March 11, 2015
Two recent events on Capitol Hill are colliding in a potentially significant way. First, on March 9, the Congressional Budget Office (CBO) – the scorekeeper for federal legislators on budgetary matters – issued its budget “baseline” that will be used in decision-making on legislative proposals for the balance of this year, including the annual congressional budget resolution process that is about to begin.
Unsurprisingly, CBO projects higher costs for farm bill programs than it projected in 2014, shortly after Congress passed the Farm Bill. At the same time, the budget resolution, to be taken up in the House and Senate Budget Committees next week, could potentially re-open the farm bill. This possibility increases the relevance of the new higher farm bill costs projected by CBO.
Farm Bill Funding Revisited
The following is a summary of how the new CBO baseline compares with its 2014 projections:
Commodity Support — With respect to farm bill spending, the new CBO baseline, as expected, projects rapidly increasing costs for commodity program subsidies relative to CBO’s cost estimates for the 2014 Farm Bill. When the 2014 Farm Bill was signed into law early last year, CBO estimated that the commodity programs would cost $36 billion over the decade spanning 2014 to 2023. The new CBO baseline updates that figure by a nearly 50 percent increase to $52.7 billion over the same time period.
CBO’s projected subsidy increases are even higher than that for the next few years, including over 80 percent higher for the coming crop year, but then are projected to decline and level off.
Why? CBO’s estimates have increased because commodity market prices are significantly lower now then they were during 2013 when the farm bill was being finalized. The new commodity program options are price-sensitive, and hence their costs increase when prices fall. This escalation in the sticker price of commodity programs was widely expected, even as the ink was not yet dry on the new farm bill last year.
In contrast to the commodity programs, CBO estimates for the federal crop insurance program will be very close to what was projected a year ago. At that time, CBO estimated the 10-year cost at $90 billion and in the new baseline for this year has declined slightly to $89.1 billion.
Generally speaking, the cost of insurance declines when market prices are falling. Insurance premiums fall when market prices fall, and, given the fact that taxpayers on average pay over 60 percent of premium costs on behalf of farmers, lower commodity prices tend to result in lower federal crop insurance program costs. Averaged out over a ten-year time frame, however, CBO projects very little difference for the approximately $9 billion dollar a year program.
Taken together, the farm safety net components of the farm bill — commodity and crop insurance programs — are currently projected to cost $141.8 billion over the 2014-2023 decade, a 12.5 percent cost increase over the projection given for the farm bill last year. That puts them in the cross hairs should the farm bill be re-opened via budget reconciliation (see below).
Conservation — The farm bill conservation programs, on the other hand, are projected to cost just about the same as they were a year ago — $54.8 billion over the 2014-2023 decade as compared to last year’s projection of $54.1 billion.
Unlike the commodity and crop insurance titles of the farm bill, Congress has legislated funding changes to the conservation title since passage of the farm bill. In the annual appropriations bill for fiscal year 2015 finalized last December, Congress re-opened the farm bill to take away nearly $600 million in funding for the Conservation Stewardship Program and the Environmental Quality Incentives Program. That cut to conservation programs was then re-purposed to pay for other federal programs.
These misguided conservation cuts are included in the new CBO projection, but are offset by projected increases in the outyears for spending on EQIP.
As we have previously reported, President Obama’s budget proposal for fiscal year 2016 suggests to Congress that it double down on cuts to farm bill conservation programs, a move that NSAC strongly opposes as do a wide range of conservation organizations.
SNAP — Turning to the Supplemental Nutrition Assistance Program (SNAP) — better known as food stamps — the new CBO projection shows a slight increase in projected spending of less than two percent, from $734 billion over the 2014-2023 ten-year period to $747 billion. SNAP costs are highly sensitive to changes in the overall economy, including unemployment rates, wages, and food prices, and have been declining modestly as the economy has improved. The projected increase in the new baseline is entirely due to CBO’s projected increase in food price inflation.
With the new CBO projections as backdrop, the House and Senate Budget Committees plan to markup their respective version of the congressional budget resolution for fiscal year 2016 next week. The budget resolutions will then go to the House and Senate floor, and if passed, will be negotiated into a final budget resolution to guide spending decisions for fiscal year 2016.
In addition to setting the overall size of the spending pie for annual appropriations bills which dictate government discretionary spending, the budget resolution is occasionally also used to send budget reconciliation instructions to House and Senate authorizing committees with jurisdiction over mandatory spending. Those instructions are in essence directives to cut spending in mandatory-spending programs under a committee’s control by a specific dollar amount. Budget reconciliation is most often used as a procedure for deficit reduction.
According to the Capitol Hill rumor mill, there is a strong possibility that the draft budget resolutions to be introduced by the Budget Committee chairmen next week will include reconciliation instructions and that those instructions may include a directive to the Agriculture Committees to cut farm bill spending by a designated amount. Should that happen, a farm bill that took three years to create and that was signed into law just over a year ago for what was presumed to be a five-year period will be open for debate all over again.
This is not at all unprecedented. For instance, the 1987 Omnibus Budget Reconciliation Act re-opened the 1985 Farm Bill and made downward adjustments to the government support prices for commodities. The 1987 Act also introduced the cost-saving requirement that farm subsidy recipients be actively engaged in farming. (Editors note: The regulations promulgated to implement that provision included gaping loopholes that remain intact to this day and have nullified the effectiveness of the law and the presumed budget savings; a revised set of regulations is expected to be issued as a new proposed rule in the near future).
The 1989 budget reconciliation bill cut commodity spending a bit more. The 1990 Omnibus Budget Reconciliation Act modified commodity support provisions in tandem with the farm bill that passed the same year. The budget reconciliation act in 1996 made major cuts to the food stamp program which was reauthorized in the farm bill of the same year.
More recently, the 2005 Deficit Reduction Act modified the terms of the 2002 Farm Bill, not just lowering commodity subsidies this time, but also making cuts in conservation, rural development, agricultural research, and renewable energy programs.
A broad coalition of farm, anti-hunger, conservation, and rural groups with a stake in the farm bill, including NSAC, wrote to both budget committees several weeks ago urging them not to re-open the farm bill through the budget reconciliation process. That farm bill coalition will very likely mobilize in opposition to any moves by the Budget Committees to re-open the farm bill.
Whether such moves are forthcoming remain to be seen, though the situation should become clear one way or the other in the coming week. NSAC will work against farm bill reconciliation instructions.
If, nonetheless, they should be adopted by the House and Senate, we will propose that attention be focused on the cost escalation in the farm subsidy programs, most especially by revisiting the subsidy limitation provisions passed by both the House and the Senate in 2013. That pro-family farm provision was rejected by the final farm bill arbiters who, meeting behind closed doors, tossed out the subsidy reform passed by both bodies, substituting the will of the special interests over the public interest and the democratic process.
Categories: Commodity, Crop Insurance & Credit Programs, Conservation, Energy & Environment, Farm Bill, Nutrition & Food Access