Soil Health and the 2018 Farm Bill

February, 2018

Washington -- On Capitol Hill again this week, I attended a forum on soil health sponsored by another unusual combination of interests: producers and processors.* A farmer from Oklahoma and another from Minnesota shared the dais with a representative from General Mills. The session was moderated by an agronomy professor from a land-grant university. The common concern was the future of soil health.

The Minnesota farmer, Jon Jovaag, told us Minnesota's biggest export, by far, is topsoil, in the form of soil erosion. He is active in the Land Stewardship Project and an advocate of better farming practices.

The Oklahoma farmer, Jimmy Kinder, whose family farms 8,000 acres, called for an effort to "rebuild the nation's topsoil." He participates in USDA's Conservation Stewardship Program (CSP) and would like to see much more research on soils, including their capacity to sequester carbon dioxide.

This discussion took place against the backdrop of the release of President Trump's proposed 2019 budget, which disfavors all such efforts, and imminent House action on the 2108 Farm Bill, in which soil health and conservation are likely to get short shrift.

As usual, a lot of the best take-aways happened in individual conversations before and after the forum.

Meeting with a soil health advocate before the forum, I offered that it was hugely helpful that his organization published Congressional Budget Office (CBO) scoring of options in the upcoming Farm Bill. He said both House and Senate Agriculture committee staffs disapproved in no uncertain terms with his release of the information. I told him that when I worked in the Senate many years ago, staffs were often faced with such quandaries, but many of us felt that if the information was paid for by taxpayer dollars, and it was not classified for national security purposes, the public had a right to see it. In the current case, CBO's scoring of options on the federal crop insurance program are upsetting interest groups that do not want the public to see waste in the program. This is waste that could be cut and the savings re-directed to soil health and conservation efforts.

Meeting with the agronomy professor after the forum, I asked about his remark in open session about how a soil health event in his state will draw a hundred farmers, compared to the usual Extension Service event that might draw twenty. What does this say about the Extension Service? He offered a none-too-charitable account of Extension personnel, estimating that only about half are committed to dealing with soil health issues. Whereupon I went a step further and asked about the commitment of Home Extension agents to better nutrition. Again, he was not sanguine about the effort. The 2018 Farm Bill presents a good opportunity to get the Extension Service back on mission.**

I am part of a small group of citizens and taxpayers, volunteers with no attachments to interest groups, who are trying to advance the public interest in the always-parochial Farm Bill. Good luck with that, you may say, but we are not of the sort that gives up easily. We are advancing ideas that are getting good reviews; maybe some will even get into legislation.

* Last week it was CAP and the R Street Institute. This time it was the National Sustainable Agriculture Coalition; General Mills; the Soil Health Institute; and the Land Stewardship Project. We met in the Veterans' Affairs Committee hearing room in the Cannon Building, where the original GI Bill was written, according to the remarks of Congressman Tim Walz of Minnesota, a member of both the House Veterans' Affairs Committee and the House Agriculture Committee.

** In Nebraska, the Extension Service and the state Department of Agriculture are currently devoting much time and many resources to address Dicamba dangers. This should not be a taxpayer responsibility, in this taxpayer's opinion, but fully paid for by the producers of the product. A good amendment to the Farm Bill would prohibit the Extension Service from using taxpayer dollars to relieve responsibility for product liability.

Say No to Deficits; Time for Schuldenbremse

February, 2018

Washington -- Is it time to dust off the proposed Balanced Budget Amendment to the U.S. Constitution and put it back into the national debate? Deficits are dangerously high and neither the President nor Congress seems to care.

The December tax cuts were largely paid for by additional federal borrowing, as were the latest spending increases for both military and domestic spending. The President's 2019 budget proposal gives up on achieving a balanced federal budget anytime soon, if ever.

This time the concern about fiscal responsibility must come from Democrats. Republicans have no more credibility on the issue. Republicans have not really cared about deficits since the time of President Gerald Ford, except rhetorically. Even lip service to the concept was conceded when Vice President Dick Cheney told the country that deficits don't matter. The last Republican president to achieve a balanced budget was Dwight Eisenhower.

Democrats have a coherent argument that they are the more fiscally responsible party. It is unfortunate that they have not made more of the issue over the years: liberal Democrats like Governor Jerry Brown and Senator Paul Simon fought years for a Balanced Budget Amendment; President Bill Clinton actually balanced the federal budget and started using surpluses to pay down the federal debt.

In these Democrats' views, deficit spending is to be avoided whenever possible because interest payments on the debt amount to a transfer of wealth from average taxpayers to the better-off lending class. It increases inequality. And it is not only the American lending class that buys U.S. debt and makes money off the interest, but also foreign entities, like China. It is one thing to keep interest payments within our own borders; it is quite another when national security is imperiled because the debt is held by foreign adversaries.

Democrats wary of excessive deficit spending also recall that it was the venerable John Maynard Keynes himself who cautioned against running deficits in times of economic prosperity. Those were the times to run surpluses and pay down debt, Keynes advised. Cyclical deficits as economic stabilizers in hard times, yes; structural deficits year after year (current Republican policy), no.

Add to that the experience of recent years in Europe. Switzerland in 2003 adopted a constitutional amendment called a Schuldenbremse, or "debt brake." Germany followed in 2009, as did Austria, France, and others as part of an EU economic effort against structural deficits. The key concept is the differentiation between necessary cyclical deficits and structural ones. Germany's limitation, for example, is a structural deficit of no more than 0.35% of annual GDP.

It is not by coincidence that European economies are thriving, even more than the U.S. economy. They are using revenues to pay down structural debt. It's time to see how Schuldenbremse might translate into new U.S. balanced budget language.

How does this relate to, say, Nebraska and the 2018 elections? Republicans Deb Fischer and Don Bacon, who both voted in December and February to pay for tax cuts and new spending by ballooning the federal deficit, have given their Democratic opponents a golden opportunity to campaign against them on grounds of utter fiscal irresponsibility.

Although the conventional wisdom would be that this is unlikely, as it would amount to trying to run to the right of Fischer and Bacon, it is anything but. There is a long history (see above) of Democrats holding forth against excessive deficit finance, which is perfectly consistent with Democratic advocacy of federal investment in human capital. The conventional wisdom, as usual, is wrong; there is no more connection between the political right and balanced budgets. That's been clear for years, but now Fischer and Bacon have driven a stake through its long-dead heart.

When one looks at competition in the federal budget, interest on the debt is a great threat not only to social programs, but to everything else as well. Debt interest is clearly a competitor against defense spending, which Fischer and Bacon claim to support but are endangering by relying on China* to pay for it.

This is the time for Democrats to start running political commercials centered around the proverbial family kitchen table, talking about how families have to make responsible choices, and how it is now truly time for action to stop current, incredibly reckless fiscal policy. That would be first by removing incumbents, and second by taking another look at budget reforms, including a responsible constitutional amendment that can be informed by the positive experiences of European democracies.

*Still very Red, still totalitarian, still freedom's formidable adversary.

An Answer to WOTUS

February, 2018

Washington -- Last week I attended a forum on Farm Bill conservation programs, hosted by an unlikely pair of think tanks: the progressive Center for American Progress and the libertarian, free-market oriented R Street Institute. Together, they have published "Fertile Ground," a useful guide to matters of conservation and environmental quality that Congress will address in the 2018 legislation.

The session took place in the Capitol's South Congressional Meeting Room, attended mostly by congressional staff and conservation interest groups. In other words, this was a get-together of the players.

"Fertile Ground" analyzes the potential for voluntary, market-driven conservation measures through USDA programs. It finds many promising approaches and promotes pay-for-success models involving private capital, as well as flexibility for NGO and state and local government participation. It advocates for mitigation banking efforts and creation of more environmental markets. If you want to know more about these concepts, read the report. It points out that more than $1 billion of private capital has been invested in environmental markets since 2015 and another $3 billion of private capital is earmarked for conservation if the right projects are put together.

Much enabling legislation is already authorized in existing USDA law: the Regional Conservation Partnership Program (RCCP); Conservation Innovation Grants (CIG); Conservation Stewardship Program (CSP); Environmental Quality Incentives Program (EQIP); as well as the more well-known Conservation Reserve Program (CRP) and the Agricultural Conservation Easement Program (ACEP).

What the 2018 Farm Bill needs, the think tanks say, are more resources to meet demand for these programs, which are over-subscribed. Although the report does not identify a specific source of funding, many people are hoping for crop insurance reforms that would free up funds within the Farm Bill for these programs at no additonal cost. Suffice it to say that the current crop insurance program actually impedes conservation efforts as it incentivizes the largest corporate farming businesses to exploit and pollute marginal lands with little risk, as well as to drive up the price of farmland. CBO has scored a $3.4 billion savings over ten years simply by putting a meaningful cap on crop insurance eligibility.

Enough of acronyms and scoring. What would an actual effort look like in, say, Nebraska?

If I were still in Nebraska state government doing budgeting and planning, I would see how USDA's programs might stimulate partnerships with the state's Department of Natural Resources and Department of Environmental Quality. Farmers want property tax relief; they also do not want to pollute but do not want a WOTUS-style regulatory approach from the federal EPA. Perhaps the pay-for-success model is an answer. Farmers would voluntarily adopt anti-pollution practices and in exchange their property taxes would be reduced by their county.* Counties would be reimbursed by the state thorugh a fund at the DNR or DEQ. What might be the revenue source for this fund? I'd phase out the ill-advised diversion of a quarter-cent of the state sales tax that now goes for roads and move it to property tax relief, earned voluntarily. Roads have their own source of funding – user taxes – where there is more fiscal capacity for revenue. (Even the U.S. Chamber of Commerce has advocated an increase in fuel taxes.)

Many years ago, Nebraska adopted the Duis Amendment to get the state out of levying property taxes; it then put into place a sales-income tax base to fund state government and to shift more of the local property tax burden onto the broader base. Except it hasn't worked out quite that way, and nothing exemplifies this more than the robbing of the sales tax to pay for roads rather than property tax relief.

That's just an example of how a conservation program might work, with state and local government involvement. Maybe with ingenuity, Nebraska could get some of that $3 billion in private capital for conservation.

Another example is mitigation banking, although that has its downsides. As more factory livestock farms appear, bringing along their inevitable envirnonmental impacts, corporate owners will be eager to pay for mitigation programs elsewhere, where there is a market. That could be a water quality market.

Back to the forum on Capitol Hill. I was disappointed to look at the sign-in sheet and see no Republican staffers. None, at an event sponsored by R Street Institute! Lots of Democratic staffers, however.

The way the 2018 Farm Bill is shaping up, Republican interest is centered on trying to put more work requirements into SNAP eligibility (food stamps), not on efforts to help rural America (where they think they have a lock on the voter base), even through market-oriented and private capital innovations. A question is whether Democrats will take the bait, think the Farm Bill is all about food stamps, and not press forward with ideas to help rural America, where the party is so weak in places as to be almost nonexistent.

*Many farmers are already adopting anti-pollution practices, such as better targeting of fertilizer and pesticide treatments and limiting irrigation run-off. These are being done to cut costs, as farmers are incredibly squeezed by low crop prices, high input prices, and high property taxes. Additional incentives would result in even more conservation measures such as expanding the use of cover crops, crop rotation, and greater diversification.

Broken Promises to Student Loan Borrowers

February, 2018

Washington -- In 2007, Congress established the Public Service Loan Forgiveness program for student loan borrowers who took public service jobs in government – teachers, nurses, first responders, for example – or in recognized charities. The deal was this: pay for ten years on your loan at a rate commensurate with your income, which is often low in such jobs; any loan balance remaining will be cancelled if you complied with your work and payment obligations.

In 2017, about 7,500 borrowers began to file for their part of the bargain. What they found, however, is botched paperwork by the contractor handling the PSLF program and a Department of Education unable to straighten things out, apparently neither capable nor willing to stand behind the program.

This is only the tip of the iceberg. The take-up rate of participation in the program was slow. As word gradually spread, many more thousands of borrowers signed up.

The great majority of them may be in for a rude awakening, as they find out the contractor put them in the wrong program, gave them erroneous advice on qualifying charities, or forced them out of the program by interrupting their payments while trying to handle its own sign-up backlogs.

How did this happen?

Student loan servicers often have conflicts of interest between doing what is right for the borrower and what is best for their own bottom lines.

For example, if a borrower is in default on a bank-based (FFEL) federally guaranteed loan and wants to get out of default, he or she can either rehabilitate the existing loan or consolidate it into a new government-issued Direct Loan (DL). The servicer may steer the borrower into rehabilitation, because the servicer might also be the actual loan holder on which the government is paying a subsidy and, as lender, it does not want to lose the loan to consolidation elsewhere. However, if the borrower wants not only to get out of default but also into the PSLF program to take advantage of eventual loan cancellation, that can be done only through DL consolidation.

Initial reports from borrowers suggest it was not made clear that only DL and not FFEL loans are eligible for PSLF. This is just one problem borrowers are reporting. If and when an investigation is done, I suspect many other such conflicts between borrowers' interests and servicers' bottom lines will come to light.

Now is a good time to recall a similar loan cancellation promise gone awry about the same time PSLF was initiated. The Kentucky Higher Education Student Loan Corporation established a loan forgiveness program for teachers, but when its funding source dried up, the teachers were left with nothing but an empty promise.

The KHESLC program was operated under the jurisdiction of the U.S. Department of Education, but the Department made no effort to help borrowers. Nor did any Kentucky members of Congress or senators, despite pleas from their wronged constituents.*

That is a bad omen for the PSLF program. Both the Department of Education and the Congress have a record of walking away from borrowers in loan forgiveness programs. Lenders and servicers have powerful lobbys; borrowers don't. Even when borrowers have the law on their side, they have had trouble getting their claims before the courts.

One ray of hope: several state attorneys general have now taken an interest in student loan borrowers. Suggestion to borrowers: take your case to the consumer protection division of your state attorney general's office.

* Kentucky update: Borrowers left in the lurch under the KHESLC "Best in Class" loan forgiveness program were told to participate in federal Department of Education's loan forgiveness programs. But according to actual Kentucky teachers, because of problems in the federal programs, "many were duped by both promises."

Enough with the False Patriotism

February, 2018

Lincoln -- Take it from a veteran: Nebraskans are free to stand or not for the national anthem today at the Super Bowl, despite the proclamation of Governor Ricketts. It is still a free country, which many of us have been proud to serve. It does veterans no honor whatsoever to claim such proclamations are made to respect us. To the contrary, diminishing our freedoms diminishes us and our service.*

"Patriotism is the last refuge of a scoundrel," Samuel Johnson said in 1775. Still true today.

* Personally, I stand to honor a country that permits a person the freedom not to stand.

Iron Triangles, Part IV

February, 2018

Washington -- Not surprisingly, there is more news about the Iron Triangle that now connects congressional committee staffs, the lobby group CECU, and the U.S. Department of Education. See earlier posts about Iron Triangles here, here, and here.

• Secretary Betsy DeVos has announced yet further weakening of student and taxpayer protections from predatory for-profit colleges. Two of her top advisors, Robert Eitel and Julian Schmoke, have deep roots in that sector.

• The Department of Education has awarded a student loan collection contract to Performant, a corporation with a checkered history but one in which Secretary DeVos has had a financial interest.

• The Department of Education brought back a figure from an earlier Iron Triangle, Kent Talbert, to be acting General Counsel. He formerly worked for Senator Strom Thurmond, then for House and Senate higher education authorizing committees, then as General Counsel for the Department of Education during the years it paid illegal claims to student loan lenders, 2002-2006. Thereafter, he was in legal practice with Robert Eitel in the Talbert & Eitel law firm.

• Sensing an imperfection in the Iron Triangle, Secretary DeVos has removed A. Wayne Johnson from COO at Federal Student Aid after only a few months on the job. He is being replaced by James Manning, known for being a good soldier, and Kathleen Smith, a proven veteran of Iron Triangles from her days in the interest groups, on the Hill, and twice in the Department.

Likely there is recusal paperwork on file in the Department to show that Eitel and Schmoke did not make or participate in the decision to aid for-profit colleges; Secretary DeVos surely has divested from Performant; and others with conflicts of interest likely do not have to report them as arguably they are former, not current.

Two observations: First, there is a history at the Department of Education of abuse of recusals and conflicts of interest. See the earlier post on Eugene Hickok and Matteo Fontana. Second, is Talbert not supposed to know what Eitel wants, even if Eitel is recused? Does FSA not know Performant was financed by DeVos? Of course they know, and perhaps have acted accordingly. I recall asking FSA why it was paying illegal claims to lenders in 2003. The answer was "That's what Bill Hansen wants." Bill Hansen, former lobbyist* for the lenders but then Deputy Secretary, was recused from the decision, but FSA knew his mind. The mess has never been cleaned up, although lenders got their comeuppance when Congress, fed up with corruption, false claims, bribery of college financial aid officers, and gifts of stock to Department officials, simply killed the bank-based lender program, FFEL, in 2010.

That may be the only way to deal with the current Iron Triangle: disestablish FSA. Those who follow comparative government know how other countries handle student aid more efficiently and without hurting the lives and prospects of students and their families.

There is another route that keeps coming up in lawsuits by borrowers: RICO – federal and state laws against racketeering. Iron Triangles are colloquially rackets, no doubt, but the question is are they illegal? Do acts at the Department of Education, and actions the Department permits through its contractors, constitute violations of federal or state RICO laws? Perhaps we shall soon know more, if any of these lawsuits survive.

*Hansen was head of the Education Finance Council and was succeeded there by Kathleen Smith not long thereafter. He is now on the board of Performant, which not only got a huge loan collection contract last month from the Department of Education but also benefited by advance trading in its stock before the announcement of the award, thanks to the way FSA handled the release of the information.