How Agriculture Would be Impacted Via House FY 2013 Budget Resolution

March 27, 2012 06:49 AM
 
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via a special arrangement with Informa Economics, Inc.

Details on mandatory spending involving farm programs, food stamps


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


The House this Wednesday and Thursday will debate and eventually vote on HConRes 112, Budget Resolution for FY 2013, which calls for reductions in deficits and the growth of debt through major cuts in non-defense discretionary spending and mandatory spending over the next 10 years and beyond. It cancels the sequestration of discretionary spending scheduled for January 2013 under the Budget Control Act, primarily to prevent cuts in defense, and assumes a deficit-neutral overhaul of the tax code that reduces tax rates while eliminating deductions.

For FY 2013, it calls for $3.5 trillion in outlays, while assuming revenue of $2.9 trillion, for a net deficit of $797 billion. Non-war discretionary spending is capped at $1.028 trillion, $19 billion below the level set by the Budget Control Act.

To replace the canceled sequester, it includes reconciliation instructions for six House committees, including Agriculture, to propose substitute savings from mandatory programs (including the coming farm bill).

Medicare and food stamps two big focus issues. The measure assumes significant future savings by restructuring Medicare into a "premium support" system beginning in 2023, converting Medicaid and the food stamp program into block grants to states, and repealing the 2010 health care overhaul.

Overall, the budget resolution calls for spending to total $40.1 trillion over the next 10 years, which the Budget Committee says would be $3.8 trillion less than what cumulative spending would be under a "current policy" baseline. Cumulative deficits over the 10-year period would total $3.1 trillion, decreasing from $797 billion in FY 2013 to $166.2 billion in FY 2018, and then rising to $287 billion in FY 2022. It is estimated that the budget would reach balance by about 2039, based on CBO's current economic assumptions.

Compared to President Obama's FY 2013 budget proposal, the resolution assumes $5.3 trillion less in spending through FY 2022 and $2 trillion less in revenues, which would result in $3.3 trillion less in accumulated deficits over that period.

As a share of the economy, the resolution assumes that revenue will remain between 18% and 19% of GDP, with a long-term goal of 19% of GDP, while spending would decline from an estimated 23.4% of GDP in FY 2012 to 19.3% in 2018, and then rise slightly to 19.8% of GDP in FY 2022. As a consequence, deficits would fall to 1.7% of GDP in FY 2015 and remain at about the 1% of GDP level from 2017 to 2022.

The budget calls for spending to decline to 16% of GDP by 2050, with debt held by the public declining to 10% of GDP as the nation begins running budget surpluses.

Impact on Agriculture Spending

Reconciliation Savings to Replace Sequester. To help replace the discretionary savings lost by preventing the January 2013 sequester, the budget includes reconciliation instructions directing six House committees to report legislation that would modify mandatory programs to produce a total of $18.4 billion in savings for FY 2012 and FY 2013 and $261.5 billion in savings over 10 years. Those savings would be in addition to the $19 billion in discretionary savings achieved in the resolution by lowering the overall discretionary cap for FY 2013.

The following six committees would be required to report legislation by April 27 that achieve the specified savings:

Agriculture — $8.2 billion through FY 2013 and $33.2 billion through FY 2022;

Energy and Commerce — $3.75 billion through FY 2013 and $96.8 billion through FY 2022;

Financial Services — $3 billion through FY 2013 and $29.8 billion through FY 2022;

Judiciary — $100 million through FY 2013 and $39.7 billion through FY 2022;

Oversight and Government Reform — $2.2 billion through FY 2013 and $78.9 billion through FY 2022; and

Ways and Means — $1.2 billion through FY 2013 and $53 billion through FY 2022.

(Overlapping recommendations between the committees would reduce the overall totals.)

The budget reconciliation process provides for expedited consideration of legislation (including protection from a filibuster in the Senate) to change tax laws and mandatory spending programs in order to bring spending and revenues in line with levels specified in the budget resolution. Under the process, legislation reported by the individual committees is combined by the Budget Committee into a single measure for House floor consideration.

Decisions regarding the actual policy modifications are left to the discretion of each individual committee; they must only meet the savings goal set by the budget resolution.

The committee report suggests numerous policy changes that could be included to produce savings, including requiring federal employees to contribute more to their pensions, repealing certain federal authorities included in the 2010 Dodd-Frank financial services regulatory overhaul law ( PL 111-203 ), means-testing entitlements, modifying federal health care programs to reduce spending, and reforming the medical liability system.

The report notes that it assumes quick enactment of the reconciliation measure to provide savings as soon as possible, including savings from repealing expansions of the food stamp program that would become effective on July 1 of this year.

None of the above, however, are required under the resolution.

Non-Defense Discretionary Spending: Agriculture.

Discretionary programs within the agriculture function include various Agriculture Department activities, including research and education programs, economics and statistics services, administration of the farm support programs, farm loan programs, meat and poultry inspection and a portion of the Public Law 480 ( PL 83-480 ) international food aid program.

The resolution calls for $5.9 billion in budget authority in FY 2013 for discretionary programs in the agriculture function, just slightly below current levels. The bulk ($15.8 billion) of budget authority in the agriculture function is mandatory funding for commodity, crop insurance and some farm loan programs. The budget recommends a reduction in mandatory farm support programs (see Agriculture: Mandatory Spending).

Manding Spending: Agriculture.

Food Stamps. The budget assumes savings of $123 billion over 10 years by converting the Supplemental Nutrition Assistance Program (SNAP, also known as food stamps) into block grants to states.

According to the committee report, the resolution envisions converting SNAP into an allotment tailored for each state’s low-income population, indexed for inflation and eligibility. However, no changes would be made to the program until 2016, presumably after employment has recovered, to give states time to structure their own programs.

The committee also proposes the program be modified to make aid contingent on work, education or job training, and recommends that broad-based categorical eligibility for SNAP be narrowed so participation in certain other federal programs doesn't automatically qualify an individual for SNAP.

Farm Programs. The budget assumes savings of 29.3 billion through FY 2022 by modifying farm support programs through enactment of a new farm bill.

The committee notes that with farm income, crop prices and federal deficits hitting new highs, and with food prices rising, "it is time to reform agricultural support programs, while maintaining a strong safety net for farmers." The committee suggests that savings could be achieved by reducing both direct payments and crop insurance subsidies, and by reforming export assistance programs.



NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


 


 

 

 

 

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