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Thursday, November 8, 2012

Budget Issues Shaping a 2012 Farm Bill

Jim Monke
Specialist in Agricultural Policy

Budget issues are among the primary factors affecting the development of a new farm bill, particularly in a Congress that is focused on deficit reduction. The Senate passed its version of a 2012 farm bill (S. 3240) on June 21, 2012. The House Committee on Agriculture reported its version (H.R. 6083) on July 11, 2012. House floor action and/or reconciliation of the differences between the chambers is pending.

The Congressional Budget Office (CBO) projects that current farm bill programs, if they were to continue from the 2008 farm bill, would cost nearly $1 trillion over the next 10 years. Compared to this “baseline,” the Senate-passed farm bill, S. 3240, would reduce spending by $23.1 billion (-2.3%); and the House-reported bill, H.R. 6083, would reduce it by $35.1 billion (-3.5%).

One of the most noticeable budget differences between House and Senate bills is the reduction proposed for the nutrition title, with the Senate reducing the nutrition baseline by $4 billion and the House bill reducing it by $16 billion. This has emerged as one of the most important political issues for the bill, especially in the House, with some calling for less reduction and others for more. For crop insurance and farm commodities, the combined change for these titles in the House bill (-$14.1 billion) is similar to the combined crop insurance and commodities subtotal in the Senate bill (-$14.4 billion), even though policy approaches differ between the bills.

The $23 billion 10-year reduction in the Senate bill is consistent with a joint House-Senate Agriculture committee proposal to the Joint Select Committee on Deficit Reduction in the fall of 2011. The $35 billion 10-year reduction in the House bill is consistent with reconciliation instructions in the House budget resolution for FY2013.

Funding to write the next farm bill is based on CBO baseline projections of the cost of farm bill programs, and on varying budgetary assumptions about whether programs will continue. The CBO baseline is an estimation (projection) at a particular point in time of what federal spending on mandatory programs likely would be under current law. When new bills are proposed that affect mandatory spending, their impact (or “score”) is measured as a difference from the baseline. This process sets the mandatory budget for considering a new farm bill.

The budget situation is more difficult and uncertain this year than for recent farm bills because of the attention on the federal debt. Uncertainty about government-wide deficit reduction plans is beyond the control of the agriculture committees and may not be resolved for months. Several high-profile congressional and Administration proposals for deficit reduction are specifically targeting agricultural programs with mandatory funding. Across-the-board reductions to most farm bill programs also could occur in 2013 unless Congress avoids an automatic budget sequestration process. Moreover, some 2008 farm bill programs do not have a baseline to continue, and some budgeting rules have changed since the last farm bill.

The desire by many to redesign farm policy and reallocate the remaining farm bill baseline—in a sequestration and deficit reduction environment—is driving much of the farm bill debate this year. Political dynamics concerning sequestration and broader deficit reduction goals leave open difficult questions about how much and when the farm bill baseline may be reduced. In this context, Congress faces difficult choices about how much total support to provide for agriculture, and how to allocate that support among competing constituencies.

Date of Report: November 2, 2012
Number of Pages: 27
Order Number: R42484
Price: $29.95

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