R Street welcomes amendments to pare down $1 trillion Farm Bill
The R Street Institute this week urged U.S. Senate members to pay heed to the destructive fiscal and environmental impacts that would flow from S. 3240, the Agriculture Reform, Food, and Jobs Act, as the chamber begins debating the measure commonly known as the 2012 Farm Bill.
According to projections from the non-partisan Congressional Budget Office, the Farm Bill would authorize $969 billion of U.S. Department of Agriculture spending over the next decade. While that total is $23.6 billion less than current projections, the spending cuts called for in the bill fall far short even of the modest $32 billion in cuts requested by the White House.
The bill makes some commendable progress by eliminating the wasteful and outdated system of direct payments to agricultural producers that in recent years has cost $5 billion a year. But it largely replaces that program with a new “shallow loss” entitlement that would guarantee up to 90 percent of producers’ revenues. According to the CBO, repealing direct payments would save $44.6 billion over the next decade, but the new “agricultural risk coverage” adds $28.9 billion to the budget. The losses the program would compensate for need not be from floods, droughts, frosts, or other weather-related catastrophes, but would instead largely be driven by market fluctuations in the prices of commodities.
Economists Vincent Smith, Bruce Babcock and Barry Goodwin estimate that if corn, wheat, soybean, rice and cotton prices return to historical levels, the program will likely cost between $5 billion and $7 billion annually – at least as much as the direct payments program it replaces, and roughly double what CBO now projects – and could be as high as between $8.4 billion and $13.98 billion per year.
“The growth of demand from Asian markets in recent years had led to big jumps in the prices of corn, soybeans, wheat and other crops, but if current prices prove unsustainable, the shallow loss program would leave American taxpayers on the hook for enormous payments, which go disproportionately to the largest and wealthiest agricultural producers,” R Street Public Affairs Director R.J. Lehmann said. “Moreover, the shallow loss program would be yet one more federal subsidy that encourages farms to convert for agricultural use environmentally sensitive grasslands that are most prone to erosion and flooding.”
R Street urged lawmakers to rethink creating a brand new agricultural entitlement during this time of runaway federal deficits. The institute also welcomed several proposed amendments that would pare down the cost of the federal crop insurance program’s subsidies, which the Government Accountability Office notes have grown from $951 million in 2000 to $7.3 billion in 2011, and are estimated to cost $90 billion over the next decade.
Currently, the federal government pays 62 percent of farmers’ crop insurance premiums. An amendment proposed by Sen. Jeanne Shaheen, D-N.H., and Sen. Pat Toomey, R-Pa., would save $5.2 billion by capping the premium subsidy to $40,000 for any individual farmer. An identical cap previously had been in place for the direct payments program.
An amendment from Sen. Tom Coburn, R-Okla., and Sen. Dick Durbin, D-Ill., would means test premium subsidies and reduce them by 15 percent for agricultural producers with gross incomes over $750,000. It is estimated to save $1.2 billion over the next decade.
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. R Street’s co-founders previously were the staff of the Heartland Institute’s Center on Finance, Insurance and Real Estate. Its website is www.rstreet.org.
