The mythical ‘savings’ of the 2014 farm bill

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Shortly after the Bipartisan Budget Act of 2015 was unveiled, text of the legislation, which promised to raise the nation’s debt limit and set spending levels through September 2017, prompted mayday sirens from both the House and Senate Agriculture committees. Much to the committees’ chagrin, the bill’s negotiators targeted changes in the U.S. Department of Agriculture’s Standard Reinsurance Agreement for federally supported crop insurance as a potential source of budget savings.

The SRA sets the target rate-of-return for insurance companies that participate in the federal crop insurance program, as well as payments to the companies for administrative and operating costs, such as agent commissions. It previously was exempt from being touched by congressional appropriators thanks to a provision in the 2014 farm bill. The Bipartisan Budget Act ordered USDA’s Risk Management Agency to renegotiate the agreement with participating insurers and find $3 billion in savings, an order members with agricultural constituencies found far too tall.

The House and Senate Agriculture committees almost immediately issued a harshly worded joint release. According to Senate Agriculture Committee Chairman Pat Roberts, R-Kan.: “Farmers and ranchers have done more than their fair share to reduce government spending.” Ranking Member Debbie Stabenow, D-Mich., further chimed in:

I oppose any efforts to cut or reopen Farm Bill programs… The Farm Bill made meaningful reforms to help reduce the deficit. Any attempts to reopen any part of the Farm Bill to more cuts would be a major set-back for rural America and our efforts to create jobs.

In the words of House Agriculture Committee Ranking Member Collin Peterson, D-Minn.: “We made major cuts when we wrote the Farm Bill. It is not appropriate to cut agriculture again. The Farm Bill should not be raided. I oppose any cuts.” For House Agriculture Committee Chairman Mike Conaway, R-Texas, the prognosis was even direr: “Make no mistake, this is not about saving money. It is about eliminating Federal Crop Insurance.”

Unfortunately, these overblown warnings were too powerful for Congress to resist; the directive to negotiate more taxpayer-friendly reinsurance deals with private crop insurers was reversed in the highway bill passed in November 2015. But in fact, the arguments made by crop-insurance-subsidy proponents are misleading. Giving in to the committee leaders’ line of thinking sets a dangerous precedent, not just for those dedicated to ensuring farm programs are accountable to taxpayers, but also for those dedicated to transparency and accountable spending in all programs.

Beyond the question of whether the federal government should support any large, established industry, or the more specific question of whether that industry could withstand having its taxpayer-supported rate of return lowered from 14.5 percent to 8.9 percent, it’s just simply not true that “farmers and ranchers have done more than their fair share to reduce government spending,” or that “it is not appropriate to cut agriculture again” (emphasis added).

Part of the disagreement stems from discrepancies between the spending that was projected at the time the 2014 farm bill was passed and the actual spending by the USDA over the past two years. While it’s true that lawmakers passed legislation that was projected to achieve savings, spending todate has far exceeded those projections, erasing much of the promised progress. If Congress wants to ensure the nation’s agriculture programs don’t become unwieldy, ever-growing budget items, understanding the current state of these programs is an important first step.

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