Randy Alison Aussenberg
Analyst in Nutrition Assistance Policy
Libby Perl
Specialist in Housing Policy
As Congress formulates the next farm bill—an omnibus bill that reauthorizes a
range of agriculture and nutrition programs—program integrity and deficit
reduction have been leading themes. One of the cost-saving measures in the
113th Congress’s
farm bill proposals would address the way in which Supplemental Nutrition
Assistance Program (SNAP) benefits are calculated. The SNAP statute allows
for certain deductions from income when calculating a household’s benefit
level, including an excess shelter deduction which incorporates utility costs. If
a family receives benefits through another federal program, the Low Income Home
Energy Assistance Program (LIHEAP), this deduction from income can be
higher, allowing for a higher SNAP benefit for the household. Bills in
both the Senate and House would limit the deduction associated with
LIHEAP, particularly seeking to end a practice that has been referred to as “Heat and
Eat.” Similar proposals were considered in the 112th Congress but were not
enacted.
Under current law, a SNAP household can use a LIHEAP payment (regardless of the
amount of that payment) to document that the household has incurred
heating and cooling costs. This documentation triggers a standard utility
allowance (SUA), a figure intended to represent typical state-specific
utility costs that enters into the SNAP benefit calculation equation. Unless
the household is receiving the maximum SNAP benefit already, a household’s
monthly benefit can increase if the inclusion of an SUA results in an
excess shelter deduction. In addition to current law, current practice of,
most recently, 17 states also affects the interaction between these
benefit programs. While virtually all SNAP states consider LIHEAP in their calculation,
approximately 16 states have implemented the so-called “Heat and Eat” policy. “Heat and
Eat” is a phrase that the low-income and anti-hunger advocacy community has
used to describe state and program policies that leverage nominal (as
little as $1) LIHEAP payments into an increase in households’ SNAP
benefits that is larger than the initial LIHEAP payment. Also, one state
allows SNAP applicants to benefit from an SUA if the household applies for
LIHEAP.
In the 113th Congress, farm bills in the Senate and House would limit “Heat and Eat”
policies:
• Under S.
954, the Agriculture Reform, Food, and Jobs Act of
2013, which was passed by the Senate on June 10, 2013, only LIHEAP
payments above $10 annually would confer this potential advantage.
Payments of $10 and below would no longer entitle a household to earn an
SUA during the benefit calculation process. If a household received less
than $10 in energy assistance, households would have to present alternate
documentation of heating and cooling costs in order to have utilities
factored into calculating their excess shelter deduction.
• Under both H.R. 1947, the Federal Agriculture
Reform and Risk Management Act of 2013, which was defeated on the House
floor on June 20, 2013, and H.R. 3102,
the Nutrition Reform and Work Opportunity Act of 2013, only LIHEAP payments
above $20 annually would confer this potential advantage.
In addition, several bills have been introduced in the 113th Congress that would go
further than the proposals in S. 954, H.R. 1947, and H.R.
3102 and eliminate the ability of households to qualify
for the SNAP SUA based on receipt of LIHEAP. Instead, households would have to present
alternative documentation of utility costs. These bills include S.
458/H.R. 1510 and S. 762 /H.R.
1657.
Date of Report: September 17, 2013
Number of Pages: 15
Order Number: R42591
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Randy Schnepf
Specialist in Agricultural Policy
The heightened price volatility of global commodity markets in 2008, the
devastating U.S. drought of 2012, China’s growing demand for international
commodities, and almost routine media reports of daunting world population
growth all raise the specter of food price inflation and generate many
questions about farm and food price movements. Understanding food price changes
and their effects on consumers is an important matter for Members of Congress
and their constituents. This report provides information on the current
status and outlook for U.S. food prices, measuring their changes and how
such changes relate to U.S. consumers.
Despite the hype associated with media coverage of international catastrophes,
historical evidence suggests that prices for retail food products are
driven more by consumer demand (strongly linked to general economic conditions),
than by price changes in raw commodity markets, although this linkage
varies with the degree of raw commodity content in the retail product. For a
discussion of the relationship between farm and retail prices, and the
major factors influencing farm-level and wholesale food prices, see CRS
Report R40621, Farm-to-Food Price Dynamics.
During the 1991 to 2006 period, U.S. food prices were fairly stable—annual food
price inflation, as measured by the Consumer Price Index (CPI) for All
Food (excluding alcoholic beverages), averaged a relatively low 2.5%.
However, several economic factors emerged in late 2005 that began to
gradually push market prices higher for both raw agricultural commodities and
energy costs, and ultimately retail food prices. U.S. food price inflation
increased at a rate of 4% in 2007 and at 5.5% in 2008—the highest since
1990 and well above the general inflation rate of 3.8%. The situation of
sharply rising prices came to a sudden halt in late 2008 when the financial
crisis led to a severe global economic recession. Annual food price
inflation dropped to 1.8% in 2009 and 0.8% in 2010, driven by the global
financial crisis and its aftermath. In 2011, improving U.S. and global
economic conditions led to a 3.7% rise in average food prices. However, by
mid-2011 through 2013, food price inflation leveled off—due in part to
continued sluggish economic growth, stagnant wages, and persistently high
unemployment, which combined to weaken consumer purchasing power. The U.S.
Department of Agriculture (USDA) projects that annual U.S. food price
inflation will be in the 2.5% to 3.5% range in 2012 and from 3% to 4% in 2013.
For households with low disposable income levels where food expenditures are a
large share of the budget, rising food prices result in diminished
purchasing power and may force difficult budgetary tradeoffs. To help
food-deficient households during periods of rising prices, many domestic
food assistance programs are linked to price inflation through escalation
clauses, in order to retain consumer purchasing power during periods of
rising food prices. However, even for households with escalation clauses,
a time lag usually occurs between the time the price inflation is measured
and the time when the wage or program benefit is adjusted upward to compensate.
The All-Food CPI has two components—Food-at-Home and Food-Away-from-Home. The
Foodat- Home CPI is most representative of retail food prices and is
significantly more volatile than the Food-Away-from-Home index. The
Food-at-Home CPI is projected at 3% to 4% for 2013, compared with 2.5% to
3.5% for Food-Away-from-Home prices. This difference is partially explained
by the larger share of farm products in the final price of retail foods than in
Food- Away-from-Home. Farm product prices are, in general, substantially
more volatile than the other marketing and processing costs that enter
into retail or ready-to-eat foods.
Date of Report: September 13, 2013
Number of Pages: 37
Order Number: RL40545
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Jim Monke
Specialist in Agricultural Policy
Randy Alison Aussenberg
Analyst in Nutrition Assistance Policy
Megan Stubbs
Specialist in Agricultural Conservation and Natural Resources Policy
Farm bills, like many other pieces of legislation, have become more complicated
and politically sensitive, and are taking longer to enact than in previous
decades. Legislative delays have caused the past two farm bills to expire
for short periods and to be extended. Expiration may become an issue again
unless Congress passes a new farm bill by September 30, 2013.
Farm bill expiration does not affect all programs equally. For instance,
appropriations action such as a continuing resolution can continue some farm
bill programs, but not all of them. Discretionary programs can be
continued via appropriations action, even if their authorization is expired.
But programs with mandatory funding generally cease operations when they expire
and are not continued in an appropriation. However, the Supplemental
Nutrition Assistance Program (SNAP) and the other programs in the SNAP
account receive appropriated mandatory funding, so these mandatory
programs may be continued with appropriated funds.
The most recent farm bill expiration was from October 1, 2012, to January 2,
2013, from the 2008 farm bill (the Food, Conservation, and Energy Act of
2008, P.L. 110-246). During this period, mandatory-funded programs such as
the Conservation Reserve Program and Market Assistance Program ceased new
operations. SNAP’s authorization expired, but continued via appropriations action.
An outdated and expensive “permanent law” for the farm commodity price support programs
was about to be resurrected on January 1, 2013. However, the American Taxpayer Relief
Act of 2012 (P.L. 112-240) extended all 2008 farm bill provisions that were in
effect on September 30, 2012, for one additional year until September 30,
2013. For the farm commodity programs, the extension covers crops harvested
in 2013 and dairy price support through December 31, 2013. Crop insurance
is permanently authorized and did not expire.
The one-year extension preserves the budget baseline to write a new farm bill
in 2013. Moreover, the extension incurred no net cost because the
mandatory funding to continue the major farm bill programs was already in
the budget baseline, such as for the farm commodity, conservation, trade,
and nutrition programs. However, the extension forestalled the projected
reductions in spending estimated to come from the 2012 farm bill proposals
to restructure many farm bill programs. A future extension could be budget
neutral, could make some changes to achieve deficit reduction, or could
continue policies that are not included in the baseline (thereby increasing
estimates of spending).
Though many programs were continued, a subset of the 2008 farm bill programs
expired and remained expired throughout 2013. They did not have a
continuing mandatory baseline beyond 2012 and did not receive any additional
mandatory funding under the extension or discretionary funding under the
FY2013 appropriation. This group includes certain agricultural disaster assistance
programs, conservation programs, specialty crop research, organic research and certification,
beginning and socially disadvantaged farmer programs, rural development, bioenergy,
and farmers market promotion programs. Many of these programs would have been funded
in the five-year farm bills that the House and Senate considered.
In 2013, concern over proposed budgetary reductions—especially those to
nutrition programs, which are too large for some and too small for others—again
is complicating action on a new farm bill. The one-year extension in P.L.
112-240 sets up the possibility for similar expiration and extension
issues in 2013 as were experienced in 2012.
Date of Report: September 16, 2013
Number of Pages: 28
Order Number: R42442
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Remy Jurenas
Specialist in Agricultural Policy
Joel L. Greene
Analyst in Agricultural Policy
Most retail food stores are now required to inform consumers about the country
of origin of fresh fruits and vegetables, fish, shellfish, peanuts,
pecans, macadamia nuts, ginseng, and ground and muscle cuts of beef, pork,
lamb, chicken, and goat. The rules are required by the 2002 farm bill (P.L.
107-171) as amended by the 2008 farm bill (P.L. 110-246). Other U.S. laws have
required such labeling, but only for imported food products already
pre-packaged for consumers. The final rule to implement country-of-origin
labeling (COOL) took effect on March 16, 2009.
Both the authorization and implementation of COOL by the U.S. Department of
Agriculture (USDA) have been controversial, particularly for the labeling
rules for meat and meat products. A number of livestock and food industry
groups continue to oppose COOL as costly and unnecessary. They and the
main livestock exporters to the United States—Canada and Mexico— view the
requirement as trade-distorting. Others, including some cattle and consumer
groups, maintain that Americans want and deserve to know the origin of
their foods.
Less than one year after the COOL rules took effect, Canada and Mexico
challenged them in the World Trade Organization (WTO), arguing that COOL
has a trade-distorting impact by reducing the value and number of cattle
and hogs shipped to the U.S. market, thus violating WTO trade commitments
agreed to by the United States. In November 2011, the WTO dispute settlement (DS)
panel found that (1) COOL treats imported livestock less favorably than like
U.S. livestock (particularly in the labeling of beef and pork muscle
cuts), and (2) COOL does not meet its objective to provide complete
information to consumers on the origin of meat products.
In March 2012, the United States appealed the WTO ruling. In June 2012 the WTO’s
Appellate Body (AB) upheld the DS panel’s finding that the COOL measure
treats imported Canadian cattle and hogs, and imported Mexican cattle,
less favorably than like domestic livestock. But the AB reversed the
finding that COOL does not fulfill its legitimate objective to provide
consumers with information on origin. The Obama Administration welcomed
the AB’s affirmation of the U.S. right to adopt labeling requirements to
inform consumers on the origin of the meat they purchase. Participants in
the U.S. livestock sector had mixed reactions, reflecting the heated debate on COOL
that has occurred over the last decade.
The WTO’s Dispute Settlement Body (DSB) adopted the AB and DS panel reports in
July 2012. A WTO arbitrator set a deadline of May 23, 2013, for the United
States to comply with the WTO findings. In order to comply, USDA issued a
final rule requiring that labels show where each production step (i.e.,
born, raised, slaughtered) occurs and prohibits commingling of muscle cut meat
from different origins.
COOL’s supporters have applauded the final rule for providing consumers with
specific and more useful information on origin. Domestic opponents decried
the rule, arguing that it is more discriminatory than the previous rule
and imposes additional recordkeeping burdens on processors and retailers,
and in turn, additional costs on consumers. In July 2013, COOL opponents
filed suit to stop USDA from implementing the final COOL rule. However, in September,
the court decided against granting a preliminary injunction against the rule.
Canada and Mexico have expressed disappointment with the final rule, and argue
that it does not bring the United States into compliance with its WTO
obligations. In August 2013, Canada and Mexico requested the establishment
of a compliance panel to determine if the final COOL rule complies with
WTO findings. Once the compliance panel is formed, a panel report could be released
within 90 days. The compliance report could be appealed. Depending on the
outcome of
the compliance ruling(s), procedural timelines, and whether or not the case
progresses to the retaliation phase and arbitration, the WTO COOL case may
not be concluded before 2015.
Date of Report: September 16, 2013
Number of Pages: 50
Order Number: RS22955
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