Senate Democrats are crafting a proposal that would avoid automatic spending cuts to the federal budget through Sept. 30, 2013. Currently, cuts are slated to take effect on March 1 if Congress and the Administration cannot agree to a plan that saves revenue. Part of the Senate's proposal would save money by cutting direct payments funded through the farm bill.
The package is expected to include both tax revenue and spending cuts, totaling approximately $84 billion in savings. Direct payments would cost the United States $4.96 billion in 2013.
Congress and the White House agreed to sequestration in August 2011 after the super-committee failed to bring meaningful cuts to the table. The January 1 Fiscal Cliff solution pushed the deadline back for implementation of sequestration, which takes an equal across-the-board cuts totaling nearly $110 billion between defense and non-defense spending.
The White House estimated that given that these cuts must be achieved over only seven months instead of 12, the effective percentage reductions will be approximately 9% for nondefense programs and 13% for defense programs.
"If sequestration does occur on March 1, the impact will be significant because spending reductions will have to be absorbed over the last seven months of the federal fiscal year. If a grand budget deal is reached, then its implementation will dictate Congressional action for months to come," said Roger Szemraj, counsel for Olsson Frank Weeda law firm.
The White Houses' Office of Management and Budget (OMB) estimated that the cuts impact on agriculture would be roughly $8 billion, including $4.6 billion from commodity programs (excluding the commodity loan programs, which the report lists as exempt) and $2.8 billion from conservation programs.
OMB also sent a memo out last week warning federal employees that may be forced to go on temporary furlough should sequestration occur. In a fact sheet released by the Administration, it stated that if a sequester takes effect, up to 2,100 fewer food inspections could occur, putting families at risk and costing billions in lost food production.
Secretary of Agriculture Tom Vilsack made similar assumptions while speaking to media at a conference Thursday, Feb. 7, stating an across-the-board furlough of as much as 15 days for all Food Safety and Inspection Service (FSIS) employees, including inspectors.
“It is likely, if sequester is triggered, that in our food safety area we will have to furlough workers for a period of a couple weeks. Now you say, well, you know, everybody gets a couple weeks’ vacation. The problem is, as soon as you take an inspector off the floor, that plant shuts down, so it’s not just the inspectors, it’s the hundreds of thousands of people who are in the processing business. Those plants shut down," Vilsack said.
“Now, what impact and effect is that going to have on markets? It’s billions and billions of dollars of impact on the markets. What happens when supply gets shorted because we aren’t processing? Prices go up for consumers. That’s one tiny, tiny implication or consequence of sequester,” he went on to say.
In follow-up comments, USDA also said that production will shut down for that time period, impacting approximately 6,290 establishments nationwide and costing roughly over $10 billion in production losses. USDA further told reporters that industry workers would experience over $400 million in lost wages and that consumers would experience limited meat and poultry supplies and potentially higher prices.
A total of 38 organizations representing various aspects of animal agriculture, livestock and poultry producers, food processing and manufacturing, retail, international trade and transportation, wrote to Vilsack to express strong concerns with the possibility of furloughing the nation's federal meat, poultry and egg products inspectors in the event sequestration goes into effect.
The letter detailed not only the negative effects that furloughing meat and poultry inspectors would have economically, but it also pointed out the negative effects on meat and poultry exports and imports, on schools and other public institutions that rely on contracted-for meat and poultry products, on the welfare of livestock and poultry and on American consumers.
The groups also noted that even when the federal government has shut down due to lack of appropriations, FSIS inspectors were among the "essential" federal employees who stayed on the job. FSIS's plans for a potential shutdown in April 2011, for example, declared FSIS inspectors "necessary to protect life and health" and "essential to the nation's food safety operations."
"We fail to see how employees performing such a critical function as to be exempted from a full government shutdown should be furloughed to make up a budget shortfall," the letter continued.
“We agree with the assessment that furloughing inspectors would have a profound, indeed devastating, effect on meat and poultry companies, their employees, and consumers, not to mention the producers who raise the cattle, hogs, lamb, and poultry processed in those facilities,” said American Meat Institute president J. Patrick Boyle. “AMI respectfully disagrees with the Department’s assertion is that, in the event of sequestration, the furloughs referenced are necessary and legal. The Federal Meat Inspection Act and the Poultry Products Inspection Act (the Acts) impose many obligations on the inspected industry, which we strive to meet. Those Acts, also however, impose an obligation on the Department –to provide inspection services.”
Boyle noted that a significant percentage of the FSIS's budget goes to personnel salaries, but not all of those funds are used to pay the inspectors necessary to allow establishments to operate.
“Rather than impose across the board furloughs that will lead to plant closures, it is incumbent upon the Department to examine the options available to it, e.g., suspending certain non-essential programs and furloughing non-essential personnel within the 13 different offices (only one of which involves inspectors in plant) that make up FSIS,” Boyle wrote in a letter to USDA.
“Such an approach would enable FSIS to meet its obligations under a sequestration scenario and satisfy its statutory obligation to provide inspection pursuant to the Acts,” he concluded. “By doing so the Department would avoid inflicting unnecessary hardship on the more than 500,000 people who work in the meat and poultry industry and the more than one million livestock and poultry producers whose livelihoods also depend on those plants operating, and would also disruption of supplies to the 95% of Americans who make meat and poultry a nutritious part of their diets."