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Thursday, February 28, 2013

Budget Issues Shaping a 2013 Farm Bill

Jim Monke
Specialist in Agricultural Policy

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.

Funding to write the next farm bill is based on Congressional Budget Office (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

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. As a starting point for farm bill discussions in the 113
th Congress, bills from 2012 may be used. Compared to the baseline, the Senate-passed farm bill in the 112th Congress, S. 3240, would have reduced spending by $23.1 billion (-2.3%); and the House-reported bill, H.R. 6083, would have reduced it by $35.1 billion (-3.5%).

One of the most noticeable budget differences between the House and Senate bills was 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 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) was similar to the combined crop insurance and commodities subtotal in the Senate bill (-$14.4 billion), even though policy approaches differed.

The $23 billion 10-year reduction in the Senate bill was 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 was consistent with reconciliation instructions in the House budget resolution for FY2013.

Date of Report: January 18, 2013
Number of Pages: 28
Order Number: R42484
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