Bridges Weekly Trade News DigestVolume 16Number 11 • 21st March 2012

Farm Bill: New Budget Plan Sparks Controversy


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A new budget proposal from the House of Representatives is calling for US$30 billion to be cut from US farm spending over ten years. The proposal, released on Tuesday, comes on the heels of an earlier budget proposal from US President Barack Obama that had called for a US$32 billion trim in agricultural outlays.

In an outline, House Budget Committee Chair Paul Ryan, a Republican from the US state of Arizona, argued that direct payments need to be trimmed since soaring commodity prices are “reducing the need for high levels of income support.” Crop insurance programmes should allow farmers to manage risk in the way “other businesses” do, cutting “open ended” support from the government, he added.

If the House of Representatives as a whole agrees to Ryan’s proposal, the Agriculture Committee will be bound by its terms.

However, House Agriculture Committee Chair Frank Lucas, also a Republican, cautioned against “reading too much” into proposals from President Obama and Representative Ryan, noting that these were “only suggestions.”

Proposal ‘irresponsible,’ some say

Meanwhile, the ranking Democrat in Lucas’ committee, Colin Peterson, took a harsher tone, arguing that the cut proposed on Tuesday “all but guarantees” that there will be no farm bill this year. On the Senate side, Agriculture Committee Chair Debbie Stabenow - also a Democrat - called the proposal “irresponsible,” adding that it did not “strengthen production agriculture” and would “hurt families.”

The Senate Agriculture Committee had earlier set US$23 billion as the proposed reduction in farm subsidies over ten years, which still remains the target figure. The figure emerged from last fall’s discussions surrounding the “Super Committee,” a bipartisan effort to reign in federal spending that ultimately failed.

The US budget is a compromise between the executive and legislative branches, with interest groups often vying for pieces of the pie. Budget committees in the two chambers of Congress must first agree on an overall level of spending, recommending cuts in specific areas - such as agriculture - to the appropriate committees.

The current farm bill is set to expire at the end of September and efforts are underway to either renew or reform the package of laws that govern US agriculture.

Current high prices have focused Congress’ attention on crop insurance and direct payments for cuts, Carl Zulauf, professor of agricultural economics at Ohio State University, told Bridges. Other types of farm spending, such as counter cyclical payments, are often triggered by low prices and may not draw the attention of reformers when commodity prices set record highs.

Having followed US agricultural policy since the 1980s, Zulauf added, that “there has been talk of not getting it done but every farm bill has gotten completed,” if late.

ICTSD reporting; “Ryan Budget Plan ‘Guarantees’ No Farm Bill, Peterson Says,” BLOOMBERG, 20 March 2012; “Farm Bill: Budget Committee Chairman Paul Ryan Releases House GOP Budget Outline,” FARMPOLICY.COM, 21 March 2012; “UPDATE 1-House ag plan would slash US crop, insurance payouts,” REUTERS, 20 March 2012.

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