President’s Budget Proposal: Agriculture, Climate Issues, and Trade
Posted
By Keith Good On February 2, 2010
Budget: General
Overview
An update
posted yesterday at CQPolitics reported that, “President Obama
proposed a $3.8
trillion fiscal 2011 budget Monday that administration officials are
touting as a prescription for
both adding jobs to the economy and reducing deficits over the next decade [See:
“Remarks by the President on the Budget,” transcript, video].
“Obama proposed $1.16
trillion in discretionary spending, not including military operations in
Corey
Boles reported yesterday at the Real Time Economics Blog (The Wall
Street Journal) that, “The Obama administration’s fiscal 2011 budget request
includes a range of measures aimed at spurring job growth, from extending jobless benefits to the
unemployed, investing in infrastructure and increasing loans to small business
owners.
“As expected, the budget focuses heavily on the need to repair
the moribund jobs market, as the White House seeks to improve
the nation’s employment picture heading into the November midterm elections.”
Budget: Agriculture
With respect to the budget
proposal and agriculture (general
summary, complete
overview, additional
details) the executive branch indicated that, “The Budget proposes to limit farm subsidy payments
to wealthy farmers by reducing the cap on direct payments by 25 percent and
reducing the Adjusted Gross Income (AGI) payment eligibility limits for farm
and non-farm income by $250,000 over three years. The Farm Bill
currently precludes an individual or an entity from receiving any benefit in a
year where their non-farm AGI exceeds $500,000 and precludes receipt of any
direct payments when their farm AGI exceeds $750,000. This proposal would allow
USDA to target payments to those who need and can benefit from them most, while
at the same time preserving the safety net that protects farmers against low
prices and natural disasters. The
Budget also includes a proposal that will save billions of dollars by reforming
how the Federal Government administers the crop insurance program.
Crop insurance companies currently benefit from huge windfall profits due to
the structure and terms of the Government’s contract with the companies, called
the Standard Reinsurance Agreement (SRA). Through the SRA renegotiation process, which will occur in 2010, USDA
will pursue reforms to the financial terms in the SRA that will allow the
Department to offer the same program benefits to farmers and ranchers with
significantly reduced costs—saving $8 billion over 10 years.”
Reuters writers Charles
Abbott reported yesterday that, “President Barack Obama asked Congress on Monday to slash crop
subsidies to ‘wealthy farmers’ and to pare federal support for crop insurance,
moves estimated to save $10 billion over 10 years.
“Obama targeted those areas for
large cuts last year without
success. Another fight is likely this year. Agriculture
Secretary Tom Vilsack offered to work with Congress to concoct a
palatable package.”
“The administration plan
would end crop subsidies to people with more than $250,000 adjusted gross
income (AGI) from off-farm sources or more than $500,000 on-farm AGI. The caps
now are $500,000 off-farm AGI and $750,000 on-farm AGI.”
Mr. Abbott noted that, “But the cuts will be a tough sell for Congress with
mid-term elections looming. Senate Agriculture Committee
chairman Blanche Lincoln,
Arkansas Democrat, said she
will oppose ‘cuts that will harm farmers, ranchers and rural
communities.’
“‘It is Congress’s job to write the annual budget,
and based on my conversations with House Leadership, no one is interested in
making cuts to the
Farm Bill after the
battle we just fought to pass it a year and a half ago,’ said House
Agriculture Committee chairman Collin Peterson, Minnesota
Democrat.
“Roughly 30,000 people would be
affected by the lower AGI ceiling, equal to 2 percent of the 1.4 million
recipients of crop subsidies, said an Agriculture Department spokesman.”
“The administration also
would cap the
direct-payment subsidy at $30,000 a year, down from the current
$40,000.”
Yesterday’s article
pointed out that, “Vilsack told
reporters it would be ‘an improper conclusion’ to link the $10 billion in farm
subsidies and crop insurance to a proposed $10 billion increase in school lunch
and other child nutrition programs. The budget is filled with
cuts and increases at the line-item level, he said.”
DTN Ag Policy Editor Chris
Clayton reported yesterday that, “The White House’s fiscal 2011 budget
proposal released Monday would lower the cap on direct payments to individual
farmers from $40,000 a year to $30,000, a 25 percent cut in direct payments for
farmers at the highest end of the income scale.”
The DTN article added
that, “In stating its justification
for the reductions, USDA describes direct payments as ‘made to farmers based on
historical production, regardless of whether they currently produce crops. They
distort production and drive up the value of farm land.’”
“In its entire budget, the
White House projects USDA’s mandatory spending, including money from the
American Recovery and Reinvestment Act, will be $132.28 billion in FY 2011, up from $129.34 billion
in 2010,” Mr. Clayton said.
Philip
Brasher reported yesterday at The Des Moines Register Online that,
“The White House is trying again to
cut subsidies to the largest grain and cotton farmers while also proposing to
slash payments to the crop insurance industry.
“The president’s proposed 2011 budget would at the
same time increase spending on school lunches and other child nutrition
programs by $10 billion over 10 years — the equivalent amount of the cut in
farm subsidies and crop insurance.
“Congress last year
refused to approve a cut in farm subsidies to fund child nutrition; farmers protested that the proposal unfairly pitted
them against hungry kids. Agriculture Secretary Tom Vilsack argued today that
the latest proposals have nothing to do with each other.”
Bill
Tomson reported yesterday at The Wall Street Journal Online that, “The
Obama administration foreshadowed the desire to cut farm subsidies a year ago
when USDA Secretary Tom Vilsack announced he wanted to take a look at changing
how payments are made to farmers.
“Budget officials said
government payments would be cut by about $2.5 billion over 10 years from the
proposed subsidy reductions.
“The Obama administration
is counting on more cost cuts in fiscal year 2011 from overhauling the way the
USDA subsidized the crop-insurance industry. The USDA is in the midst of that
overhaul after unveiling the first draft of its proposal for a new Federal Crop
Insurance Program in December.”
Budget: Crop Insurance
and the Standard Reinsurance Agreement
On Friday January 29,
FarmPolicy.com spoke with former USDA Chief Economist Keith Collins and Bob Parkerson, the president
of National Crop Insurance Services about
the federal crop insurance program. Specifically, the conversation focused on
the current renegotiation of the Standard Reinsurance Agreement (SRA) that is
underway between the crop industry and the USDA’s Risk
Management Agency (RMA).
RMA released its initial
SRA draft proposal in
early December, while the industry submitted its counter draft
proposal earlier this month.
For more detail on crop
insurance, and the cuts that the crop insurance program sustained in the 2008
Farm Bill, see Monday’s FarmPolicy.com
report, which contained audio excerpts from the discussion with Dr. Collins
and Mr. Parkerson. Yesterday’s report also included background on last year’s
executive branch budget proposal, which also included proposed cuts to the crop
insurance program, as well as general background on the Standard Reinsurance
Agreement.
In our
conversation from Friday, Dr. Collins also addressed some of the specific
aspects of the RMA SRA proposal and described the crop industry’s perspective
on some of these points. To listen to this analysis, just
click here (4:54).
The crop industry’s
counter draft proposal also included an interesting attachment that
contained a legal memorandum
discussing in detail whether or not RMA has a legal basis for cutting
administrative and operating expenses (at page 35 of the draft
proposal).
FarmPolicy inquired about
this issue on Friday and Bob Parkerson provided additional perspective. To
listen, just
click here (3:03).
As the SRA negotiations
move forward (a second SRA draft from RMA is anticipated in mid-February), the
role of crop insurance as a variable in the farm safety net is likely to
increase in the future, even as the administration seeks to scale back funding
for the program.
Jerry Hagstrom reported on
January 26 at DTN that, ““[House
Agriculture Committee Chairman Collin Peterson (D-Minn.)] said he believes that
crop insurance may be the centerpiece of that safety net at some point in the
future, saying, ‘Down the road the safety net may be primarily
crop insurance. We need to cover every crop grown in this country.’”
Meanwhile, Jared
A. Favole and Alicia Mundy reported yesterday at The Wall Street
Journal Online that, “Food companies
and drug makers could face more than $250 million in new fees under a proposal
included in the Food and Drug Administration budget Monday by the Obama
administration.
“The fees would be used to
review applications for generic drugs, improve inspections of food facilities
and cover the costs of reinspecting drug manufacturing plants.
“The fees would have to be
enacted by Congress before they could be collected, and the idea faces opposition from the food industry.
Presidents have proposed such fees before without success.”
Budget: Climate Issues
Beyond agricultural
programs, Reuters writers Jeff
Mason and Timothy Gardner reported yesterday that, “The White House on Monday dropped prospects for
revenue from a climate cap-and-trade system opposed by many lawmakers, but its
proposed budget still called for a ‘market-based’ policy to fight climate
change.
“Last year the
administration forecast revenues of $646 billion for 2012-2019 from a program
in which the output of greenhouse gas would be capped and polluters would be
forced to buy, and could later trade, emissions permits.
“‘Unlike last year, we do
not show an assumed amount of cap-and-trade revenue since the exact nature of
the legislation remains in flux,’ an administration official told Reuters.”
Ian
Talley reported yesterday at The Wall Street Journal Online that, “The Obama Administration proposed
giving the Environmental Protection Agency an additional $47 billion
in its 2011 budget to fund plans to regulate greenhouse gases such
as carbon dioxide.
“The administration said
$4 million would pay for a new rule requiring firms to report their emissions
and $43 million would go toward
new regulatory initiatives the EPA is preparing.
“In the absence of legislation from Congress to cut
greenhouse gases, the agency is drafting rules to regulate emitters across the
economy.”
Bloomberg writer Kim
Chipman reported yesterday that, “Obama’s EPA spending plan for fiscal
2011 is down from an estimated $10.3 billion in the current year, according to
the budget blueprint released today by the administration. About half of the
funds would be used for clean-water programs, helping states curb pollution and
combating climate change.
“The EPA budget would
provide $43 million in new money for efforts by the agency and states to
control greenhouse-gas pollution. Obama,
who prefers to tackle global warming by legislation, is preparing to do so
through the EPA if lawmakers fail to pass a measure, Carol Browner, the
president’s top environmental aide, has said.”
Yesterday’s Bloomberg
article added that, “Senator Lisa
Murkowski, an Alaska Republican, is leading an effort in
Congress to block the EPA from regulating greenhouse gases.
Democrats Blanche Lincoln of
Arkansas, Mary Landrieu of
Louisiana and Ben Nelson of
Nebraska said last week they backed Murkowski’s motion to overturn the Obama
administration’s finding that the gases are a threat to public health and
should be regulated.”
In related news,
Washington Post writer Juliet
Eilperin reported yesterday at The Post Carbon Blog that, “MoveOn.org is launching a series of hard-hitting
ads this week targeting the three Senate Democrats–Blanche Lincoln (Ark.), Mary
Landrieu (La.) and Ben Nelson (Neb.)–who’ve co-sponsored
Sen. Lisa Murkowski’s (R-Alaska) resolution blocking the Environmental
Protection Agency from regulating greenhouse gases under the Clean Air Act.”
Budget: Trade
Reuters writer Roberta
Rampton reported yesterday that, “U.S. farm exporters are relieved that trade has finally made it on to
President Barack Obama’s agenda, although his new goal to double U.S. exports
in five years might be a little too much to hope for.
“After a year when farm
exporters wondered aloud whether the administration even had a trade policy,
Obama linked export growth to job growth. He also promised an initiative to
address deep distrust many American hold toward trade pacts, viewed as sapping
manufacturing jobs from the United States.
“‘My hope is that we can
move forward with some of these trade agreements having built some confidence …
among the American people that trade is going to be reciprocal, that it is not
just going to be a one-way street,’ Obama said on Friday.”
Yesterday’s article added
that, “Obama on Monday proposed a 20
percent budget increase to the Commerce Department’s International Trade
Administration to $534 million to launch the export drive.
“The Agriculture
Department budget included $54 million to develop foreign markets and work to
remove trade barriers. That spending would be offset in part by a $40 million
cut in a program to boost sales of high-value U.S. farm goods overseas.
“Commerce Secretary Gary Locke is expected to give
more details this week about how the administration plans to double exports, a
pledge Obama made in his state of the union speech.”
The Reuters article
pointed out that, “The presidential
goal won’t necessarily include a target of doubling farm exports, Agriculture
Secretary Tom Vilsack said.
“Obama ‘wasn’t suggesting, by referring to
agriculture, that there was going to be doubling of ag exports,’ Vilsack said.”
Ms. Rampton also noted
that, “For agricultural exports, demand will increase as world economies
recover, lifting prices, said Jim
Grueff, a former trade negotiator with the U.S. Agriculture
Department.
“‘What we always talk
about are the huge, affluent middle classes. If those start to come back, I
would say there’s some possibility (to double farm exports), but I would not
say it’s probable,’ said Grueff, managing partner of Decision Leaders.”
Last week, Nebraska GOP
Sen. Mike Johanns indicated
in a news
release that, “[Sen. Johanns] led a bipartisan effort in support of
pledges President Obama made in his State of the Union address to increase
American exports and strengthen trade relationships abroad. In a letter sent to the President on Friday, Sen.
Johanns and 17 cosigners, including Senate Agriculture Committee Chairwoman
Blanche Lincoln (D-Ark.), expressed their commitment to help the President meet
the goals of doubling American exports over the next five years and ratifying
pending trade agreements with
“‘I was very pleased to
hear President Obama state his support for increasing exports and expanding
trade during the State of the Union address,’ Johanns said. ‘With unemployment
at 10 percent, we should be pursuing every possible avenue to promote good
opportunities for job growth and business investment. Our businesses, farmers,
and ranchers produce the highest quality products in the world and deserve an
opportunity to compete on a level playing field.’”
And a news
release issued yesterday by the American Farm Bureau Federation stated
that, “Combined, the Colombia, Panama
and Korea free trade agreements represent almost $3 billion in increased U.S.
agricultural exports. Congressional action to approve those
agreements would help set an aggressive trade agenda that is important to the
“In a letter to the
chairmen and ranking members of both committees, Stallman said approving the trade agreements would
be a great way to answer President Obama’s call in his State of the Union
address for doubling
--
Keith Good
President
FarmPolicy.com, Inc.
(t) 217.356.2269
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