Cutting spending on new farm bill would make tiny dent in the deficit

COLUMBIA, Mo. — As discussion develops on writing a 2012 farm bill and in reducing federal budget deficits, there may be talk of cutting farm subsidies.

“Defenders of current farm programs can point out that farm program spending is a tiny share of federal expenditures,” said Pat Westhoff, director of the Food and Agriculture Policy Research Institute

For comparison, look at the deficit for fiscal year 2010. It ended Sept. 30, 2010, and the federal budget deficit was $1.3 trillion. Most estimates show a budget deficit in excess of a trillion dollars again in the current fiscal year.

The net outlays in fiscal year 2010 for the USDA Commodity Credit Corporation totaled $11 billion. The Commodity Credit Corporation funds most farm commodity programs and the conservation reserve.

Adding in crop insurance, disaster programs and other conservation programs brings the farm-related spending to about $20 billion a year, Westhoff said.

Spending changes

For perspective, a trillion dollars is $1,000 billion. How did the budget get out of balance? In the preceding years the deficit ballooned from 2007 to 2009, and the individual income tax collection dropped to $249 billion and corporate tax collection dropped to $215 billion.

On the deficit side, spending on entitlements (Social Security, Medicare and Medicaid) payment increased to $220 billion. Defense spending increased to $109 billion. Non-defense discretionary spending went up to $88 billion. All other federal outlays, including the Troubled Asset Relief Program, increased spending by $274 billion.

The only component that did not contribute to the deficit was net interest paid on federal debt.

Much scrutiny

Even if USDA’s budget is not cut in 2011, farm program spending will be under a lot of scrutiny when the next farm bill is debated. Congress may begin to consider new farm legislation before many current farm programs are set to expire in 2012.

Westhoff points out some of the current spending projections from the Congressional Budget Office. The farm bill is usually written taking into account budgetary implications over the next 10 years.

The projections for the next decade under a simple extension of current farm programs could be: $63 billion for farm commodity programs, $76 billion for crop insurance and $64 billion on conservation.

Food programs are also part of the USDA budget. That includes, for the decade, $685 billion for Supplemental Nutrition Assistance Program formerly known as food stamps and $222 billion on child nutrition, including school lunches, but not counting Women, Infant, and Children programs.

“Each of these programs will have strong defenders, so it is far from obvious where cuts would be made, if the decision is made to reduce USDA spending,” Westhoff said.

Farm interest groups might point to cutting Supplemental Nutrition Assistance Program benefits, rather than farm programs.

Also expect farm groups to be unable to decide where to cut the various farm programs. Federal spending on the direct payment program, which makes fixed annual payments to producers, exceeds spending on all the other traditional commodity programs combined.

Direct payments

Already, some have said they could accept a cut in direct payments, if money was added to crop insurance and other risk management programs. However, some producers, cotton and rice, get more support from direct payments than from crop insurance.

“They are likely to oppose cuts to direct payments,” Westhoff said.

“The new Congress will face challenges and a learning curve in deciding where budget balancing efforts will be made. However, budget concerns will affect the debate for the next farm bill and other farm policy choices for years to come.”

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