D.C. Watch: More budget battles ahead

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It took until after the deadline, but Congress finally approved a bill that avoided some of the tax increases that were to take effect on Jan. 1 and delayed the automatic spending cuts for at least a little while. Rolled into the bill was a nine-month extension of the 2008 farm bill. The inclusion of the farm bill extension was due to the fact that the milk support price was set to rise to more than $38 per cwt under permanent law if Congress did not take action. While the country breathed a sigh of relief when the fiscal cliff was averted, more bruising battles between Democrats and Republicans are just ahead.

The bill passed by Congress early this week made permanent the tax rates that were in effect in 2012 for individuals making less than $400,000 per year and for couples with incomes of $450,000 or less. Tax rates rise only for people with incomes above those levels. The bill also renews tax credits for low-income households, extends long-term unemployment benefits and delays the automatic spending cuts for two months. This ensures another budget battle will begin soon after the new Congress is sworn in. In fact, the battle may commence immediately. Next item explains why:

The U.S. hit its current debt ceiling as of the end of 2012. Treasury Secretary Tim Geithner formally informed Congress of that fact this week. Default can be avoided for a month or two using accounting gimmicks. But in the very near future, Congress will have to vote on raising the debt ceiling. Several key Republicans have said they will not vote to raise the debt ceiling without major cuts in government spending. The rancorous debate that has gripped Washington for the past few weeks is probably going to resume at once an continue well into this year.

The 2008 farm bill was extended through September in the bill approved by Congress this week. The fact that milk prices were set to double as of the beginning of this year encouraged Congress to include the farm bill extension. Members of the House and Senate Agriculture Committees were generally opposed to extending the old farm bill, but could not convince other members to include the reforms both committees had worked out. Some parts of the old farm bill are not included in the extension, such as the Supplemental Revenue Assistance Payments Program (SURE), and about three dozen other programs. The extension does not include the new dairy “gross margin program” that has been pushed by Representative Collin Peterson (D-MN) and others. The bill does include another round of direct payments to farmers, a part of the old farm bill that most members of Congress have opposed.

The bill also had language easing the adverse effects of estate taxes. Under the provisions approved this week, the estate tax exemption for 2013 will be $5.12 million. The tax rate for the amount above the exemption will rise to 40 percent. (If Congress had not included the changes to the estate tax, the exemption would have fallen to $1 million and the tax rate would have increased to 55 percent.) However, these changes in the estate tax levels will make it unlikely that Congress will seriously consider eliminating the so-called “death tax” entirely, which many had called for.

So far it appears that Agriculture Secretary Vilsack will remain in place for at least part of the President’s second term. However, EPA Administrator Lisa Jackson has announced that she will step down after the President’s State-of-the-Union Address. Administrator Jackson has been under fire from a lot of agriculture-related organizations because of some of the regulations that have been proposed and adopted by EPA during her tenure the last four years. Other changes in the President’s Cabinet are also expected over the next couple of months, but they don’t include the Ag Secretary (at least for now).



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