Ag Policy Blog

The White House late Friday issued its orders for the sequester cuts, as well as a detailed accounting of the cuts in a letter from the Office of Management and Budget.

The cuts amount to $85.33 billion, of which $42.667 billion will come equally from defense and other domestic programs.

Medicare will take a 2% cut, accounting for $11.347 billion.

The OMB letter states that because the cuts must take place over seven months instead of 12, the reductions amount to 13% for defense programs and 9% for non-defense programs.

For USDA, the cuts are effectively 5% across the board for the rest of the budget year. As stressed over the past several weeks, one of the biggest impacts could be furloughs of meat inspectors for the Federal Safety and Inspection Service, which has a $1.05 billion budget. FSIS will face about $53 million in cuts.

At Commodity Classic on Friday, Agriculture Secretary Tom Vilsack pointed out 87% of the budget for FSIS is payroll for inspectors. That means FSIS inspectors could face up to 22 days of furloughs. "So you could furlough everyone else for 22 days and you would still have to furlough inspectors," Vilsack said.

According to the OMB, commodity programs and disaster spending will face $329 million and $70 million in cuts, respectively.

The Women, Infants and Children program, or WIC, will take a $333 million cut.

http://www.whitehouse.gov/…

In his speech Friday, Vilsack said the budget cuts could disrupt and cut agriculture by as much as $8 billion, affecting as many as 60,000 jobs.

"I have to apologize to all of you because this is crazing what is happening," Vilsack told farmers.

In terms of other effects, Vilsack said sequester will prevent as much as $35 million in USDA loans to as many as 1,500 farmers.

In conservation, another 2,600 farmers won't be able to complete conservation plans and another 11,000 to 12,000 farmers won't get their conservation projects funded.

Also, furloughs in the Foreign Agricultural Service could reduce another $500 million in potential export opportunities.

Crop-insurance indemnity payments won't be affected by the sequester cuts, Vilsack told reporters.

Distributing direct payments among producers will be equitable. USDA is prepared to operate the program and also committed to giving farmers in the Average Crop Revenue Election program options to stay in or withdraw from ACRE.

"I think there will be an impact on the program with the sequester," Vilsack said. "Sequester may impact the amount of payments, but I don't think it will affect whether people get payments. And I think anything that Congress does relative to removing, reducing or modifying direct payments, as they either formulate a response to sequester or formulate a farm bill, I suspect will be in future years and won't be this particular this year. I think it would be very difficult to change the game in the middle of the game."

The secretary said it is also possible that some producers could be asked to return a percentage of commodity or conservation payments made to them. In other words they would see a "clawback."

"There clearly are circumstances today where people have been paid and have not been paid," he said. "It is an interesting debate about what does sequester do. Does it require clawback."

Vilsack added, "I can't tell you how complicated this process is and I can't tell you how much time it has taken."

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