreed on a nearly $1 trillion farm bill that would eliminate long-standing direct payments to farmers but beef up the heavily subsidized crop insurance program. Farmers are pretty happy about that because federal crop insurance covers farmers’ crop losses or revenue losses, while the government pays a high percentage of the premiums’ costs and underwrites most of the insurance companies’ administrative costs.

The five-year farm bill replaces the 2008 farm bill, which had expired and was extended because Congress could not reach agreement on components of a new bill.

The command-and-control sugar program remains in place, with its combination of controls on domestic supply, price supports, and restrictions on sugar imports. It has been estimated that the sugar program costs consumers up to $4 billion a year in increased costs, while driving many confectionery companies out of business or out of the country.

The bill would also continue U.S. country of origin labeling requirements for meat – COOL – even though the protectionist program is being challenged by Canada and Mexico as being discriminatory under World Trade Organization rules. COOL requires labeling that indicates where the animal was born and raised, where it was slaughtered and processed.

The conference agreement would include modest cuts to the food stamp program – about a one percent cut over 10 years or about $9 billion. Originally the House had pushed for more extensive cuts, but the Senate balked at those.

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Post image for Trade Issues Heat Up — A New TPP Leak, “Fast-Track” Bill

WikiLeaks on January 15 leaked another chapter of the negotiation text of a major trade agreement – the environmental chapter of the Trans-Pacific Partnership Agreement (TPP). Environmental groups jumped on the text and said the U.S. position outlined in the documents shows backward steps in areas such as enforcement of environmental provisions and deference to multilateral environmental agreements (MEAs).

According to an article in the New York Times, the U.S. seems to be pushing for more extensive environmental provisions, but the other eleven negotiating parties are pushing back, arguing that such provisions would hamper needed growth in their countries.

For example, in the Chairs’ summary of different countries’ views on incorporating measures in TPP to fulfill specific MEAs and making those enforceable, only the U.S. supported that position. Ten of the twelve countries thought otherwise and indicated that since those agreements were negotiated in different circumstances, those obligations shouldn’t be subject to dispute settlement in TPP.

In an apparent reaction to the leaks and to negative reaction from environmental activists, the Office of the U.S. Trade Representative late Wednesday afternoon issued a press release stating its strong commitment to the environmental chapter:

The United States’ position on the environment in the Trans-Pacific Partnership negotiations is this: environmental stewardship is a core American value, and we will insist on a robust, fully enforceable environment chapter in the TPP or we will not come to agreement.

The release went on to state:

In December the trade ministers of the 12 TPP countries met for three days to tackle tough issues together, including in the environment chapter. There, the United States reiterated our bedrock position on enforceability of the entire environment chapter, as well as our strong commitments to provisions such as those combating wildlife trafficking and illegal logging.

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Post image for Sugar — Congress’ Favorite Sweetener

The sugar lobby’s sweet contributions and their day-in-day-out lobbying means broad bipartisan support for continuing the U.S. sugar program in the 2013 farm bill, as The Washington Post noted in a wide-ranging article December 7. Sugar policy, consisting of price supports, restraints on domestic supply, and import controls, benefits mainly a small number of rich sugar producers at the expense of consumers and taxpayers, according to the article.

Historically, the program has resulted in domestic sugar prices substantially higher than the world price. Besides those sweet deals, the government also buys back sugar producers’ surplus so they don’t have to pay back federal loans. Then the U.S. Department of Agriculture sells that sugar to ethanol producers at a loss.

Numerous attempts have been made to rein in this egregious program, but the sugar industry’s intense and consistent lobbying and the huge contributions they make on both sides of the aisle almost guarantee them the program’s continuation.

The cost to consumers hits them in the pocketbook, as sugar is an ingredient in not just sweet treats, but in staples such as bread and processed food. The sugar program means about $3.5 billion in additional costs to consumers per year.

It’s estimated that the higher domestic prices for sugar has cost the confectionery, beverage, and food industries nearly 127,000 jobs between 1997 and 2011, according to the U.S. Department of Commerce, and has led to many candy companies moving their operations to other countries, such as Mexico and Canada. For every job saved in the sugar producing industry through the sugar program, about three jobs are lost in the confectionery and food industries, says Commerce.

As CEI noted in a coalition letter to the House and the Senate:

The U.S. sugar program is a classic public choice case of concentrated benefits and dispersed costs: of how special interests can trump the public interest. A small number of sugar producers receive enormous benefits, while the costs are spread across the U.S. economy, hitting consumers and the sweetener-using industries.

Post image for Sugar Policy Drives Out Candy Companies

“Cheaper sugar sends candy makers abroad” says a headline in today’s Wall Street Journal (gated). The article noted that increasingly U.S. candy makers are moving their production to other countries because federal price supports keep domestic sugar prices way above the world market price.

Candy companies, such as Atkinson Candy Co., said it moved 80 percent of its production to Guatemala. “It wasn’t like we did it for profit reasons. We did it for survival reasons,” said the president of the family-owned Texas company. And confectioners aren’t the only ones affected by high sugar prices. Besides candy makers, general food producers feel the crunch of high sugar prices, as sugar is an ingredient in breads and baked goods, many canned and preserved fruits and vegetables, and other canned goods. The U.S. Commerce Department found that for every one job saved in the sugar industry because of the U.S. sugar program about three jobs were lost in the candy-making industry.

These food producers blame U.S. sugar policy for keeping the prices high through a system of domestic supply and import restrictions and price support programs that historically have kept U.S. sugar prices double or triple the world price.

And that’s not likely to end soon. The current agriculture bills in the House and the Senate both maintain the costly sugar program, and earlier proposals to reform the system were narrowly defeated.

CEI has long been involved in attempts to reform the sugar program. See here and here and here for more background on the issue.

Post image for House to Consider Separate Food Stamp Bill Later Today

H.R. 3102, the “Nutrition Reform and Work Opportunity Act of 2013’’ will be considered on the House floor later today. The 109-page bill, which would take steps to reform the $80 billion per year food stamp and nutrition programs, is being considered on its own, separate from agricultural titles.

Recent background for this story is necessary. Food stamp programs have traditionally been included in farm bills – those omnibus bills that every five years hand out the largess that every farm product receives from taxpayers’ funds. This year’s farm bill was no different. Both the Senate and the House voted on farm bills that included both elements. The Senate passed its legislation on June 10, 2013. But the outcome in the House was a lot different: On June 20, 2013, the $940 billion farm bill was killed on a 195-234 vote, mainly because Democrats were opposed to an included amendment that would have given states the option of running pilot programs for instituting work requirements for food stamp recipients.

Some principled Republicans also voted against the bloated bill because few agricultural reforms were included and few amendments were allowed to be considered. CEI and other free-market groups called for the bills to be split in two, so that the agriculture programs would be considered separately from the nutrition and food stamp program and could be considered on their own merits. A split would also drive a wedge into the unholy alliance and deal-making between rural farmers and urban food stamp proponents.

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Post image for Taxpayers Pay High Costs for Crop Insurance Subsidies

Bloomberg on September 9 published an in-depth article on the high costs of federal crop insurance – likely to be increased even more if the House version of a proposed farm bill gets passed. The article noted that last year the U.S. Department of Agriculture spent $14 billion insuring farmers against losses due to crop failure or income. Proposed House legislation would up that to cover so-called “shallow losses” – that would guarantee up to 90 percent of a farmer’s income.

It’s estimated that U.S. taxpayers fund about 60 percent of the premiums farmers pay. And there are no caps on those crop insurance subsidies, which encourages farmers to plant on unproductive land, take higher risks, and claim losses. The names of the crop insurance recipients are also not public.

As the Bloomberg article noted:

In 2011, the latest year for which data is available, 26 farmers each got annual subsidies of more than $1 million; more than 10,000 received $100,000 or more. One grower of tomatoes and peppers in Florida enjoyed a subsidy of $1.9 million, according to the Environmental Working Group. Congress has barred the USDA from revealing the identities of payout recipients.

Farmers are not the only ones getting subsidized by the crop insurance program. The federal government also pays the administrative costs of the 18 approved insurance companies that write the policies. Last year those administrative costs amounted to $1.4 billion paid out by the government.

The House and the Senate farms bills are expected to be reconciled by September 30. While a host of lawmakers are calling for cuts in the crop insurance program, agricultural and insurance interests are lobbying hard to continue and even expand the program. Here’s what the Bloomberg article noted:

Yet the president and the Republicans’ chief budget expert are no match for the farm and insurance lobbies, which spent at least $52 million influencing lawmakers in the 2012 election cycle. Rather than thin the most expensive strand in the nation’s farm safety net, Congress is poised to funnel billions of dollars more to individuals who already are more prosperous than the typical American.

“We have been subsidizing some of the farmers who least need it in a way that is really costing taxpayers a lot of money,” said Senator Jeanne Shaheen, a Democrat of New Hampshire. “We’re never going to solve our budget challenges if that’s what we’re doing.”

Post image for Before Net Neutrality Eats the World (Part 14): What Should Congress Do?

(Note: On September 9, the U.S. Court of Appeals for the D.C. Circuit will hear oral arguments in Verizon’s challenge of the Federal Communications Commission’s December 2010 Order on “Preserving the Free and Open Internet.” This series explores fundamental issues at stake.)

As the prior installments of “ Before Net Neutrality Eats the World” contend, it would be a grave mistake and historical misfortune for the Federal Communications Commission’s (FCC) Order to stand.

Forced “openness” on the assets in existence now will undermine growth of infrastructure wealth and property tomorrow, and downgrade expansion of physical and wireless access to content.

However the U.S. Court of Appeals for the D.C. Circuit ends up ruling, it is absolutely clear that the impulse for genuine liberalization must come from outside the FCC; the regulatory approach to infrastructure creation and access to content will fail, but FCC has no other mission, tool or inclination.

Policy emphasis belongs on fostering the emergence of competitive institutions that replace uninspired and damaging bureaucratic oversight of “long and thin” property.

A handful of things Congress might contribute to such future reforms include:

  • Legislatively affirm that the agency is not authorized by Congress to regulate the Net; Remove FCC’s power and advance “Communications Without Commissions.”
  • Ban the extension of neutrality mandates (or so-called “openness” rules) to wireless and future technologies.
  • Short of a radical liberalization, legislatively affirm exemption from regulation of future construction and competitive options, to all that which does not yet exist. Guarantee that compulsory neutrality shall not apply to future network extensions or those that are not part of the “public” Internet, and those that seek to break away.
  • Discourage the use of antitrust against large scale content and infrastructure ventures.
  • Have FCC present a report to Congress, not critiquing “discrimination” and other alleged “market failures,” but articulating the pro-market role of pricing and network management freedom, and clarifying the agency’s understanding of the primacy of private enterprise in creating and managing networks.
  • Hold detailed hearings not on private business practices, but on FCC practices and political failure: its scope of authority and whether it’s growing or declining, its interventionism, its expansion in staff and budget, its reason-for-being in modern times compared to that invoked at its origin. Such concerns were covered in “Before Net Neutrality Eats the World (Part 5): The Fallacies Motivating Net Neutrality.”
  • Explore the state of infrastructure regulation across all sectors, not solely communications, and create inter-agency plans for liberalization and the potential for future cross-industry consortia.

Today, CEI sent a letter to the House of Representatives urging a vote against the farm bill, H.R. 2642. The letter pointed out that the bloated bill is the one voted down when it was connected to the food and nutrition provisions, with an important addition that would make this legislation permanent.

Now that it is being considered separately, the agriculture leadership is trying to push it through under a closed rule with no amendments. By making it permanent law, the bill would leave in place huge subsidies for areas such as crop insurance and no reform of the sugar and dairy programs.

Here’s what the letter said:

Besides greatly expanding the heavily subsidized crop insurance program, the House bill does nothing to rein in the central planning schemes represented by the sugar program and the dairy program.

This bill would also make itself the permanent law for farm programs to replace the 1949 legislation. That takes the future of agricultural programs out of the hands of policymakers -no longer will they have to deal with a farm bill every five years. Instead, they can do nothing and revert to this travesty of farm bill reform.

The bill is being debated now, with many Democrats objecting to the separation of food and nutrition programs from the commodity provisions. Considering food programs separately from agriculture programs would make sense — the political dynamic could change, with urban representatives and rural interests not being in lock-step in passing massive ag bills. However, the Democrats seem to realize the food and nutrition programs then would have to be considered on their own merits and are objecting to this. The Republicans, on the other hand, are trying to ram through a bloated farm bill.