Bill Huffman
Director - Government Relations

The Friday Report

February 5, 2010

The President’s proposal to cut farm supports and export market promotion programs drew immediate reaction from farm state members of Congress this week. The annual budget battle is underway.

The President’s Budget

President Obama sent a proposed $3.83 trillion fiscal year (FY) 2011 budget to Congress this week. The President seeks to cut farm programs, specifically asking Congress to reduce crop subsidies and crop insurance among other proposals. The proposal for farm subsidies would cut $2.26 billion over ten years with $8 billion in cuts for crop insurance, both estimated to save the government $10 billion over 10 years.

The Obama plan would end crop subsidies for people with more than $250,000 adjusted gross income (AGI) from off-farm sources or more than $500,000 on-farm AGI. The caps, under the 2008 Farm Bill, are currently set at $500,000 off-farm AGI and $750,000 on-farm AGI. The plan would also cap the direct-payment subsidies at $30,000 per year per person, down from the current $40,000 per person.

Other proposed cuts include a 25 percent cut, to $1.2 billion, in the Environmental Quality Incentives Program; the Conservation Security Program would be cut by $1 million with enrollment capped at 12 million acres in FY 2011, down 800,000 acres from FY 2010.

There is also a proposed cut of $166 million over 10-years to the Market Access Program, a program that is vital to the U.S. rice industry’s foreign market development and promotion program.

Analysis

Once again we should remember that the President’s budget is just that, a proposal.  Congress will ultimately develop and adopt a budget plan that eventually will drive Federal expenditures in FY 2011.

As you can imagine, the reaction from farm state members of Congress was immediate.

• Senate Agriculture Committee Chair Blanche Lincoln, D-Ark, said “I will oppose cuts to programs important to agriculture and rural communities”.  Senator Lincoln said the 2008 Farm Bill is a “contract with America’s farmers that they depend on to make sound business decisions.  Changing the rules in the middle of the game would be detrimental to their operations and would cost jobs in rural America.”

• House Agriculture Committee Chairman Collin Peterson flatly rejected the President’s proposal.  Peterson said, “It is Congress’s job to write the annual budget and based on my conversations with the House leadership, no one is interested in making cuts to the Farm Bill after the battle we just fought to pass it a year and a half ago.”

• Senator Saxby Chambliss, the ranking Republican member of the Senate Agriculture Committee said, “While I commend the President on his effort to reign in government spending, the proposed budget request requires additional work to live up to his promise.  As with last year, the Administration unfairly targets farmers and ranchers to achieve savings and fund Washington based programs. I will continue to examine the budget along with my colleagues to ensure we are spending hard earned taxpayer dollars efficiently and effectively.”

In reading comments by Washington, D.C. farm policy observers, most believe the Obama proposal to cut direct payment limits and to lower AGI won’t fly.  There may be budget cuts to specific programs, but that remains to be seen.

As Jim Wiesemeyer of Informa Economics, Inc. said this week, “An Administration proposes, but Congress disposes.”  It will be an interesting year!

Other News Notes

Pay-Go Rules

The House of Representatives voted Thursday to revive “the pay-as-you-go budget rules that helped wipe out the massive Federal deficits and balance the budget during the Clinton Administration’s years.  This is known as “pay-go”.  The Senate previously adopted the same rules. They now go to President Obama for his signature.

EPA

House Agriculture Committee Chairman Collin Peterson has co-sponsored a House bill that would block the Federal EPA from regulating greenhouse gases through the Clean Air Act. The bill is comparable to the resolution offered a week ago in the Senate by Senator Lisa Murkowski, R-Alaska and Senator Blanche Lincoln, D-Arkansas.  Chairman Peterson co-sponsored the House version with Congressman Ike Skelton, D-Mo., and Congresswoman Jo Ann Emerson, R-Mo.