Domenici-Rivlin deficit reduction plan would cut farm program spending over $3 billion per year

By Jon H. Harsch

© Copyright Agri-Pulse Communications, Inc.

Washington, Nov. 17 – Echoing the farm program spending cuts proposed in last week's Bowles-Simpson deficit reduction plan, the Domenici-Rivlin plan announced Wednesday details over $3 billion in annual cuts to USDA programs. (For an overview of the Domenici-Rivlin plan, go to: www.agri-pulse.com/Domenici_Rivlin_Deficit_Reduction_Plan_20101117H.asp.)

This week's Bipartisan Policy Center's “Restoring America's Future” report acknowledges the need for USDA farm programs. It notes that:

• “The federal government plays an important role in the farm sector because agricultural markets do not always efficiently balance supply and demand in the way that one would expect normal markets to behave. Consumers typically do not respond to changes in the price of staple food items by buying proportionally smaller or larger quantities of food, and farmers cannot easily respond to price changes by reducing or increasing production. These imbalances are exacerbated by the long time lag between crop planting or livestock breeding and harvest, as well as agriculture’s innate susceptibility to shocks from environmental changes or natural disasters.”

• “In light of these factors, the Agriculture Department (USDA) provides support to U.S. farmers through various programs, including: three types of commodity payments aimed at stabilizing farm income; crop insurance to protect against crop failure and disaster relief; direct and guaranteed loans to make credit available for planting and marketing; agricultural research and education; regulatory programs to preserve the integrity of the food supply from pests and diseases; conservation programs to protect soil, water, and other natural resources; marketing and export promotion programs; and food aid.”

  
  

  "Restoring America's Future" report co-chairs Alice Rivlin and Pete Domenici. Photo: Agri-Pulse.

Then the report proposes to save $15 billion for the 2012-2020 period by:

• “eliminating all payments based on production history to large commercial producers (with combined farm and non-farm adjusted gross incomes (AGI) of greater than $250,000); and,”

• “lowering the cap on direct payments based on production history from its current $40,000 level to $20,000 (although counter-cyclical payments will remain intact). These changes will reduce average government payments per commercial farm by about $20,000 and promote greater distributional equity in payments to farms, as smaller farms will still benefit from the payments.”

The plan proposes saving $9 billion over the 2012-2020 period by reducing USDA's Federal Crop Insurance Program administrative and operating costs subsidies paid to insurance providers “to levels consistent with recent studies that estimate a reasonable rate of return” and by reducing the premium subsidy for farmers from its current 60 percent level to 50 percent in order to “equalize the sharing of costs and risks between the government and the producer.”

The plan proposes saving $6 billion over the 2012-2020 period by tackling USDA's array of conservation programs. The report concludes that “There is significant overlap between the various conservation programs that USDA funds, which creates inefficiencies that strain the federal budget. This proposal will eliminate that overlap by consolidating 16 of the programs into one capped entitlement that grows with inflation.”

The plan lists these programs as candidates for consolidation: the Conservation Technical Assistance Program, Soil Surveys, Snow Surveys and Water Supply Forecasts, Plant Material Centers, the Grazing Lands Conservation Initiative, Agricultural Management Assistance, the Chesapeake Bay Watershed Program, the Cooperative Conservation Partnership Initiative, Environmental Quality Incentives (EQUIP), the Agricultural Water Enhancement Program, Conservation Innovation Grants, Ground and Surface Water Conservation, the Farmable Wetlands Program, the Conservation Reserve Enhancement Program, Emergency Forestry Conservation Reserve Program, and the Voluntary Public Access and Habitat Incentives Program.

To read the Bipartisan Policy Center's full 138-page “Restoring America's Future” report, an executive summary or other materials, go to: www.bipartisanpolicy.org/projects/debt-initiative/about. The section on farm program spending cuts begins on page 108 of the full report.