An Urban's Rural View

Bracing For Further Cuts in Farm Programs

Urban C Lehner
By  Urban C Lehner , Editor Emeritus
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Death and taxes are still life's only certainties, but further cuts in farm programs are nearing certainty status.

By "further" I mean beyond the elimination of direct payments. When the ax will fall, no one can say; that it will fall is near certain.

Why? Because we're looking at what could be years of federal budget chopping. Yes, Washington made progress through the "fiscal cliff" tax increases and will make more progress with "sequestration," which now seems inevitable. But the debt is large and the progress to date is piddling.

In the years to come, Republicans will keep the pressure on to keep reducing the debt. The issue won't go away. But the Republicans will resist tax hikes as ferociously as the Russians repelled the invading Germans in World War II. No less ferocious will the Democrats be in defending Medicare, defying warnings that the retiring baby boomers could bankrupt the program.

Absent a grand bargain to trade tax increases for entitlement cuts, which seems increasingly unlikely, what's left but to cut discretionary spending? The capitol's budget sleuths will look under every rock for candidate programs. Some programs now deemed "mandatory" could suddenly become discretionary.

As DTN's Marcia Zarley Taylor reported last week, one program with a target on its back is crop insurance. Marcia covered a speech by Robert Thompson, one of agriculture's wise men. "Crop insurance," Thompson warned, "is the largest component of the cost of farm programs today, and it is a sitting duck for deficit reduction."

The farm lobby will battle the cuts, of course, but if other worthy programs are being slashed, too, sparing crop insurance will be hard to justify. It's a big pool of money and the voters think farmers are rich. It won't be easy to persuade them that crop-insurance subsidies are a bargain compared to the disaster payments Congress will surely dole out instead.

If, in light of all this, you're wondering whether bringing the debt down is absolutely necessary after all, the answer is a qualified yes. The government doesn't have to be debt free; it managed quite well for decades with a debt equal to about 40% of gross domestic product (http://tiny.cc/…). As recently as 2000 the ratio was below 60%.

Today we're close to 100% and rising. The additional $1.5 trillion in ten-year deficit reduction President Barack Obama has proposed would leave the federal debt near 70% of gross domestic product. That's a step in the right direction -- a declining ratio will comfort the markets -- but it leaves the debt at an uncomfortably high floor. If health-care costs for our aging population explode, as they might, the debt will soon be back in territory that will leave investors uneasy.

We're talking years in the future here, and that's the other qualification. The debt doesn't have to come down dramatically today, and with the economy as weak as it is, it shouldn't come down dramatically today. Washington simply has to come up with a credible, convincing plan to reduce it in the future, preferably a plan that attacks the source of the problem -- health-care costs.

There's no sign, alas, that we're anywhere close to such a plan. Thus, you can be fairly sure -- not certain, but almost -- that farm programs have only begun to be cut.

Urban Lehner

urbanity@hotmail.com

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Bonnie Dukowitz
2/20/2013 | 12:44 PM CST
Perhaps one problem with the health issue is this nation has 3% of the worlds population and 97% of the worlds lawyers.