The close ties between the U.S. farm economy and the world and domestic economies were in evidence this week.
For starters, *rising energy costs are impacting farms by pushing up prices for everything from fuel to fertilizer. *The U.S. trade deficit in January climbed to its second highest level in history. Foreign competition for American farm goods helped inflate the deficit. *And, the federal government ran up a record monthly deficit in February en route to what analysts say will be another record-setting shortfall for fiscal year spending.
How those budget headaches are resolved most certainly will impact farm country. That's because farm program spending has been targeted as one area to make up some of the savings.
The unlikely alliance is making President Bush's 2006 Budget one of the most contentious plans in years. One reason may be that several lawmakers are up for re-election next year, and cutting farm subsidies will be unpopular among many of their constituents. A bipartisan group of 51 U.S. senators sent a letter earlier this week to the Senate Budget Committee opposing the president's proposed reductions in agriculture.
On Wednesday, the Senate and House budget committee chairmen unveiled appropriation blueprints, which contained no specifics on cuts in agriculture spending. The impact on farmers will become more clear as budget negotiations occur in the months ahead.
The Senate Budget Committee also adopted a non-binding resolution that recommends setting lower limits on payments to individual farmers. While the resolution is strongly opposed by big southern farmers, it does at least enter payment limitations into the budget debate.
In addition, the non-partisan Congressional Budget Office last week said the Bush administration's budget projections were incorrect. The U.S. Department of Agriculture is hoping to cut farm subsidies by $5.7 billion over the next 10 years, starting in fiscal year 2006. CBO estimates those cuts will total $16 billion. Members of the House Agriculture Committee argue this level of reduction is proportionally far higher than in any other budget area.
The full House and Senate plan to vote on their budgets next week. But, it may be months before a final budget is passed.