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Administration Proposes Deep Cuts in Farm Programs

President Barrack Obama proposed $33.348 billion in net cuts for agriculture to the Joint Select Committee on Deficit Reduction. The proposal includes the elimination of direct payments, an $8.3 billion reduction over 10 years for crop insurance, a $2.1 billion cut in conservation programs, and an increase of $8 billion for the Supplemental Revenue Assistance Program (SURE) program. The White House proposal includes:

  • Elimination of unnecessary direct payments. “The direct payment program provides farmers with fixed annual payments for having historically planted crops that were supported by government programs, regardless of whether the farmer is currently producing those crops, or producing any crop for that matter. Direct payments do not vary with prices, yields or producers’ farm incomes. As a result, taxpayers continue to foot the bill for these payments to farmers who are experiencing record yields and prices; more than 50% of direct payments go to farmers with more than $100,000 in income. This change would save the Government roughly $3 billion per year.”
  • Modernize crop insurance program to reduce cost and improve efficiency. The administration said that crop insurance is highly subsidized and costs the taxpayers approximately $8 billion/year to run – $2.3 billion/year for the private insurance companies to administer and underwrite the program and $5.7 billion/year in premium subsidies to farmers. The administration proposed the following changes to “improve the crop insurance program while implementing it more efficiently:”
    1. Streamline the administrative costs of the program by lowering crop insurance companies’ rate of return to meet the 12% target, saving $2 billion over 10 years.
    2. Cap administrative expenses at $0.9 billion, adjusted annually for inflation, which would save $3.7 billion over 10 years.
    3. Price the premium for catastrophic coverage policies more accurately, saving $600 million over 10 years.
    4. Shave two basis points off any coverage premium subsidy levels that are currently offered above 50%, saving $2 billion over 10 years.
  • Better target agricultural conservation assistance. The administration is proposing a reduction in conservation funding of $2.1 billion by “better targeting conservation funding to the most cost-effective and environmentally beneficial programs and practices.”
  • Extend mandatory disaster assistance to strengthen safety net for farmers. The proposal calls for an additional funding for SURE.
Senator Debbie Stabenow (D-MI), chairwoman of the Senate Agriculture Committee, has stated that “decisions on where those cuts come from should be made by the Agriculture Committee, where we constantly receive input from farmers and others in the agriculture community.” Senator Pat Roberts (R-KS), ranking member of the Senate Agriculture Committee, and Congressman Frank Lucas (R-OK), chairman of the House Agriculture Committee, said “The agriculture community remains willing to do its part in getting our fiscal house in order, but, in essence, President Obama’s plan for economic growth and deficit reduction is not credible.” They were especially critical of the cuts in crop insurance.

COOL Implementation Changes – USDA’s Office of the Inspector General (OIG) has issued various recommendations designed to strengthen the Agriculture Marketing Service’s (AMS) implementation of country-of-origin labeling (COOL) rules. The OIG made the following recommendations that AMS accepted:
  • Improving the retailer selection process for reviewing COOL compliance.
  • Strengthening AMS retailer review procedures.
  • Improving the timeliness of AMS evaluations of retailer documentation.
  • Improving AMS enforcement of COOL regulations.
  • Improving the oversight of state agencies AMS works with on compliance checks.
  • Improving AMS communication with retailers.
This is the result of an OIG review of COOL implementation.

P. Scott Shearer
Vice President
Bockorny Group
Washington, D.C.