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Monday, December 27, 2010

Actual Farm Bill Spending and Cost Estimates

Jim Monke
Specialist in Agricultural Policy

Renée Johnson
Specialist in Agricultural Policy

The 112th Congress likely will consider reauthorization of the 2008 farm bill (P.L. 110-246, Food, Conservation, and Energy Act of 2008) because much of the current law expires in 2012. The 2008 farm bill is the most recent omnibus farm bill and guides most federal farm and food policies. The omnibus nature of the farm bill—including diverse constituencies supporting farm subsidies, food stamps, conservation, bioenergy, and international food aid—helps generate interest across Congress to support passage. However, increasingly tight budgetary resources prompted both chambers to hold hearings in 2010 to hear how the 2008 law is working and what changes they want in the next bill. The Administration already has submitted budget proposals to reduce farm supports, an approach at odds with that of many farm sector advocates, who support the status quo.

When the 2008 farm bill was enacted, the Congressional Budget Office (CBO) estimated its total cost (i.e., baseline plus new funding outlays, using the March 2007 baseline) at $284 billion over five years (FY2008-FY2012) and $604 billion over 10 years (FY2008-FY2017). These costs reflect mandatory outlays that do not require appropriations action. Available information reflecting more recent CBO estimates for FY2010-FY2012 and actual expenditures for FY2008- FY2009 indicate that five-year spending on most major farm bill programs will likely be below that estimated by CBO in 2008, while spending for domestic food assistance programs almost certainly will be much greater than previously estimated.

More specifically, when the 2008 farm bill was enacted, CBO estimated that the five-year cost (FY2008-FY2012) for the major farm support programs—commodities, conservation, crop insurance, renewable energy, and exports—would be $83.3 billion, or an average of $16.7 billion per year. More current CBO projections, which include actual spending in FY2008 and FY2009 for these programs, show that spending for these programs is expected to total $86.7 billion (an average of $17.3 billion per year), or $3.4 billion above the five-year 2008 CBO estimate. Most of the difference between the 2008 estimate and more recent estimates, however, is attributable to higher than expected crop insurance spending ($6.7 billion above estimates in 2008), which is offset by lower than expected spending for farm commodity and farm conservation programs. Estimated spending for the Supplemental Nutrition Assistance Program or SNAP (food stamps) over the five-year period is significantly higher than originally projected in 2008 ($188.9 billion estimated in 2008, compared to the more current estimate of $314.3 billion), reflecting additional spending because of provisions in the American Recovery and Reinvestment Act (ARRA), higher food costs, and increasing program participation rates due to the recession.

Similar to the conditions during debate on the 2008 farm bill, the upcoming farm bill debate is likely to be driven in part by relatively large budget deficits and growing demands for fiscal constraint. As Congress moves toward considering reauthorization of the omnibus farm bill, questions about the cost of the farm bill and cost considerations among different farm bill programs will become more prominent. Among the types of questions frequently asked about farm bill spending are: What is the estimated cost of the current 2008 farm bill? How much more or less has actually been spent on the 2008 farm bill than was estimated at the time of enactment? What is the estimated cost of some of the major programs in the 2008 farm bill? This report begins to answer some of these questions and provides updated information on actual expenditures for some programs and baseline projections by CBO for spending under current law.

Date of Report: December 13, 2010
Number of Pages: 14
Order Number: R41195
Price: $29.95

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