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Obama Administration Proposes Cutting Direct Farm Payments

posted on February 17, 2012

President Obama sent Congress a record $3.8 trillion election-year budget proposal this week, calling for stimulus-style spending on job-creating projects and tax increases for the wealthy.

While the Pentagon and a handful of other Cabinet agencies would see their annual operating funds reduced, the proposed budget would leave health care programs for the elderly and the poor largely unchanged. 

The president would allow Bush-era tax cuts to expire for households making over $250,000 per year;    raise taxes on stock dividends for Americans with the highest incomes; and institute a new minimum tax of at least 30 percent on those earning more than $1 million annually. 

Trailing only the Departments of Defense and Health and Human Services in its slice of the proposed budget pie, the Agriculture Department would see its coffers increased modestly.   But that doesn't necessarily mean all of its programs will continue.

The specifics of those cuts, however, and a litany of others, are likely to be addressed on Capitol Hill in the days ahead as lawmakers continue the arduous process of writing the next Farm Bill. 

Obama Administration Proposes Cutting Direct Farm Payments

Preliminary work on the 2012 Farm Bill has been in progress for several months. The current law authorizing government farm programs, was approved in 2008 and expires in September.

This week, the Obama Administration proposed $154.7 billion budget for agriculture, an increase of nearly 5 percent over last year.  Despite the increase, a savings of $32 billion over 10 years would be achieved through the elimination of some subsidies like direct payments to farmers.

Secretary Tom Vilsack, USDA: "As you consider the farm bill, I hope that you'll recognize the importance of streamlining the number of programs we have."

The idea of cutting the payments, which are made regardless of price or yield, was attempted during the Bush Administration and was blocked by Congress.  It remains to be seen whether the sacred cow will survive in an election year.

But in the wake of the worst year for natural disasters in U.S. history, Secretary Vilsack still sees a need for a farm safety net.

Secretary Tom Vilsack, USDA: “Fifty-five million acres last year through no fault of - of the producers devastated by natural disaster a flood, a drought, a tornado, a fire.  What do folks do given the high costs of inputs what do they do?  One bad year can actually put a farm family out of business.  So it is important and necessary for us to have some kind of support mechanism that allows them to reduce that risk.  Now crop insurance is key.  We have got to continue that and we have got to continue to expand as we have in this administration.  Now we expanded this to a number of new crops.”

Replacing the cash outlays would be a continuation of the Average Crop Revenue Election program and a renewal of the Supplemental Revenue Assistance Payments program. 

Another key safety net program facing cuts is federal crop insurance, which pays farmers through a combination of government and private funding sources. According to Vilsack, the Administration feels the private industry can better handle a higher percentage of the financial burden.

Secretary Tom Vilsack, USDA: “The president, when he looked at the agricultural budget, basically had to decide whether or not to focus on a balanced approach, an approach that basically took resources from farm programs, conservation programs, and nutrition assistance programs. He opted not to take money from nutrition assistance programs. In the president’s view, these insurance companies were perhaps in a better position to stand these difficult times than the folks who are currently struggling with tight budgets and can't afford to put enough food on the table.”

Some members of Congress and the Farm Bureau have raised objections over the proposed cuts.

Farmers and ranchers often are identified as the primary beneficiaries of USDA’s annual $150 billion budget. In reality, 80 percent of last year’s budget was spent on social programs like the Supplemental Nutrition Assistance Program, or SNAP; Women, Infants and Children, or WIC; and other social programs.

Tags: agriculture budgets Department of Agriculture direct payments Tom Vilsack