The Congressional debate over the federal budget continues in Washington this week. The continuing resolution that is funding government operations ends on March 4 and an impasse is looming between the House and the Senate.

The House passed its proposed spending plan for the rest of this fiscal year, and the bill includes deep reductions in discretionary spending. The House bill would prevent EPA from implementing the use of E-15 for cars made after 2000 and would block subsidies to help retail outlets install blender pumps.

The plan would reduce the budgets for the Securities and Exchange Commission and the Commodities Futures Trading Commission. Both agencies have been given expanded responsibilities to regulate trading activities and need more people to accomplish these activities. The EPA would not be able to implement rules to reduce air pollution from dust, or reduce water pollution in the Chesapeake Bay watershed, or reduce greenhouse gas emissions. Funding for international food aid and conservation programs would also be cut. On the other side, the House defeated an amendment that would have imposed lower farm program payment caps.

The House bill received a lot of attention this week, but the plan will be modified before it becomes law. The Senate will draft its own spending plan and Senate Majority Harry Reid (D-Nev.) says he wants to keep spending at current levels, something leaders in the House say they will not accept. That sets up the potential for a government shut-down if there is no compromise.

And the current battle is just the beginning. Once the funding for this fiscal year is settled, Congress will begin work on appropriations bills for fiscal 2012. The need for Congress to raise the debt ceiling over the next three months is also looming. Spending cuts are likely for essentially all government agencies, but at some point Congress has to move beyond cutting discretionary funding and somehow reduce spending on entitlements.

House Agriculture Committee Chairman Frank Lucas (R-OK) says his committee will not draft a new farm bill until 2012. He believes it will be easier to get the president to sign a new bill into law during an election year. Lucas acknowledges that the amount of money available for farm programs may be cut by the time we get to a new farm bill. Former Chairman Collin Peterson (D-MN) had wanted to write a new farm bill in 2011 before funding was reduced.

A dispute with Taiwan over trace amounts of a feed ingredient has effectively blocked beef trade since January. A few weeks ago Taiwan rejected U.S. beef imports that contained trace amounts of ractopamine and sales to Taiwan have stopped since then. Several members of Congress have sent a letter to Taiwan’s president to protest the action. According to the letter, the amount of ractopamine in the beef was well below the minimum levels acceptable for trade by Taiwan’s own government agencies. Taiwan not only stopped buying U.S. beef but also removed beef supplies all along the supply chain. It is not clear how long this disruption in beef trade will last.

Concerns about rising food prices have been all over the public media in the last few weeks. The United Nations food price index has reached a record high level and shows no real sign of easing. Reports about the drought in China’s wheat producing area have exacerbated the anxiety. According to China’s Agriculture Minister, 42% of the country’s winter wheat cropland has been hurt by the drought.

According to the World Bank, rising food prices have pushed 44 million more people into extreme poverty since last June. Rising food prices are at least one factor fueling the unrest in countries in Africa and the Middle East. Other countries in the region are trying to drive down domestic food prices by boosting imports, adding to the upward pressure
on global prices. The anxiety about food supplies will continue at least over the next few months. Price pressure will ease only if world grain production rebounds in 2011.