Here's a to-do list for Congress during the lame duck session: Pass a farm bill that helps smaller farmers instead of the mega farms. Restore rural development funding. Pass a tax bill that helps the middle class. Continue tax credits for wind energy.
Critical rural issues will confront Congress as it convenes this week in lame duck session.
Congress must decide what will be sacrificed to bring the deficit closer to balance – or else extend current law until the next Congress can come up with a spending plan next year.
At stake are rural development investments in jobs and opportunity for rural people, conservation programs, renewable energy incentives and health care support.
Let’s run through what’s at stake for rural communities during this lame duck session of Congress.
Rural Development Funding and the Farm Bill
The stalled farm bill must be completed this year in the lame duck session, or Congress must extend current law long enough to start over and produce a new bill in the next Congress.
Most rural advocates favor getting it done or, if it is extended, at least providing funding to rural development and beginning farmer programs in the interim. The funding provided by the last farm bill has largely run out.
The Senate has passed its version of the farm bill. The House Agriculture Committee has also produced a farm bill, but it has not been considered by the full House. The Senate legislation does a better job of funding rural development than does the House bill, though both are a step down from the past two farm bills.
Both bills would fund the Value-Added Producer Grants program at $10 million a year. The Senate bill also provides $3 million annually for a continuation of the Rural Microentrepreneur Assistance Program and $50 million to fund water and sewer grants for small rural communities.
The House funds neither.
The Senate bill better funds beginning farmer education and training programs and incentives to rent land removed from the Conservation Reserve Program to beginning farmers and ranchers.
The House bill is best in one notable area — Outreach and Assistance to Socially Disadvantaged Farmers and Ranchers. Nevertheless, the $10 million it provides annually is just half of what is currently spent on this program.
The Senate bill is more supportive of conservation. It retains more funding for the Conservation Security Program, which pays farmers for managing working lands to protect the environment.
And it denies premium subsidies for crop insurance to farmers who fail to implement a conservation plan for highly erodible land or break out native grasslands for crop production.
Finally, the Senate takes modest steps to cap traditional farm subsidies to mega farms by closing loopholes in the payment limitation and lowering the cap. The House, in contrast, raises the payment cap and leaves the loopholes wide open.
Though the House bill is tough on funding for conservation, rural development and beginning farmers, it keeps the money flowing to mega farms.
Both bills spend less on traditional farm payments than prior bills, but more in premium subsidies for crop insurance. And neither bill imposes any cap on premium subsidies to mega farms.
If one corporation farmed the entire state of Nebraska, the federal government would pay 60 percent of its crop insurance premiums on every acre, every year. Unlimited payments subsidize mega farms to drive smaller operation out of business by bidding land away from them.
The Government Accountability Office found that applying a $40,000 cap on premium subsidies for crop insurance would raise $1 billion annually.
That won’t be considered in the lame duck session, but it should be. That $1 billion could replace all the farm bill cuts in conservation and all the rural development cuts over the last decade, and still leave half the savings for deficit reduction.
Renewable Electricity Production Tax Credit
The Production Tax Credit for renewable electricity has helped spur a boom in wind energy production in the Midwest and Great Plains, growing the rural economy and creating new jobs. But the Credit expires at year’s end, which has already brought wind development to a grinding halt.
Congress will consider extending the Credit in the lame duck session. The Credit has provided owners of wind farms and other renewable generation 2.2¢ per kilowatt-hour of electricity produced for the first 10 years of operation, at a total cost to the federal government of about $1 billion in 2011.
Government has long played a role in the development of energy resources. The coal industry received subsidies of $3.17 billion in 2007 alone, according to analysis by DBL Investors. The nuclear industry has been subsidized at an average of $3.5 billion annually since 1947.
The $3.17 billion annual coal subsidy does not include its health and environmental costs. Analysis by Harvard Medical School and Harvard School of Public Health researchers estimates the cost of carbon emissions from coal at 3 cents per kilowatt-hour and total health and environmental costs at 18 cents per kilowatt-hour. Allowing coal generation to push these costs on the rest of America is the nation’s biggest energy subsidy.
The Production Tax Credit provides a low cost, environmentally responsible alternative. By spending 2.2 cents per kilowatt-hour, a fraction of the health and environmental costs of coal, we can develop cleaner sources of energy that enable rural America to prosper by becoming part of the solution to climate change. Extension of the Credit will save and create 54,000 jobs, according to analysis sponsored by the American Wind Energy Association.
Ross Knott, president of the Petersburg state bank of Petersburg, Nebraska, recently provided a visual image of what wind development has meant to his community. Speaking at the Nebraska Wind Energy Conference, Knott said he now sees young families pushing strollers in his community of 328 people.
“We hadn’t been seeing many strollers in Petersburg before wind development,” said Knott.
Medicare and Medicaid pay for nearly six of every ten dollars for rural health care, according to University of Maine research. Congress will almost certainly consider cuts to these programs. For rural America, it is essential to protect benefits for low income people and modest income working people who rely on these programs to fund their health care.
In addition, there is talk of an attack on the primary feature of the Affordable Care Act for making health insurance affordable for modest income working and self-employed families. The Act subsidizes insurance for families at up to 400 percent of poverty — $89,400 for a family of four. That assistance should be retained in full to make health insurance affordable.
Congress will also consider legislation to protect rural access to care.
As lawmaking ground to a halt earlier this year, the Medicare Dependent Hospital designation expired, threatening 200 rural hospitals with substantial cuts in Medicare reimbursements.
And hundreds more hospitals in isolated rural areas are threatened by Congressional failure to extend the “low volume” adjustment to Medicare payments for hospitals with low patient numbers. Congress should extend these provisions to protect access to health care in rural America.
In 2000, the federal government had a $236 billion budget surplus. But following 9/11, our nation fought two wars — and cut taxes rather than pay for them. A financial meltdown sank us into the deepest recession since the Great Depression, reducing tax revenue and prompting new stimulus spending.
The wars exacted real fiscal and human costs. War spending totaled $1.3 trillion dollars through 2011. One hundred thousand American troops served overseas — disproportionately from rural areas and modest-income families. More than 6,600 have died. Another 45,000 to 90,000 have suffered traumatic brain injuries with persistent symptoms requiring specialized care.
While service members and their families made profound sacrifices to make our nation secure, the rest of us were not even asked to pay the wars’ financial costs. They were added to the deficit, as we received a tax cut.
It is appropriate to ask the richest Americans — those who can afford it — to give up their tax cuts as their shared sacrifice to reduce deficits and make our nation more secure. Repealing their 2003 tax cuts would raise $850 billion over ten years. That would cover two-thirds of the direct war costs.
Repealing the high income tax cuts would include reinstating limits on itemized deductions and personal exemptions for upper-income taxpayers, going back to taxing corporate dividends as ordinary income, taxing high income capital gains at 20 percent and reinstating the tax rates of 36 and 39 percent on income over $140,000.
Alternatively, tax revenues from high-income taxpayers could be raised by further closing tax loopholes without raising the top tax rates.
Revenue should also be raised by increasing estate taxes paid by the very wealthy. The estate tax credit directly exempts $10.4 million from taxation for a husband and wife this year and imposes a top tax rate of 34% percent on the largest estates. In addition, loopholes enable wealthy families to exempt several times that amount from taxation through sophisticated planning.
But unless Congress acts to extend those provisions, the tax rate on large estates will rise to 55% and the $10 million credit will fall to $2 million per couple at the end of the year. Some adjustment is needed. Current law is overly generous to large estates. The $10.4 million credit is too high, the loopholes are too wide and the 35% top rate too low for the largest estates.
An effective estate tax is essential not only to raise revenue, but also to level the playing field for ordinary Americans competing for land and markets with those born to great wealth. The estate tax protects the free enterprise system by countering the concentration of wealth and control in the hands of the few.
The richest Americans control a larger share of wealth and income than at any time in our nation’s history. We need their help in reining in the deficit. We also need policies that prevent an even larger share of the nation’s land and other wealth from getting locked in the control of the wealthiest few.
Chuck Hassebrook is the Executive Director of the Center for Rural Affairs of Lyons, Nebraska.