Funding for agriculture programs will be under pressure as Congress tries to find ways to reduce the federal budget deficit. However, the Chairs of the Senate and House Agriculture Committees say recent
and ongoing natural disasters show the need for continuing farm support programs. There is even some talk about developing an ad hoc disaster aid program to help farmers deal with flooding problems or the severe drought in the southern Plains states.

It is now official: The federal government reached the $14.3 trillion debt ceiling on Monday. The Treasury Secretary has started what are called “extraordinary measures,” such as borrowing from federal pension trust funds to meet obligations. According to the Treasury Secretary, these measures will be exhausted by August 2, at which point the United States will begin to default on its loans (Treasury Bonds and Treasury Bills) if Congress doesn’t raise the debt ceiling by then. Efforts to develop a budget that is acceptable to both Republicans and Democrats are making slow progress. The “gang of six,” a bipartisan group of senators that has been working on a compromise, became the “gang of five” this week when Senator Tom Coburn (R-OK) dropped out. Senate Budget Committee Chairman Kent Conrad (D-ND) said he has no immediate plans to mark up a budget. That makes the budget talks led by Vice President Biden the most likely option to put forward a plan to raise the debt ceiling. This will be an issue that will dominate activity in Congress over the next couple of months.

House appropriations committees are working on funding bills for 2012. The Housepassed budget resolution caps discretionary spending at just over $1 trillion, about $30 billion less than the level for fiscal 2011. Key House committees hope to have all 12 appropriations bills for fiscal 2012 completed before the August recess. Meanwhile, the Senate has not yet passed a budget resolution for next year.

The momentum toward passing the free trade agreements with South Korea, Panama, and Colombia ran into a roadblock this week when the Obama administration said they would not submit the agreements to Congress for approval until Congress agrees to renew the Trade Adjustment Assistance program. The TAA program helps retrain workers that lose their jobs as a result of trade policies. That program lapsed in February as Congress took steps to trim spending.

U.S. biofuel production through 2007 probably had no impact on indirect land use, according to a new peer-reviewed study from Michigan State University. The indirect land use issue has been a major factor in discussions about the environmental benefits associated with biofuels production. One theory is that an acre of land in the U.S. used for biofuels production causes new acreage to be brought into production somewhere else in the world. The MSU study reaches a conclusion similar to recent research for the Department of Energy’s Oak Ridge National Laboratory that the indirect land use change has been “minimal to zero”.

The Senate rejected a bill this week that would have reduced tax breaks for the five biggest oil companies. The plan would have saved about $2 billion per year but opponents argued taxing oil companies more heavily would discourage new domestic production. But talk about mixed signals, the next day the Senate voted down a proposal that would have encouraged offshore oil drilling! It is not clear if either of these proposals will be brought up again later in the session.