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Writing the 2012 Farm Bill: Is there any money?. Roman Keeney 08/19/2011. Budget and the Farm Bill. August 1-2, 2011: House of Representatives, Senate, and President Obama approve a $2.4 trillion deficit-ceiling increase. Cut $917 billion in spending over 10 years

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Presentation Transcript
budget and the farm bill
Budget and the Farm Bill
  • August 1-2, 2011: House of Representatives, Senate, and President Obama approve a $2.4 trillion deficit-ceiling increase.
    • Cut $917 billion in spending over 10 years
    • Raise debt limit initially by $900 billion
    • Committee to find $1.5 trillion in deficit savings by year’s end
  • Key Events
    • Budget committee appointments
    • Election year fiscally responsible campaigns
implications for 2012 farm bill
Implications for 2012 Farm Bill
  • Mandatory vs. Discretionary Spending in Farm Bill
    • Mandatory Programs
      • Have baseline beyond expiration of 2008 farm bill, assumed to continue under current law (though programs revert to prior farm bill)
      • All farm commodity programs; most nutrition and conservation programs; and research, bioenergy, and rural development programs
    • 37 programs that are not guaranteed funds at the end of the 2008 farm bill
      • Estimated $9-$10 billion over five year period
      • Paid for from the agriculture committee’s budgetary resources
      • Include: forest and wetland services, WIC, domestic and international marketing assistance, and more
current farm bill allocation
Current Farm Bill Allocation

*Includes Rural Development, Research, Food Safety, and Marketing and Regulatory functions

Source: USDA

expected 2012 farm bill outlays
Expected 2012 Farm Bill Outlays

*Includes Rural Development, Research, Food Safety, and Marketing and Regulatory functions

Source: USDA

why has the commodity share in spending changed
Why has the commodity share in spending changed?
  • Fixed direct payments are provided regardless of market outcomes or producer decisions
  • The farm bill has significant budget exposure on the commodity side for a number of large acreage crops
    • Counter-cyclical payments
    • Loan deficiency payments
    • ACRE
  • Strong markets have meant few outlays under these programs
  • Meanwhile, nutrition assistance has been expanded and the recession has made more families eligible
2008 baseline performance
2008 Baseline Performance
  • 2008 baseline under estimate of nutrition spending
    • (~2/3 was the CBO score share)
  • 2008 baseline over estimate of commodity spending
    • (~1/10 was the CBO score share, not including crop insurance)
2013 2018 baseline caps the next farm bill
2013-2018 Baseline caps the next farm bill
  • Best-case scenario
    • Budget neutral farm legislation
    • Make use of the full baseline spending
  • More likely scenario: some reduction from the full baseline
  • “We’ve been hearing $10 billion to $48 billion in cuts to agspending.”

-Sen. Charles Grassley (R-Iowa)

increased spending on commodity objectives can come from
Increased spending on commodity objectives can come from…
  • Nutrition/SNAP
  • Direct Payments
  • Conservation
  • More likely any programmatic reductions contribute directly to deficit reduction
  • Could recalibrate CCP, LDP, ACRE at low budget/baseline costs
    • Budget exposure could be large
2012 farm bill proposals
2012 Farm Bill Proposals
  • Fiscal Commission: reduce mandatory agricultural spending by $15 billion from FY2012 to FY2020
    • Reduce DP when price exceeds cost of production
    • Limit conservation programs
    • Reduce the Market Access Program (exports)
  • Bipartisan Debt Reduction Task Force: reduce mandatory spending by $30 billion through FY2020
    • Reduce Adjusted Gross Income cap and lower max DP
    • Reduce crop insurance reimbursements to private insurance companies
    • Reduce crop insurance premium subsidies to farmers
    • Consolidate and cap agricultural conservation programs
proposals for 2012 farm bill cbo
Proposals for 2012 Farm Bill (CBO)
  • Obama Administration’s FY2011 budget request: reduce farm commodity programs by $2.6 billion over FY2011-FY2020
    • Reduce Adjusted Gross Income cap and lower max DP
    • Reduce Market Access Program
  • Large mandatory programs are not immune to budget cuts
    • Farm commodity programs, conservation programs, crop insurance
    • Nutrition programs are ‘tougher’ to cut
    • Crop insurance outlays have significantly increased and have surpassed farm programs in spending
reducing direct payments
Reducing Direct Payments
  • DP majority of commodity pmts. in CBO 10-year projection
  • Cost about $5 billion per year, regardless of market conditions
    • CCP cost about $1 billion per year
  • WTO friendly but difficult to justify to taxpayers in a sector with strong performance and high income operators
views on us commodity policy
Views on US Commodity Policy

DISFAVOR

LDP—Floor Price

ACRE—Counter-cyclical Revenue

External Citizenry

CCP—Counter-cyclical Price

DP—Fixed Transfer

DISFAVOR

FAVOR

Domestic Citizenry

public opinion on commodity support
Public Opinion on Commodity Support
  • Public opinion survey (2009)
    • Subsidies given on a regular basis regardless of good/bad year?
      • 40 percent favor when asked about small farms
      • 15 percent favor when asked about large farms
    • Payments in bad years are much more favored
  • NY Times Editorial Board (2009)
    • “…indefensible program of direct payments…”
views on reducing direct payments ag spending
Views on Reducing Direct Payments/Ag Spending
  • “We have to expect that agriculture will have to contribute … to deficit reduction”

-Sen. Kent Conrad (D-N. Dak), chairman of the Senate budget committee

  • “The department is prepared to do as much as we can with fewer resources, but there is no doubt that cuts will have a real impact on American agriculture and on American people. There will be pain, and everyone will have to sacrifice something.”

-Agriculture Secretary Tom Vilsack

views cont
Views (cont.)
  • “If you’re a farmer like me, you’re going to expect less. Something’s going to go away. The direct payments are going to go away.”

-Rep. Tim Huelskamp (R-KS)

  • “There’s no sacred cows anymore…The bottom line is, ag should be cut like everything else, but no more than anything else. I think direct payments will be done away with.”

-Sen. Charles E. Grassley (R-Iowa)

  • "In times of record-high prices [the government is] still handing out money like this, it's just politically not possible, feasible or popular these days”

-Anthony Bush, National Corn Growers Association.

  • “We shouldn’t be giving corporate farms, these large agribusiness companies, subsidies. I strongly believe that.”

-Rep. Paul D. Ryan (R-WI), chairman of the House Budget Committee

alternate views on direct payments
Alternate Views on Direct Payments
  • “We’ve been hearing $10 billion to $48 billion in cuts to ag spending,’ he said. ‘Farmers are ready to do their part, but agshould not take the disproportionate amount of cuts.”

- Sen. Charles Grassley (R-Iowa)

  • “You can cut agriculture all day long and twice on Sunday and it won’t move the needle on debt and deficits….Washington cannot balance its books on a policy that makes up just one-quarter of 1 percent of the total federal budget.”

- Congressman Mike Conaway (R-Texas)

  • “U.S. farm supports account for less than 1.0 percent of the federal budget.”

- Jack Roney, American Sugar Alliance

farm operator views
Farm Operator Views
  • “I’m sure they’re going to go away. It’s all giveaways — any entitlement program is a giveaway,” said Don Paxson, 72, who farms corn and wheat and said he received about $8,000 this year in subsidies.
  • “We need to wean them off everything — any income from the government. It’s all a welfare state,” said Carl Quint, 56, another farmer who stands to lose money.
  • A third farmer, Williard Riggs, 86, shrugged and said: “They’ve got to cut somewhere.”
will there be direct payments in the next farm bill
Will there be direct payments in the next farm bill?
  • Almost certainly in some form
    • Less lucrative at least toward the end of the legislation (phase down/out)
    • Address additional objectives
      • Conservation Security Program style service payments or stringent compliance guidelines
      • More likely if there are conservation spending cuts
    • Payment limits and means testing will be the key reform that generates projected budget savings
      • How difficult they are to organize/manage around will be the key for realized savings.
will there be a 2012 farm bill
Will there be a 2012 Farm Bill?
  • Highly unlikely
    • Heated election year means that the rural bipartisan coalition that normally writes farm bills will not be available
    • 2008 farm bill passage facilitated by Republicans trying to be progressive
    • Hearings to date have not generated momentum
    • Budget negotiations were nonspecific about agriculture
    • Direct payment quotes seem like lip service.
    • If deficit spending is high on the agenda, the cost/benefit doesn’t make the agriculture bill a priority. Extend with a promise to cut in 2013.
closing evaluating farm bill discourse
Closing: Evaluating Farm Bill Discourse
  • Be leery of $ numbers in agricultural policy discourse
    • “$5 billion in direct payments to mostly wealthy farmers…”
      • Is this more or less than wealthy non-farmers receive from the government?
      • Is it an effective means of supporting the agric. sector?
    • “Agricultural subsidies are X billion $ in a Y trillion $ economy…”
      • Is low cost “good” or just lowering the probability of notice?
      • What’s the best alternative use of the money?