Budget Plan Lands With a Thud

Farm Groups, Insurers Oppose Trump Plans to Redefine Farmer Safety Net

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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USDA would see major changes in spending for most agencies under the budget and farm bill changes proposed by the Trump administration. (DTN photo illustration)

OMAHA (DTN) -- President Donald Trump's 10-year budget proposal for USDA handed down Tuesday essentially serves as the White House's marker, calling for roughly $240 billion in cuts in the next farm bill.

The Trump administration wants to lower federal spending over the next decade on the farm safety net, food aid, rural development and foreign market promotion. The farm bill cuts are needed to help achieve the president's goal of balancing the federal budget in 10 years.

Budget cuts like those proposed by the White House can only happen by rewrite of existing law, which would most likely happen via the next farm bill.

Agriculture Secretary Sonny Perdue told USDA employees in a video that he wasn't going to sugar coat the situation. USDA will likely see a significant funding cut at the end of the budget process. "This shouldn't be a surprise to anyone as the president promised before the election that he would realign government spending, attempt to eliminate duplication or redundancy, and see that all government agencies are efficiently delivering services to our customers, the taxpayers of America."

Perdue noted President Trump campaigned that he would reduce the deficits, and that is what he is proposing in the budget.

"I believe the people knew what they were doing when they elected President Trump," Perdue said. "They understand, and believe, as I do, that I just don't think it's moral to continue to kick a $20 trillion debt down to our grandchildren without any relief."

The USDA budget was essentially crafted without Perdue's input, as he was on the sidelines while the White House Office of Management and Budget drafted the plan. "This is a process that happens through the Office of Management and Budget," said Michael Young, acting deputy secretary for USDA.

Young stressed that most of the cuts would require legislative change, primarily through the farm bill. Yet he disagreed when DTN asked if the specific plans to cut farm programs and food stamps should be considered the Trump administration's marker for the farm bill. "That's a process that will happen in a different timeframe," Young said.

Groups such as the Heritage Foundation praised the overall White House proposal as an opportunity to enact needed reforms in the social welfare systems. The plan landed with more of a thud for agricultural groups, which pointed to the decline in farm income and questioned how the White House could continue to find cuts in the farm safety net.

Zippy Duvall, president of the American Farm Bureau Federation and a fellow Georgian like Perdue, said the budget fails agriculture and rural America. The White House fails to give agriculture any credit for prior cuts and would gut the crop insurance program.

"Farm income is down substantially since Congress passed the last farm bill," Duvall said. "USDA cuts of this magnitude in the current economic cycle would be unwarranted and unwise. AFBF will work with the House and Senate Agriculture, Appropriations and Budget committees to protect programs that are critical in managing risks inherent to production agriculture, and maintain programs that are vital to rural communities."

For farm programs, the budget proposes several changes in the farm bill. They include:

-- Cap crop insurance premium subsidy at $40,000, which would save an average of $1.6 billion a year. The proposal would affect about 33,000 farmers, or about 6% of all policies sold.

-- Eliminate the Harvest Price option, saving an average of nearly $1.2 billion a year. The White House stated farmers could hedge their risks with unsubsidized harvest price insurance or use futures and options markets instead.

-- Eliminate premium subsidies, commodity payments and conservation technical assistance for farmers with adjusted gross income over $500,000. The proposal would save about $100 million a year. The current income cap for farm programs is $900,000 and there is no means testing for crop insurance. The White House stated, "It is hard to justify to hardworking taxpayers why the federal government should provide assistance to wealthy farmers with incomes over a half-million dollars."

-- Tighten the Conservation Reserve Program by ending the general signup period through 2020 and rely on continuous signup. In other conservation programs, the White House wants to increase funding by $1.9 billion over 10 years for the Environmental Quality Incentives Program while at the same time end any new acreage enrollment in the Conservation Stewardship Program, saving roughly $7.9 billion over 10 years.

-- Eliminate the Market Access Program and Foreign Market Development Program, saving over $1.8 billion over 10 years.

-- Reduce the Supplemental Nutrition Assistance Program by $191 billion over 10 years, mainly by shifting up to 25% of the costs to states over the decade. States would also have more latitude about changing food-stamp eligibility.

Roger Johnson, president of the National Farmers Union, called the budget proposal "an assault on the farm safety net and rural communities."

Johnson said, "It is deeply disappointing that the president would propose such cuts, especially in the midst of a farm crisis that has family farmers and ranchers enduring a drastic, four-year slide in farm prices and a 50% drop in net farm income."

The crop insurance industry -- companies, reinsurers and agents -- said the plan would weaken crop insurance and make it harder for farmers in tough times to recover. Further, the industry stated such a plan "will find little support in rural America or on Capitol Hill." The industry added that insurance reduces taxpayer risk -- minimizing calls for disaster aid -- as the farmer safety net has largely shifted from direct farm payments to crop insurance over time.

The combined insurance cuts add up to about $28.5 billion over 10 years, or as much as 36% of the spending. The American Soybean Association cited that 99.4% of revenue policies bought by soybean growers last year had the harvest option.

"This is a program that exists to sustain farmers who suffer catastrophic losses," said Ron Moore, president of ASA and a soybean farmer from Roseville, Illinois. "Coupled with the arbitrary caps the budget would impose on premium subsidies, it's clear that this budget was written without input from farmers who would be severely affected."

Senate Agriculture Committee Chairman Pat Roberts, R-Kan., and House Agriculture Committee Chairman Michael Conaway, R-Texas, were among the GOP lawmakers caught opposing a budget plan by a president they support. Roberts and Conaway said in a joint statement they support the president's goal of 3% economic growth. Their vocabulary responding to Trump's plan was more measured than when President Barack Obama proposed to cut farm programs.

"As we debate the budget and the next farm bill, we will fight to ensure farmers have a strong safety net so this key segment of our economy can weather current hard times and continue to provide all Americans with safe, affordable food. Also, as a part of farm bill discussions, we need to take a look at our nutrition assistance programs to ensure that they are helping the most vulnerable in our society," Roberts and Conaway stated.

The overall USDA budget would cut $4.8 billion from discretionary spending for USDA in 2018 as well as see a reduction of mandatory spending by $7 billion. The White House did call for increasing USDA farm loans to nearly $7 billion, a $616 million increase in spending from 2017. That would support an estimated 42,400 loans.

According to the budget plan, it would also cut USDA staffing by about 5.5% next year, mainly through attrition and early retirement, Perdue said.

"Obviously, the budget in the final form has yet to be determined by the Congress and the president, but I want everyone to know my job as agriculture secretary [is] to manage and implement that plan," Perdue said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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Chris Clayton