Tuesday, July 26, 2011

Deficit plans offer clues to ag cuts

Congress and the White House still seem far apart on an agreement to raise the debt ceiling, but some of the proposals that have come out may offer some clues as to how much spending will have to be cut in the next farm bill.

The Gang of Six plan called for $11 billion in cuts over 10 years. The proposal did not specify which programs should be targeted but did protect food stamps from cuts. Were the entire cut to come out of the $4.7 billion in direct annual payments that go to grain and cotton growers it would amount to about a 23 percent reduction. (In Iowa, the largest recipient of such subsidies, the typical direct payment averages around $30 an acre.) Now comes Senate Majority Leader Harry Reid's plan, which specifically would cut those direct payments by about 30 percent. The cut would be made by reducing the payment rate. Farmers are now paid on 85 percent of their base acreage. That would be reduced to 59 percent.

I wouldn't put too much stock in what programs these plans target, only the total reduction. Congress will have the last say on how the cut is distributed when the next farm bill is written, presumably in 2012. The chairman of the House Agriculture Committee, Frank Lucas, R-Okla., made clear at a hearing last week that he wants to look at food stamps for savings.

Another note: The Gang of Six plan has to be the high-water mark for what ag interests can expect to get in any deal, given that the Six include Sens. Kent Conrad, D-N.D., and Saxby Chambliss, D-Ga.

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