Corn+Soybean Digest

Changing Hands

Republicans have controlled both houses of Congress almost continuously since 1994. This fall, the voters may be ready for a change. Opinion polls have shown widespread dissatisfaction with Republican performance and a desire by a majority of Americans to see Democrats take control of Congress.

For example, a recent Associated Press-Ipsos poll found that Americans held a low opinion of the GOP-controlled Congress and wanted Democrats in power, by a 3-1 margin.

Should Democrats win control, they have vowed to take measures to bring the surging federal budget deficit under control. “We will pass accountability legislation that will say no new deficit spending, pay-as-you go and audit the books,” House Democratic Leader Nancy Pelosi declared in a recent press conference.

If the Democrats follow through, they'd likely be joined by fiscally conservative Republicans in Congress who have complained about the spending spree that has added $1.3 trillion to the deficit between 2002 and 2004 and is expected to add another $1.8 trillion by the end of 2011, according to the Congressional Budget Office. That begs the question of what they will cut. Huge entitlement programs such as Social Security and Medicare are untouchable, as is much of the huge Pentagon budget. Farm programs are another matter.

“Make no mistake about it, farm subsidies are in the public eye because money is tight,” says Dana Hoag, professor of agricultural economics at Colorado State University (CSU). “Everybody who gets money from the government thinks they're going to lose. That puts intense pressure on everyone to justify everything they do so their program won't get cut.”

Budget cutting doesn't mean farm programs would be decimated. Farmers are too important an electoral block for that to occur, and both parties have long catered to their interests.

But they could take hits in certain areas. “I see potential that farm conservation programs, which pay farmers to adopt soil improvement measures and not to farm erodible land, would take a disproportionately high cut,” says Otto Doering, professor of ag economics at Purdue University. “Beyond that it's hard to tell.”

But some Democrats argue that farm programs need not be hit in order to restore budget discipline. For one thing, the cost of farm programs has come in $14 billion under estimate since 2002, says U.S. Rep. Collin Peterson, the Minnesota Democrat who would assume the House Agricultural Committee chairmanship if his party takes the House. “We shouldn't be cut because we've already done our share,” he says. But there is room to save money that's being wasted on some Homeland Security measures and in Iraq, he adds.

He also says Democrats won't attempt a quick budget fix, which could require sizeable cuts in numerous programs. “I don't want anybody to think we will balance the budget next year,” he says. “We didn't get into this mess overnight. To get to a balanced budget could take a number of years. What we're going to do is stop digging the hole and pay as you go.”

Budget cuts aren't the only threat to farm programs. In the latest World Trade Organization talks, many nations demanded deep cuts in U.S. farm subsidies. While the administration offered some farm subsidy cuts in return for reduced tariffs on U.S. goods, the subsidy cuts weren't deep enough to satisfy our trading partners and the talks had all but failed by mid-summer.

Some farm state legislators have been concerned that farm programs could be vulnerable if Congress finally deals with the deficit. “In 2001, when the last farm bill was drafted, America enjoyed a projected multibillion dollar budget surplus,” Rep. Stephanie Herseth (D-SD) told constituents last year. “Those surpluses have since turned into a record budget deficit, and those opposed to farm programs will use the budget situation to argue for significant cuts in the 2007 Farm Bill,” she says. “The challenge for the bipartisan coalition of farm state representatives will be to protect both the current funding levels and the safety net for family farmers.”

Of course it's possible that the Republicans could retain power and decide on their own to tackle the deficit. That, too, could spell trouble. “There's some evidence that Democrats are more supportive of farm programs than Republicans,” says CSU's Hoag. “Republicans are philosophically more market oriented. That would dictate that they would cut farm programs because they involve subsidies.”

Then there's the possibility that the budget may continue to bleed red ink regardless of which party controls Congress. That may represent the biggest threat to agriculture. “There is a point at which budget deficits matter,” says Purdue's Doering. “They will cause inflation because the federal government is shoving a lot more money into the economy than it's getting back. When you get inflation, you get big increases in interest rates. That hurts farmers. If the rate increases are big enough, they will cause land prices to fall.

“Higher interest rates also affect farm costs,” he says. “Implement companies will raise prices. It's the same thing with farm chemicals. Operating loans will cost more. But corn and soybean prices won't necessarily go up in tandem with rising farm costs. That's what we had in the farm crisis of the 1980s. We had interest rates go up. We had farm commodity prices go way down. And land prices fell so farmers couldn't use the land as collateral to borrow their way out of trouble. It was a perfect storm.”


If Democrats win a majority in the U.S. House and Senate this fall, they also gain control of the chairmanships of the House and Senate Ag Committees. Rep. Collin Peterson (D-MN) would become the House Ag Committee chairman, while Sen. Tom Harkin (D-IA) would assume the Senate chairmanship. They would replace Bob Goodlatte (R-VA) as House chairman, and Sen. Saxby Chambliss (R-GA) as Senate chairman.

Why Congress May Change Hands

The economy has been strong. Home ownership is high. Millions of jobs have been created. Why would voters want a change now? Despite these plus factors, voters have repeatedly told pollsters that they feel the country is headed in the wrong direction, and that spells trouble for the party in power. To take control of Congress, Democrats must displace 15 Republicans in the U.S. House and six Republicans in the Senate.

Here are some of the developments on voters' minds as the election approaches:

  • The war in Iraq. The war has cost thousands of American lives and hundreds of billions of dollars.

  • Rising energy prices. Rising prices can turn voters against the party in power. For instance, presidential approval ratings fall when energy prices rise, according to a May BusinessWeek analysis. President Jimmy Carter, a Democrat, lost his re-election bid in 1980 after gas prices surged to an all-time high of $38/barrel in 1979. (That's equal to $100.52/barrel in today's dollars.)

  • Rising interest rates.

  • Precedent. The president's party has historically lost seats in the sixth year of his service, according to the Associated Press. For instance, Democrats lost 72 seats in 1938, mid-way through Franklin Roosevelt's second term. Republicans lost 48 seats in 1958, Dwight Eisenhower's sixth year as President. The exception was the 1998 election, six years into Bill Clinton's presidency.

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