USDA’s unused case to push own rule

In a striking, two-and-a-half page analysis that ran counter to department leanings, the chief economist at the U.S. Department of Agriculture strongly objected to the department’s use of two outside studies that justified the massive retooling — essentially gutting — of the 2010 update of Grain Inspection, Packers and Stockyards Administration (GIPSA) rules to ensure fairness in livestock and poultry markets.

Freedom of information

The memo was one needle in a nearly 1,700-page haystack USDA forked over in reply to Freedom of Information Act requests by the Organization for Competitive Markets. OCM filed the requests to examine the background material USDA used to water down its proposed GIPSA rule last summer after more than a year of fence-sitting by the department and pounding by meatpackers, their contract growers and politicians.

Joseph Glauber, USDA’s chief economist, started his July 2011 “Comments on Draft Cost & Benefit Analysis” with a tough tone.

Economic inputs. “Draft CBA [cost benefit analysis] reads more like a summary of comments than a cost benefit analysis where each of the economic inputs” — reports from Informa Economics and RTI, the two non-government studies used by USDA to support its weakening of the rule — “should be scrutinized and adjusted.” (Read it and other GIPSA documents at www.farmandfoodfile.com.)

“Accepting both studies w/o [without] such scrutiny is problematic and misleading.”

Proposed rule

That was especially so with the Informa study, a 71-page report on the original proposed rule that was bought and paid for by the very industry — the National Meat Association — the rule was designed to reign in.

“Informa inaccurately claims that the proposed rule,” continued Glauber “‘relieves plaintiffs from the burden of proving competitive injury.’”

The claim was patently false, but for most of the previous year meatpackers and their allies in the National Cattlemen’s Beef Association and the National Pork Producers Council had repeatedly described it as “a trial lawyer’s dream.”

Economic damages

That “this ‘is the most damaging’ provision in the rule,” Glauber wrote, was as wrong as Informa’s claim that “‘simply removing that one provision could reduce the economic damage expected from the rule by nearly 75 percent.’”

Glauber could challenge the Informa claims for two reasons.

First, since “the final rule was only codifying the existing position,” he wrote, nothing in the nearly 90-year history of the Packers and Stockyards Administration remotely suggested litigation costs were anywhere near the wild-eyed guesses of Informa.

In fact, Glauber added, “Our review of historical ligation costs indicates there are only about 4 cases brought under P&S [Packers and Stockyards] Act each year and that the litigation costs are around $12m/yr.”

That’s $12 million, not the “nearly 75 percent” of Informa’s total estimated cost, $1.6 billion, of the GIPSA rule.

GIPSA cost analysis

Glauber also knew Informa’s claims were false because the GIPSA staff had done its own cost–benefit analysis — they were livestock and poultry market experts, after all — and had flooded him and USDA higher-ups with facts and figures that showed the meatpackers and their “experts” had weighted their reports with unsubstantiated fat.

What’s curious, however, is that the chief economist seemed to favor the industry take over GIPSA’s until the rule was altered. After it was changed, he leaned toward GIPSA’s analysis.

Whatever the reason for the switch, Glauber was frank in his review of USDA’s effort to push the changed rule through the bureaucracy. He listed more than 10 “specific areas where draft CBA did not include adjustments for changes made in the final rule.”

Wow.

Uncompetitive

So what was going on inside USDA last July as it revisited, then all but junked, the Obama administration’s signature ag proposal, the GIPSA rule, to address growing complaints by farmers and ranchers that livestock markets were increasingly dysfunctional and uncompetitive?

Very little out the ordinary: Big business and their lackeys had bought a very favorable economic study that USDA was using — over the objections of its own officials — to justify the gutting of its own proposed rule. Sounds like classic Washington policymaking to me.