The U.S. Congress continues to haggle over the public debt as it searches for ways to squeeze more than $1 trillion out the federal budget by late November. One high-profile target is farm subsidies. As the price of commodities have increased by more than 60 percent over the past five years, direct payments to farmers – roughly $5 billion worth in 2010 – are receiving even greater scrutiny. Congress tried to wean the American farmer off the public dole with the Freedom to Farm and ACRE programs but to no avail. Now it appears the Obama Administration wants to make its own run at cutting farm subsidies.
President Obama: “It will cut taxes for every small business owner and virtually every working man and woman in America. And the proposals in this jobs bill are the kinds that have been supported by Democrats and Republicans in the past. So there shouldn’t be any reason for Congress to drag its feet. They should pass it right away. I'm ready to sign a bill. I've got the pens all ready.”
Speaking from the White House rose garden this week, President Obama pressed lawmakers to move swiftly on his American Jobs Act. The presidential proposal includes a litany of tax breaks for small businesses that hire new employees and fresh infrastructure spending on bridges and roads across the country. Obama contends many of the proposals were previously supported by Democrats and Republicans and the bill would jolt the economy without growing our deficit.
President Obama: “All told, this plan cuts $2 in spending for every dollar in new revenues. In addition to the $1 trillion in spending that we’ve already cut from the budget, our plan makes additional spending cuts that need to happen if we’re to solve this problem. We reform agricultural subsidies -- subsidies that a lot of times pay large farms for crops that they don't grow. We make modest adjustments to federal retirement programs. We reduce by tens of billions of dollars the tax money that goes to Fannie Mae and Freddie Mac.”
With a target pointed straight at agricultural subsidies, President Obama is just the latest Washington lawmaker to balance spending initiatives with a slash in farm program spending. Under the Obama plan, $33 billion over 10 years would come from mandatory programs earmarked as agriculture spending. The administration advocates the end of direct payments and the defunding of $8.3 billion from crop insurance. Another $2 billion would be saved from USDA’s conservation programs.
The White House says the American agriculture sector can weather the cuts because of its relative strength compared to other sectors of the economy. According to the Obama administration, 2011 farm income is forecast at $103.6 billion – up 31 percent from 2010 and marks the highest inflation-adjusted net farm income in more than 35 years.
The proposal has sent shockwaves throughout the ag sector already bracing for cuts from the so-called congressional Super Committee later this year. The National Corn Growers Association responded with a call for “shared sacrifice” but warned:
“…we are deeply concerned by proposals that would directly undermine a farmer’s ability to purchase adequate insurance coverage at a time of heightened volatility in commodity markets.”
Farm policy overhauls are traditionally handled by congressional farm bills but economic factors have pressed the White House to search for immediate savings. Congress has given the President a mixed response.
Iowa Republican Charles Grassley warned that agriculture programs cannot shoulder the budget savings without cuts from additional government programs.
Sen. Charles Grassley: “I believe direct payments will be cut back. I believe some other programs will be affected. I don’t have a certain figure but I believe that we in a bi-partisian way come up with a program that we can save near the x number amount of dollars that people think we ought to be saving, I think that policy will be better than what the president has adopted, and may save maybe not the same amount, but a sizeable amount of money.”
Congress is expected to examine the President’s American Jobs Act in the coming weeks, only months before the Super Committee tallies its first vote.