by Chris Clayton, DTN Ag Policy Editor
OMAHA (DTN) — The Obama administration effectively rolled out much of the same budget proposals for USDA as last year, looking for $32 billion in overall budget savings over 10 years, largely through eliminating direct payments and cutting subsidies to crop insurers.
Proposals for USDA cuts were part of the $3.8 trillion federal budget proposal that would have a $901 billion deficit. The proposal shows the national debt continuing to grow through 2022 to $19.4 trillion. The budget plan also factors in $1.43 trillion in added revenue over the next decade by allowing tax cuts to expire at the end of the year.
The budget recommends reducing agricultural subsidies by $30.2 billion over 10 years. Changes or “targeting” conservation programs would also lead to $1.8 billion in savings over 10 years as well.
The proposal only made minor tweaks to recommendations in USDA programs pitched by the administration last year. The dollar figure for USDA budget cuts has ranged from $15 billion to $48 billion over 10 years, depending on the proposal. Lawmakers on Capitol Hill have been trying to lock in a $23 billion figure in the farm-bill discussions, which is $9 billion lower than the administration proposed on Monday.
Noting the range of figures being used for budget cuts, Agriculture Secretary Tom Vilsack said some consensus is needed on the dollar figure for USDA budget cuts. “I think it’s incumbent on folks to put ideas on the table that, at the end of the day, provide sufficient time at USDA to manage change and allow us to maintain a strong, viable and economically feasible safety net for producers,” he said.
With an emphasis in the overall budget on education and infrastructure, the document is viewed more as a political statement for Obama’s election campaign than a budget proposal that will be enacted on by Congress. It’s considered highly unlikely Congress will move a fiscal-year 2013 federal budget before the presidential election.
Vilsack cited the record farm income, but said farmers need to know the administration wants to ensure one bad crop would not put them out of business. A USDA projection released Monday also forecast 2013 net farm income at $92.8 billion, down from 2011 but still one of the highest in recent history.
“Given the fact we’re seeing good income, solid income, we don’t want to do anything in any way, shape or form to upset that momentum, or set it in a different direction,” Vilsack said. “Uncertainty can sometimes do that.”
Also embedded in the budget are $91 million a year in fees for programs in the Natural Resources Conservation Service, the Animal Plant and Health Inspection Service, the Food Safety and Inspection Service, and the Grain Inspection, Packers & Stockyards Administration, as well as a biobased labeling fee.
Under a subhead of “Responsibly Reduces Farm Spending,” the budget proposal states farmers were expected to receive $10.6 billion in farm-program payments in 2011, of which $4.7 billion, or 44{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f}, were direct payments. The administration and congressional agriculture committees have proposed eliminating direct payments.
“I think there is a general consensus that the direct payment system is going to change,” Vilsack said. “It’s going to change because fiscal realities will necessitate it. It’s going to change because it’s very hard to explain to the 98{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} of the population that doesn’t farm.”
Yet, the administration also states it wants to continue providing disaster assistance and reduce subsidies to crop-insurance companies, though the specifics are not spelled out.
The proposal for cutting crop insurance remains the same as last year, a 2{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} cut in the premium subsidy across-the-board. It also would change payments for catastrophic coverage and the administrative payments made to crop insurance companies.
But Congress has been steadfast in rejecting more cuts to crop insurance. A farm-bill proposal offered last fall in the failed supercommittee talks did not recommend any more cuts to insurers.
Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., said she agreed with the president that direct payments are indefensible, but Stabenow disagreed on further cuts to crop insurance.
“I have heard loud and clear that strong, effective risk management is the number one priority of farmers and producers across the country,” Stabenow said. “Farming is a high-risk business and we don’t want farmers and other small businesses going under because a few days of bad weather — it jeopardizes the economy and the safety of our national food supply.”
Still, Stabenow said the budget proposal from the White House “reinforces the need for Congress to pass a strong, fiscally responsible Farm Bill immediately this year, to provide farmers with the certainty they need to continue being successful.”
House Agriculture Committee Chairman Frank Lucas, R-Okla., offered some harsher criticism, saying the president’s proposal “demonstrates that neither rural America nor fiscal discipline is a priority for this administration.” Lucas criticized raising taxes on small businesses as well, but complained about what he called the lack of perspective in budget cuts.
“For example, President Obama’s proposal to cut crop insurance threatens the integrity of the program itself. And, he ignores other areas for savings such as streamlining or eliminating duplicative programs in conservation, or closing loopholes in nutrition spending. Nutrition spending comprises 80{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} of the agriculture baseline, and there is bipartisan support in Congress to save billions by eliminating loopholes, but not one penny is cut in the President’s budget.
“Not only does it fail to address our serious fiscal problems, but it undermines our investment in providing a stable food supply,” Lucas said.
Senate Agriculture Committee Ranking Member Pat Roberts, R-Kan., said the administration ignored feedback from producers who said that crop insurance is the most effective safety net. “Farmers and ranchers are ready to do their part to rein in federal spending. In negotiations last fall, we identified $23 billion in savings from U.S. Department of Agriculture programs,” Roberts said. “Our work to listen to farmers and ranchers continues this week as we hold more hearings on tough issues facing farm country and how they impact producers, consumers and the taxpayers.”
Tom Zacharias, president of the National Crop Insurance Services, stated that the industry has already contributed more than $12 billion in spending reductions since 2008.
“Unfortunately, the additional disproportionate reductions being proposed would weaken a crop insurance infrastructure at the very time we need it most,” Zacharias said. “We fear such reductions would undermine the successful public-private partnership that was specifically designed by Congress to minimize taxpayer exposure to risk.”
The crop insurance spending reductions, however, were cuts in the growth of spending for crop insurance, which continues to project higher costs over the next decade.
Farm Service Agency employees, also fearing cuts in their own offices, are pitching a proposal to shift crop insurance servicing away from companies and back to FSA office. The proposal could save $2.5 billion a year, but also counters the notion of reducing government bureaucracy and is strongly opposed by the crop insurance industry.
The president’s budget proposal also would cut discretionary spending at USDA about $700 million in FY 2013, or about 3{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} from the current budget level. USDA’s discretionary spending would be at about $23 billion.
Vilsack said about 30 programs at USDA would be affected by being eliminated or reduced in spending. “Bottom line, this department has stepped up over the last couple of years, has taken deficit reduction seriously and is instituting changes within its operations to reduce additional resources.”
Ferd Hoefner, policy director for the National Sustainable Agriculture Coalition, commented that “the Obama farm bill budget cutting proposal is not terribly interesting.” Hoefner noted it follows the consensus that direct payments are going away, but offers no alternative safety net. Hoefner criticized the proposals on crop insurance and direct payments because they fail to protect smaller producers.
“Neither proposal addresses the critical issue of whether the public should be given assurances that natural resources are protected in return for their large investment in farm production subsidies,” Hoefner said. “Nowhere in the President’s request is any indication given that the farm bill has an important role to play in economic recovery, job creation, and improved public health through renewal of funding for innovative programs that expire at the end of 2012. Frankly, the proposals are relatively lame and not at all progressive. Clearly, all the heavy lifting is left to Congress.”
Hoefner also noted the proposal would cut another $432 million out of USDA conservation spending over 10 years. The bulk of those cuts, $347 million, would come from the Environmental Quality Incentives Program.
The administration also calls for $6.1 billion in loans to rural electric cooperatives and utilities for “transition to a clean-energy generation and the creation of high-value jobs in rural America.” The administration is proposing $200 million to continue developing advanced biofuels.
Vilsack is scheduled to testify Wednesday before the Senate Agriculture Committee on energy and rural development issues.
The full budget proposal can be read at http://www.whitehouse.gov/…
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Posted with DTN Permission by Haylie Shipp
