The onset of the 112th Congress brings a plethora of new faces and power structure to Capitol Hill, yet the question remains as to what will happen when the “unstoppable force” of the new fiscally conservative members meets the “immovable object” known as Washington, D.C.

With the GOP now controlling forty seven seats, there will be a different power dynamic in the United States Senate, where Senator Chuck Schumer (D – NY) is expected to have a bigger role in crafting floor strategy. Conversely, a handful of freshman Republican senators are likely to challenge the party leadership when it comes to prioritizing the GOP’s legislative and political agenda.

The results of the 2010 elections brought about opportunities for a number of Senators from the AgriBank District. For example, Senator Dick Durbin (D – IL) will serve as the Minority Whip and is likely to emerge as a key player in the debate surrounding a reduction in the federal deficit. According to Capitol Hill sources, Mr. Durbin would be the key in persuading liberal members of the Democratic conference to support a deficit reduction deal that includes significant spending reductions, as well as entitlement reform. In addition, Mr. Durbin has indicated that he plans to be active in overseeing implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

On the other side of the aisle, Senate Minority Leader Mitch McConnell (R – KY) has new found relevance. The gains made by Senate Republicans last November have tilted the balance of power in the Senate toward the GOP. The Administration and Senate Majority Leader Harry Reid (D – NV) attempted to work around Mr. McConnell during the 111th Congress by trying to garner the support of centrists in the Republican Caucus. With the GOP now controlling forty seven seats it will become more imperative that the Democratic leadership deal more directly with the Republican leader.

The Senate Agriculture Committee has also seen its share of change. Whereas the 111th Congress saw Senator Saxby Chambliss (R – GA) serve as the ranking Republican on the committee, that slot is now occupied by Senator Pat Roberts (R – KS). Mr. Roberts is no stranger to agriculture policy and the crafting of farm bills, having served as Chairman of the House Agriculture Committee from 1995 – 1997.

In the House of Representatives there will be continued jockeying to determine a new pecking order for the chamber. Although many of the players remain the same, they are now faced with new roles in the 112th Congress. For example, Speaker John Boehner (R – OH) will now set the congressional agenda because the procedural rules of the House provide him significantly more power to pass legislation than his counterpart in the Senate. Although Mr. Boehner enjoys a large majority (thus allowing him to send a steady stream of bills to the Senate), he will face a challenge from within his own caucus as he tries to balance the demands of the eighty seven House Republican freshmen. Much like their Senate counterparts, these fiscally conservative members will demand immediate action on spending reductions.

Representative Kristi Noem (R – SD) has been elected by her Republican colleagues in the freshman class to serve as their liaison with the House GOP leadership – thereby giving the class a voice in leadership meetings that are a key component of setting the legislative and political agenda within the House. Conversely, Mr. Boehner and other House leaders will rely on her to manage the expectations of her freshman classmates.

It is worth noting that a handful of members from the AgriBank District have garnered subcommittee chairmanships. Representative Jeff Fortenberry (R – NE) will chair the Department Operations, Oversight and Credit subcommittee, Representative Jean Schmidt (R – OH) assumes the gavel of the Nutrition and Horticulture subcommittee and Representative Timothy Johnson (R – IL) will chair the Rural Development, Research, Biotechnology and Foreign Agriculture subcommittee. New GOP members of the full committee include Representatives Rick Crawford (R – AR), Scott DesJarlais (R – TN), Stephen Fincher (R – TN), Bob Gibbs (R – OH), Vicky Hartzler (R – MO), Randy Hultgren (R – IL), Reid Ribble (R – WI), Bobby Shilling (R – IL) and Marlin Stutzman (R – IN). The Democratic members of the committee are expected to be named in the near future.

Although agriculture and rural interests rightfully focus much of their attention on the House Agriculture Committee, House Budget Committee Chairman Paul Ryan (R – WI) will also have a measurable impact on the agriculture sector. Mr. Ryan will be at the forefront of efforts to reduce discretionary spending and reform the entitlement programs that make up the bulk of federal outlays in the next decade. His history indicates that he will not shy away from advancing politically controversial proposals and the budget blueprint that eventually emerges from his committee will have a direct impact on agriculture.

Also of note is House Financial Services Committee Chairman Spencer Bachus (R – AL), who will have oversight of implementation of the financial reforms contained within the Dodd-Frank Wall Street Reform and Consumer Protection Act. The committee has jurisdiction over banking and securities trading as well as the Federal Reserve and the government-sponsored enterprise (GSE) mortgage guarantors Fannie Mae and Freddie Mac. As such, it will be important to monitor the committee’s activities related to any potential GSE reform.

Key Budget Themes Emerge

Although the 112th Congress has only been in existence for less than a month, a number of key budget themes have emerged which will have a direct and indirect impact on agriculture and rural America. The essence of the congressional agenda is to reduce spending, create jobs and grow the economy. The new House GOP majority has indicated a desire to reduce spending to 2008 levels, thereby reducing expenditures by approximately $60 billion for the remainder of this fiscal year. They began by instituting a five-percent across-the-board reduction from their committee budgets, for an estimated saving of $25 million to $30 million. Although symbolic in nature, the move sets the stage for a debate regarding broader (and more substantive) reductions in the months ahead. However, finding billions in savings will not be an easy task and Republican leaders have not specified which programs would be impacted. The only caveat is that military, veterans and homeland security would be exempt.

Next Farm Bill Will Face Budgetary and Political Challenges

Passage of the 2008 Farm Bill was not the first time (nor will it be the last) when the budget and politics converge to make for a challenging policy environment. Crafting the 2012 Farm Bill will be equally as daunting, and is likely to be just as complex. Although the gavel has been passed from House Agriculture Committee Ranking Member Collin Peterson (D – MN) to Chairman Frank Lucas (R – OK), many of the budgetary and political dynamics remain in play.

As noted previously, many of the new House members are fiscally conservative and there are a significant number of Agriculture Committee members who have limited experience or background with rural issues. Therefore, it will take time and patience to both educate the new members of the committee – as well as arrive at sensible solutions. For his part, Mr. Peterson has shared with Chairman Lucas that he’s “not going to buy into cuts that will, in my opinion, be unfair”. He has also gone on record as saying that he is “not going to buy into any kind of Freedom to Farm kind of deal.”

There is, however, room for common ground. The 2008 Farm Bill included substantive reductions, as well as reductions to the crop insurance program via the Standard Reinsurance Agreement (SRA). In addition to a number of programs that are set to expire at the end of the current farm bill, the primary opportunity for savings within the farm bill appears to be direct payments, which have a budgetary impact of approximately $5 billion per year.

An additional area where both parties appear to be willing to work together is in oversight of the Environmental Protection Agency (EPA). A number of agriculture stakeholders and key policymakers continue to stress that the agency is guilty of “regulatory over-reach”.

Many of the same issues are being considered by key members on the other side of Capitol Hill. In an interview with the Red River Farm Network, Senate Budget Committee Chairman Kent Conrad (D – ND) indicated that he also thinks budget pressures will lead to a change in federal farm policy. He believes that there is an opportunity to continue moving toward income protection programs and that there will be a consolidation and simplification of programs across the board – thereby leading to more effective programs and reduced budgetary pressure.