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Ag Subsidies Targeted as Fiscal Cliff Looms

December 6, 2012
By: Boyce Thompson, AgWeb.com Editorial Director google + 
Lucas 008
Rep. Frank Lucas (R-Ok.) speaks at Farm Journal Forum 2012  

Savings in competing farm bills tempt lawmakers as deadline looms for fiscal cliff action

As much as $35 billion in federal farm support is under scrutiny as lawmakers on both sides of the aisle look for ways to selectively chop spending and raise tax revenue before automatic actions take place on New Year's Eve.

Rep. Frank Lucas (R-Okla.), chairman of the House Agriculture Committee, made it clear at today's newsmaker session at the Farm Journal Forum conference in Washington, D.C., that federal agricultural programs are on the table as Congress and the White House look for ways to sidestep the fiscal cliff.

Lucas highlighted the difficulty of changing so many federal programs in so little time--three weeks. "It's a daunting process," he said, "but it can be done." At the same time, Lucas cautioned against moving too fast, given the complicated nature of federal agricultural programs.

He suggested that Congress may need a transition plan for ag programs while new regulations are created by the USDA. It doesn't make sense to eliminate one safety net, he said, without having another in place.

Speaking later in the program, Sen. Debbie Stabenow (D-Mich.) said she would oppose an extension of current agriculture programs, though she would be open to a transition plan to new programs.The chairwoman of the Senate Agriculture Committee emphasized the need for Congress to act on a farm bill before the end of the year. "What we need to do is get this done," she said.

If Congress and the White House fail to reach agreement on a deficit reduction package before the end of the year, $600 billion in automatic spending cuts and tax hikes will take place. The Congressional Budget Office has predicted that the automatic cuts may be draconian enough to send the economy into recession.

"If the powers that be--the White House and the Republican leadership in the House--can come to an agreement, we need to be ready, and there's no reason we can't be ready," Lucas said. The congressman envisions a budget reconciliation process, with congressional committees receiving targets for budget savings, with deadlines and perhaps even program requirements.

Lucas met with a bipartisan group of Senate and House leaders in the farm bill debate earlier in the week. The meeting included Stabenow (D-Mich.) and her ranking minority member, Sen. Pat Roberts (R-Kan.). Rep. Collin Peterson (D-Minn.), the ranking minority member of the House Agriculture Committee, was also part of the discussion.

The Obama deficit-reduction proposal announced last week specifically targets farm supports as part of a package of $250 billion in budget cuts. The GOP proposal, announced earlier this week by Speaker of the House John Boehner (R-Ohio), includes $300 billion in unspecified cuts in federal spending programs. Both sides seem eager to capitalize on the savings captured in the House and Senate farm bills.

The White House proposal reportedly contains $30 billion in cuts to direct payments, $7.5 billion in cuts to crop insurance over 10 years, and an additional $2 billion in cuts to conservation programs. Some of the savings would be used to pay for disaster relief. The proposal doesn't include cuts in food stamps.

The deficit-reduction package promoted by Boehner and signed by Republican leaders is modeled after the proposals of a 2011 commission on budget deficit reduction. The commission recommended $15 billion in agriculture cuts over 10 years. The cuts were to be made to direct payments and other farm subsidies, conservation programs and export promotion programs.

A farm bill that passed the Senate earlier this year produced $23 billion in savings. A bill passed by the House Agriculture Committee captured even more savings: $35 billion. But half of that would come from cutting food stamps. Staffers have been meeting to hammer out a compromise bill that could produce $30 billion or more in savings, according to published reports.

Treasury Secretary Timothy Geithner, in a series of television interviews last weekend, repeatedly pointed to farm reform as a way to save a lot of money. Speaking on Candy Crowley's "State of the Union" show, Geithner said that limiting farm subsidies can save "a significant amount of money." On the Republican side, Boehner has been an outspoken critic of federal farm support.

"We all know that agricultural programs are on the table whether we are in the room or not," said Stabenow.

Both the House and Senate versions of the farm bill eliminate direct payments to farmers, saving $46 billion. They would replace payments with broadened insurance programs and other forms of support. The House bill retains producer choice between a counter-cyclical price program and a revenue enhancement program. The Senate bill would revise the revenue program with a slightly higher guarantee than the House bill.

Lucas made it clear that he supports the House version of the bill because it gives producers choice. Even in the best of times, he said, the revenue protection in the Senate bill won't work for every farmer everywhere. He also emphasized the importance of crafting a bill that protects all types of farmers: "If we can't have a bill that everyone participates in, then why have a bill?"

But a deep rift remains between the parties over how much, if anything, should be lopped from the food stamps program, which accounts for roughly 80% of farm bill spending. The federal government last year spent $78 billion on Supplemental Nutrition Assistance. The Senate-passed bill would lop $2.3 billion a year off that tab. The House Agriculture bill ups the ante to $3.5 billion annually.

The House bill also creates a voluntary insurance program to pay dairy farmers enough to remain profitable when milk prices drop too low. To get into the program, however, farms would have to produce less milk when prices fall below a certain level in an effort to stop prices from falling further. 

The Senate bill replaces direct payments with a risk-based coverage program it calls Ag Risk Coverage. The program is designed to complement crop insurance to protect against price and yield losses. Farmers would make a one-time choice between coverage at the individual farm or county level. Payments would be made only when losses occur on acreage that’s actually planted. Losses will be calculated from benchmark revenue using an Olympic average of the previous five crop years. Also, those obtaining subsidized crop insurance would have to comply with conservation requirements.

For More Information
Read more news and coverage of the 2012 Farm Journal Forum.


 

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COMMENTS (9 Comments)

Joshua - Bozeman, MT, MT
Sorry Tom but you need to take some economics training on ag policy. Target prices, gov't commodity storage and subsidized insurance all encourage oversupply and don't let market forces dictate. Do you remember the 80's and 90's? There were a number of years where our marketing plans were based around LDP rates as much as the commodity prices!
Furthermore as farmers we are crazy to let the DCP payments slip away. Direct payments are the only non-distorting subsidies in the eyes of the WTO. We live in a world market and we would do well to remember that.
I'm sorry the DCP contract doesn't cover Milk production but you have your own support system, maybe you should work on changing that!
Freedom To Farm was a good farm bill and we shouldn't toss it out for political expediency!


12:41 PM Dec 8th
 
Joshua - Bozeman, MT, MT
Sorry Tom but you need to take some economics training on ag policy. Target prices, gov't commodity storage and subsidized insurance all encourage oversupply and don't let market forces dictate. Do you remember the 80's and 90's? There were a number of years where our marketing plans were based around LDP rates as much as the commodity prices!
Furthermore as farmers we are crazy to let the DCP payments slip away. Direct payments are the only non-distorting subsidies in the eyes of the WTO. We live in a world market and we would do well to remember that.
I'm sorry the DCP contract doesn't cover Milk production but you have your own support system, maybe you should work on changing that!
Freedom To Farm was a good farm bill and we shouldn't toss it out for political expediency!


12:41 PM Dec 8th
 
Glen - AB
The stabilization program mentioned sounds a bit like its canadian counterpart. As a canadian farmer, I think it would be very desirable for both countries to make massive cuts in ag subsidies. Now is a good time with commodity prices so high. Maybe the europeans would join in, too.
7:30 PM Dec 6th
 
FG - cuba, IL
"The proposal doesn't include cuts in food stamps."

That says it all and that is where the money really is.

Total 'food assistance' in the 2012 budget was $111.9 billion. That is for one year and not strung out over 10 years.

I would not mind the cut in ag subsidies if the welfare state were taken on. But Obama loves the welfare state and the Republicans are too gutless to take him on.

USDA ='s USDFS (United States Department of Food Stamps)
6:52 PM Dec 6th
 
FG - cuba, IL
"The proposal doesn't include cuts in food stamps."

That says it all and that is where the money really is.

Total 'food assistance' in the 2012 budget was $111.9 billion. That is for one year and not strung out over 10 years.

I would not mind the cut in ag subsidies if the welfare state were taken on. But Obama loves the welfare state and the Republicans are too gutless to take him on.

USDA ='s USDFS (United States Department of Food Stamps)
6:52 PM Dec 6th
 
mps - Paris, TN
I agree a lot of money needs to come out of agriculture and regulation too.
4:29 PM Dec 6th
 
mps - Paris, TN
"The House bill also creates a voluntary insurance program to pay dairy farmers enough to remain profitable when milk prices drop too low."

This is totaly false!
4:05 PM Dec 6th
 
Tom - TX
Targeting farm subsidies is laughable. If you eliminated all subsidies, it would amount to only about 1/4 of 1% of the total budget. Farm subsidies are an easy political target which I guess is self explanatory.
10:28 AM Dec 6th
 
TOM - KENNEWICK, WA
The insurance programs make sense, in fact I would like to see a move to private insurance.

This way a guy who wants to insure against disaster can manage that risk if he needs to, and if he can self insure then he doesn't need to.

You can also make a case for the government buying grain when the price is low and the supply high and then selling it when the price is high and the supply low; first of all it costs nothing, second of all it creates stability,

But the strait pay-outs are just welfare for farmers; I guess the dairyman does work harder than everyone else, so it is basically corporate welfare, and really people who work that hard shouldn't need any government payments so we should figure a different way to take care of the dairy sector using free-market principles.

The problem is that government intervention creates more government intervention which is why our Auto companies go broke, it is why our medical cost are so high and it is why colleges can charge historically high tuition (student loans, just as loan interest government loans caused the distortions in the real estate market)

I think we need a plan to transition out of government plans so we can steer our ship ourselves and not wait in fear while DC decides our fate.
9:48 AM Dec 6th
 



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