Fiscal Cliff deal extends current Farm Bill, keeps wasteful direct payments
While this is a better outcome than if the House had passed the $1 trillion Farm Bill boondoggle that cleared the Senate earlier in 2012, the R Street Institute notes the extension marks a clear missed opportunity to save billions by killing a program that lawmakers from both sides of the aisle recognize is horribly wasteful: the $5 billion a year “direct payments” program.
Created by the 1996 Freedom to Farm Act, direct payments are provided to owners of farm land that historically has been used to grow corn, cotton, rice, soybeans or wheat. President Barack Obama has proposed abolishing the program, as has even the American Farm Bureau, and direct payments were zeroed out in the versions of the Farm Bill passed both by the Senate and the House Agriculture Committee.
“With virtual unanimity among observers from all corners of the political spectrum about the need to abolish direct payments, a change that would save taxpayers nearly $50 billion over the next decade, it is indefensible that Congress should nonetheless continue the program as part of legislation ostensibly designed to put our fiscal house in order,” R Street Senior Fellow R.J. Lehmann said.
As the incoming 113th Congress prepares to debate a new Farm Bill in the coming months, Lehmann suggested full and permanent elimination of direct payments, combined with cuts to the $10 billion a year federal crop insurance program, could produce a bill that would save taxpayers more than $100 billion.
“Research by the Environmental Working Group demonstrates that paring down the crop insurance program would both reduce the burden on taxpayers and encourage more responsible land use planning,” Lehmann said. “Among the savings that could be realized are $15 billion from capping the premium subsidy that any particular farmer can collect, $13.8 billion by eliminating subsidies to crop insurers to market their policies and between $20 billion and $30 billion by scaling back subsidies for the most lavish policies.”
However, to realize those savings, Lehmann said it is essential that Congress not create a brand new entitlement program, such as the “shallow loss” programs proposed in the 2012 House and Senate versions of the Farm Bill. The programs would reimburse farmers when they suffer even modest drops in revenue, either due to weather-related losses or even just a drop in currently record-high commodity prices.
“Recent analysis of the proposed shallow loss programs show they could potentially cost as much as $14 billion annually, or nearly three times the cost of the direct payments program they would replace,” Lehmann said.
R Street is a non-profit public policy research organization that supports free markets; limited, effective government; and responsible environmental stewardship. It has headquarters in Washington, D.C. and branch offices in Tallahassee, Fla.; Austin,Texas; and Columbus, Ohio. Its website is www.redesign.rstreet.org.