Implications of CBO Updated Baseline Projections

February 6, 2013 02:16 AM

Via a special arrangement with Informa Economics, Inc.

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

Following is my assessment of what the updated Congressional Budget Office projections mean relative to the development of a new U.S. farm bill:

The rebound in U.S. corn and soybean production and resulting lower prices are the likely reasons tempering spending for the U.S. crop insurance program over the 10-year budget baseline period - lower prices lower the cost of coverage and thus the costs for the program. Contacts note this could ease some of the focus on the program but subsidy opponents will still keep the program squarely in their crosshairs for the future.

Nutrition programs continue as the largest portion of outlays under the farm bill -- $760 billion out of the $976 billion total 10-year outlays projected. That is down from the 2012 baseline from CBO and will no doubt be touted by nutrition program backers as a way to try and answer those calling for drastic reductions in the program.

The shifts outlined by CBO in the baseline do not really change the overall task ahead for the House and Senate Ag Committees, but they will have a slightly bigger baseline to work with -- $976 billion vs. $970 billion. Still, exactly how the ag panels craft the legislation will still be dictated by the level of savings they will have to achieve over the next 10 years. That will have a greater say in the final product and so far there is no word yet on just what kind of reductions the Ag panels will have to work with.


COMMENTS: Some commodity group lobbyists and farm-state lawmakers who predicted the baseline would significantly and negatively impact the coming farm bill debate were errant in their outlook, based on the updated CBO baseline projections.

Nutrition dropped due to an improved economy forecast and lower participation.

Commodity Title spending increased due to lower price assumptions.

The baseline for dairy is lower, especially past FY 2013 - that could add a new challenge to constructing a dairy proposal if the final March baseline is similar.

Crop insurance spending projections were lowered due to lower commodity price projections and likely premium rate reductions outweighing indemnities.

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