Obama Deficit Plan Cuts Billions in Farm Subsidies

On September 23, 2011, in Federal Budget News, by Maggie Ernst

The deficit reduction plan President Obama introduced this week will reduce farm subsidies by shrinking federal contributions to crop insurance programs and land conservation programs–direct payments that go to farmers based on crops they planted in past years.  “In a period of severe fiscal restraint, these payments are no longer defensible,” a report from the White House said.  Nationally, Obama estimates $3 billion a year in savings by ending direct payments to farmers coming from reductions in crop insurance–$830 million a year and another $200 million in savings by reducing conservation programs.

Record exports are predicted for 2011 and corn and wheat prices are double what they were in the early 1990’s.  For the first time in most growers’ lives, cotton futures are selling at more than $1 per pound.  Net farm income is predicted to jump up by 31 percent or $25.5 billion in 2011.  “It’s settling in on people that this is different than in the past,” said former Rep. Charlie Stenholm (D-TX), a long standing Member of the Agriculture Committee and veteran of multiple farm bills.  “This isn’t a discussion just in the hands of the Agriculture committees, but outside.” The annual cost to taxpayers is $4.7 billion in direct cash subsidies.

Beginning with the House Republican budget last April, deficit talks over the summer focused on 10-year cuts of about $30 billion.  The White House upped the ante further Monday by proposing what is actually a 22 percent cut in farm supports.  Unhappy with the report, House and Senate agriculture committee leaders met privately last Thursday on how to respond, but in truth, neither they nor the 12-member supercommittee can succeed with the other.  The joint committee will need farms state votes to pass its recommendations, at the same time, if the Agriculture committees dig in too much, they risk undermining not just themselves but the whole effort to address the debt crisis–important to agriculture’s world markets.  If the supercommittee fails and an automatic sequester to achieve the $1.2 trillion is ordered,  agriculture will lose $15.6 billion.

The president has proposed a total of $3 trillion in deficit reduction with roughly $2 trillion coming from cuts and $1 trillion from revenue increases.  The president has asked the Congressional supercommittee charged with deficit reduction to add his $3 trillion goal on top of the $1.2 trillion the committee was already supposed to cut.  The supercommittee, which was formed as a compromise during the debt ceiling debate, must come up with cuts and revenue increases by Thanksgiving, and Congress must approve them by year’s end.  Otherwise, automatic cuts to domestic and defense programs would take effect.