Ag Policy Blog

Budget Numbers Don't Bode Well for Avoiding Program Cuts

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Paul Ryan, speaker of the House of Representatives four roughly four months now, already finds himself in a battle within his party.

House members, including Ryan, thumped their chests and denounced the proposed White House budget for Fiscal Year 2017 even before it was delivered to lawmakers. But now they are faced with delivering a budget of their own.

The budget deal voted on last October under then-House Speaker John Boehner raised spending caps for Fiscal Year 2016 by $50 billion -- paving the way for December's funding bill to pass with heavy Democratic support in the House. That October budget agreement also agreed to raise spending caps by $30 billion for FY 2017 as well.

The more conservative elements in the House are coming back and wanting to ensure part of that extra 2017 spending in the budget deal gets quashed. The different conservative caucuses -- The Freedom Caucus and the Tea Party Caucus -- want a conservative budget showing at least $30 billion in budget cuts for FY 2017.…

Conservative groups such as Club for Growth and Heritage Action for America see opportunity for an "aspirational" conservative budget that would reflect "a clear effort to restore the limited government principles for which Republicans have stood."…

Coupled with an aggressive call to cut $30 billion from spending programs are calls to increase Defense spending, especially in the Senate. Sen. John McCain, among others, wants at least $17 billion more for Defense.…

The push to lower spending on domestic programs while boosting Defense spending seems hard to mesh with the idea that agriculture would somehow come out of FY 2017 unscathed. As it is, the White House calls for more conservation spending by fully funding programs such as the Conservation Stewardship Program and Environmental Quality Incentives Program.

Then there are demands for higher commodity spending, as pushed by the calls to provide up to $1 billion to cotton producers through designating cotton seed as an oilseed and opening up cottonseed to Price Loss Coverage payments. Already, commitments to ARC and PLC programs will increase nearly 75% from FY 2016, going from $5.54 billion to an estimated $9.6 billion for FY 2017.

ARC and PLC are mandatory programs and don't actually count in the $1.1 trillion -- and change-- in discretionary appropriation that goes to the various agencies. Still, that $4 billion or so in increased commodity programs is in the mix of the overall $4 trillion federal budget.

The House Agriculture Committee, in a letter to the Budget Committee earlier this month, suggested the budget guys look elsewhere in the federal government for cuts. As the committee wrote, "From our perspective, we believe the Committee on Agriculture has done its duty for now with respect to deficit reduction and that areas constituting the other 98 percent of the Federal budget ought to be looked to first for any additional savings being sought this Congress."…

You get the feeling, though, that it may be impossible for programs important to farmers to pass through FY 2017 unharmed if the House is going to get that conservative budget that Ryan's members desire. Congress certainly isn't going to save billions of dollars simply by allowing states to drug test SNAP recipients.

Crop insurance companies were swiftly rescued last fall by congressional aggies who reversed $300 million-a-year in cuts to the industry. The cuts were originally in the October budget deal, but were quickly clawed back, so to speak, in the highway bill. The White House, though, has stubbornly proposed $1.8 billion-a-year in cuts to crop insurance -- $18 billion over 10 years. The difference from this proposal and last fall's crop insurance cuts is that the White House budget plan would take that $1.8 billion directly out of farmers by lowering the level of federal subsidy in the premium rates for revenue policies. The administration plan also would take away some of the benefits farmers get under prevented-planting payments.

Crop insurers are going to be taking up a lot of these financial issues and political challenges at the industry's annual meeting starting this weekend in Indian Wells, Calif.

If you want to drill a little further into the "where are they going to come up with that" question, there's also the issue of potential "offsets" for the Trans-Pacific Partnership. The Pacific trade deal loved by most of agriculture also would cut tariff revenue about $28 billion over 10 years, Politico reported. That would translate into adding about $1.7 billion to the deficit in FY 2018, assuming the TPP is actually passed by Congress sometime this year. The question is whether increased economic activity would make up for that lost tariff revenue over time.…

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