GRASSLEY: On Friday, the crop insurance industry comments are due on the Risk Management Agency on the first round of the standard reinsurance agreement. I'm concerned that the large proposed cuts to the delivery of crop insurance is going to detrimentally impact farmers.
I've always been a proponent of the program because of its shared responsibility, with producers taking control over their own risk management as opposed to relying upon the federal government on an ad hoc basis to pass some money for disaster.
We have a situation, though, where crop insurance is a service-based industry between the producer and their agent. The 2008 farm bill included nearly $5.6 billion in cuts to crop insurance. The Risk Management Agency that administers the program is estimating an additional $4 billion in savings from this standard reinsurance agreement.
At some point, the service -- the services and one-on-one contact between producer and the insurance company has with her agent and the company the insurance is purchased from will suffer.
In other words, we have a group of people that deal directly with the farmer to make the crop insurance program work. And I think that these cuts might hurt that relationship, hurt the program, and hurt farmers to be encouraged to manage their own risk.
So I want to ensure, as I oversee how this evolves, to ensure that all producers continue to have the same level of access to these products that they have in the past, so we don't have to revert back to a complete disaster program.
I think farmers have now been encouraged to manage their risk. In Iowa, 92 percent of the people participate in the program. A pretty good record of farmers wanting to manage their own risk, rather than relying on Congress.
So I'm ready for questions, if you call the names.
STAFF: OK. Tom Rider (ph), at WNAX?
Dan at KICD in Spencer?
QUESTION: Good morning, Senator. Now that you're back at work in Washington, the biodiesel industry is hopeful that the Senate Finance Committee will take up that extended tax issue as soon as you get under way.
As ranking member of that committee, when do you see that happening?
GRASSLEY: OK. Repeat the question for me, Beth (ph).
STAFF: It has to do about biodiesel, what's going to happen with -- with biodiesel.
GRASSLEY: OK.
Well, Senator Baucus and I in a bipartisan effort, because we work together very closely on most everything in the committee except lately health insurance, we sent a letter before Christmas indicating that it's going to be the first issue that we're going to take up.
And not just the biodiesel, but there's about several dozen of bills that sunset like biodiesel did. Most of them won't be harmed with our not doing it, but I think there's some harm already to biodiesel so we need to get it done very quickly if we're going to keep this infant industry going.
And it would be retroactive to January 1st, so there'd be a continuation of it. So I hope we get it done very soon, and it's our intention to do it very soon.
QUESTION: Senator, if I might follow up, there is some talk that the -- that the blenders' tax cut, it would be extended for one year only. Do you see that happening?
GRASSLEY: Well, it might be only for one year, but it will be handled the same basis as all the other tax provisions that have sunseted for -- they'll be done for one year.
If it's done on a multi-year basis, it would be better. But right now we're trying to turn on the oxygen again. There's no oxygen at all there. So 12 months, albeit short, so not going to encourage a lot of long-term look, but it's going to get us over a hump. And we've been in that situation before, and I think we've still been able to develop an industry.
So I'm apologizing that it might not be longer, but we're into biodiesel for the long term, whether it's one year jerks or two year jerks.
QUESTION: And, Senator, if I might ask one more question, you talked about other tax provisions that have sunseted, would that include taking up the estate tax?
GRASSLEY: Yes. That would be probably the bill that would be used to drive all these other extenders that have sunseted.
QUESTION: And that also would be for one year?
GRASSLEY: No. I would imagine the estate tax will end up being permanent legislation. At least I hope so.
QUESTION: Thank you.
STAFF: Chris Clayton at DTN?
Stacia?
QUESTION: I was on muted real quick, but going back to the estate tax, where is the balance in terms of the exemption in the rate, and how do you set that -- can you make that retroactive to the beginning of the year, or do you make it enacted when -- you know, when it's signed into law?
GRASSLEY: Well, if it is made retroactive, I think it raises a lot of constitutional questions. But not being a lawyer, I'm not going to try to expound on those.
But I think it will be questioned by people that have had their estate settled, can you go back and make it retroactive.
There will be an attempt to make it retroactive. And -- but regardless I think the major issue we have to deal with is getting it done very quickly and hopefully getting it done at $5 million with a 35 percent rate, as opposed to where we are on December 31st, 2009, at $3.5 million and a 45 percent rate, or somewheres in between.
But I think the worst we can do on a permanent basis would be $3.5 million at 45 percent.
QUESTION: Thank you.
STAFF: Stacia at National Farm Broadcasters?
Philip at the Register?
QUESTION: Yes, Senator, back on crop insurance, what -- what do you think the administration has in mind for this -- for this money they want to cut here? Is this going to go into child nutrition?
GRASSLEY: Yes, I think so.
QUESTION: The numbers -- the number -- yes?
GRASSLEY: You know, I asked the people that were in my office, and they said, well, you know, that -- I said the worst -- the worst thing you can do is pit farmers against kids. That's the worst. And I expressed that view. They didn't say that's where they were headed.
The people that I were talking with crop insurance aren't in a position to say what's going to be done with any amount of money on a new program that the administration wants authorized. But I think that there are people someplace in the executive branch of government, maybe in the liberal elements of Congress, that are looking for that to be a source of funding.
And I'm not saying some money in crop insurance maybe can't be saved, or else I wouldn't have voted for the last farm bill, but I'm still very concerned about when we've worked so hard over a period of almost 20 years to set up a process where farmers are encouraged to manage their own risk and it takes a pool of people to make sure that that's done, and you get 92 percent of the people -- farmers in Iowa interested, I would sure hate to destroy that.
And I think it has consequences for the federal treasury down the road that's much greater than any money that could be saved for a nutrition program. And that is that if you get into disaster payments, it just soaks up billions and billions of dollars, and it isn't even given a second thought. And maybe shouldn't be given a second thought, since the federal government's the insurer of last resort and it is a disaster as opposed to just regular expenditures.
But, you know, that's where we are. And I think that your assumption is correct.
QUESTION: Well, last year, it didn't -- it didn't work, the proposal to cut farm payments -- that was fixed payments -- to put into child nutrition. Is crop insurance more vulnerable than those fixed payments were politically, in Congress?
GRASSLEY: Well, you're -- I think -- is what's more vulnerable?
QUESTION: Crop insurance, as opposed to last year when they wanted to cut fixed payments -- fixed payments.
GRASSLEY: Well, I think it's vulnerable that they're trying for this amount of money, when there's already been $5-plus billion taken out because of the farm bill. And, in fact, I thought that that was a massive amount of money that put in jeopardy -- might put in jeopardy. And then here, you come along and get this done, and I think I have more questions about this than I did about the $5.6 billion.
STAFF: OK. Tom Rider (ph), did you get added?
OK. Does anybody have a followup or did they get added late?
QUESTION: This is Chris Clayton again. I have a followup. I'm in Seattle, Senator, where the Farm Bureau convention is wrapping up. And the big push here has been against cap-and-trade at this convention.
What do you see happening in the Senate? Is any kind of energy bill expected to be taken up in 2010 in the Senate, whether it's just a renewable portfolio standard or a full debate on the climate legislation?
GRASSLEY: I think you could expect everything except cap-and-trade. And so, probably following along on the bill that Bingaman has worked on and then tax provisions that would be added by the Senate Finance Committee.
I'm not sure that I can give you much detail of it, but I think it's fair to say that there will be an energy bill taken up.
QUESTION: Would -- this is Philip Brasher -- would the renewable electricity standard be included, that's in the Bingaman?
GRASSLEY: Yes, I think it will be. Now I think it has a tough time getting through the Senate. You know, I have supported some versions of that, and I'm -- I believe that I'm committed -- well, I don't know whether to the specific things that are in that bill, but I like renewable portfolio standards and -- and I would vote for some compromise in that area.
QUESTION: Well, thank you, Senator.
STAFF: Anybody else?
GRASSLEY: OK. Anybody -- OK. Thank you all very much. Goodbye.
END