On Thursday, the House began debate on a Republican-backed budget proposal for 2012. On another budgetary front, the legislative bodypassed the continuing resolution agreed to last week in order to avoid a government shutdown in fiscal year (FY) 2011.
For more, see Congress wrestles with budget.
With few hard numbers to consider, agriculture economists say the 2012 budget proposal of Wisconsin Rep. Paul Ryan, Chairman of the House Budget Committee, is difficult to pin down. Even so, agriculture groups have largely criticized the plan as unfair.
For more, read the budget proposal (agriculture-related portion is on page 36)
On Thursday morning, Southwest Farm Press spoke with Pat Westhoff, director of the University of Missouri-based Food and Agricultural Policy Research Institute (FAPRI) about the contentious budget process. FAPRI maintains models of U.S. agricultural commodities used by Congress while crafting policy and legislation. Among Westhoff’s comments:
As an economist, what is the first thing you look for in budgets or proposals?
“I’m just trying to understand the set of things that have been proposed. The continuing resolution covers the entire USDA budget – the entire federal budget, for that matter. There is any number of issues at play every time we do this type of a bill.”
In the FY 2011 continuing resolution, “there are cuts made at a variety of USDA agencies. Some of those will have larger direct effects on agricultural producers than others.
“The trick is trying to understand what these things mean in practice. Which of these cuts will have a direct and meaningful effect on programs that farmers normally rely upon? Which cuts will have less of an impact?
For more, see list of cuts in the FY 2011 continuing resolution.
“There are a couple of examples to make the point. One of the things listed from the House Appropriations Committee was a $350 million reduction in the dairy subsidy. That’s really referring to one-time-only funding provided last year for dairy producers. There was no intention of repeating (that funding) this year. But because of the way the comparisons are made, that is shown as a $350 million reduction. But it wasn’t going to happen anyway. That’s an example of something that can be misinterpreted given the way the table is set up.
“On the other hand, other changes are very real and could have a major impact on farmers and others.”
Any of those jump out at you?
“One would affect producers participating in conservation programs. There are reductions in a variety of those – Wetland Reserve Program, Conservation Stewardship, EQIP.
“There have been differences of opinion in how to calculate the changes that have actually occurred. Some cuts shown on the House Appropriations Committee tables don’t appear to be overly large. That’s a function of the point of comparison – when compared to last year, the cuts are small, but compared to what the farm bill said was supposed to happen this year, the cuts are much larger.
“If you’re someone reliant on the FSA loan program, there will be a reduction in amount of loans the FSA can make.
“And there are changes to areas from research, to rural development to WIC (Women Infant and Children).”
Do the cuts in the FY 2011 continuing resolution have to be made between now and October (when the fiscal year ends)?
“The cuts are in terms of what is called ‘budget authority.’ USDA and other agencies have to have budget authority to sign contracts or otherwise commit to spending money. In many cases, though, the actual checks may not be written for some time – perhaps not until 2012 or beyond.”
The Ryan plan
On the Ryan proposals…
“The Ryan plan is potentially a much more important set of proposals for agriculture going forward. It is calling for very large reductions in government spending in general, and in direct payments and crop insurance in particular.
“Any of those cuts shouldn’t occur until after the 2012 farm bill debate has been decided. While Ryan has made proposals on where cuts might happen, he’s also clear that the final choices are at the discretion of the agriculture committees.
“But the (Ryan proposals) are already affecting the farm bill debate. In the last couple of days, members of the agriculture committees have made comments about how they may want to approach the funding issues and when they think it might be best to write a farm bill.”
He’s suggesting $3.3 billion in agriculture program cuts a year…
“It’s $30 billion over 10 years. But, of course, there wouldn’t be any cuts next year because that will be when the farm bill debate occurs. That means (the $30 billion would be stretched over nine years) and would translate to $3.3 billion per year.”
Do you think the agriculture committees will try to essentially pass the current farm bill again?
“It’s certainly where a lot of people are starting from. They want to try and maintain as much of the current set of programs as possible. Whether that will be the choice at the end of the day, we’re a long way from knowing.
“At the same time, Rep. Ryan’s proposal is just that -- a proposal. It hasn’t even been adopted by the House yet, let alone anything both sides of Capitol Hill have agreed to.
“It wouldn’t be at all surprising if the Senate comes up with a very different set of budgetary proposals going forward. North Dakota Sen. Kent Conrad is the Chairman of the Senate Budget Committee and he may have a different point of view when it comes to the appropriate level of cuts to agriculture programs.
“Also, I’ll remind, that this is FY 2012 budget proposal. If the committees stay on their current schedules it is unlikely they’ll write a farm bill that will be enacted by the end of FY 2012. We’re a long way from any final decisions.”
In Ryan’s plan, there are four paragraphs dealing with agriculture programs. There wasn’t anything really specific.
“You’re right – there’s very little explicit discussion about farm programs. There was mention of farm incomes being high currently, at least by some standards, and why cuts would perhaps be less harmful now than in the past.
“But in terms of actual (hard number) proposals, the budget committees typically just set what the monetary targets are. In the end, the agriculture committees will make the final choices even if there is an agreement on the budgetary framework.
“Ryan mentioned two programs: crop insurance and direct payments. There is logic in mentioning those two since they’re the largest spending ag programs by the federal taxpayer. They get the lion’s share of funding. Counter-cyclical payments, marketing loan benefits and the ACRE program are very small by comparison.”
“I’ll reiterate, this is just a proposal. Even if the full House votes for (Ryan’s plan), it’s a long way from being set in stone. There are many steps left before the next farm bill.”