Obama Budget Calls for Farm Program Cuts

President Obama is again calling on Congress to cut crop subsidies to those the administration defines as "wealthy farmers" and asking Congress to approve major ($8 billion) cuts for crop insurance, moves estimated to save $10 billion over 10 years.

President Obama is again calling on Congress to cut crop subsidies to those the administration defines as "wealthy farmers" and asking Congress to approve major ($8 billion) cuts for crop insurance, moves estimated to save $10 billion over 10 years. Last year the Democratic-controlled Congress did not go along with similar administration recommendations, and observers believe the same scenario is likely to play out this time as well.

The Obama proposals for farm supports would save an estimated $860 million over the next five years and $2.26 billion over 10 years, according to the White House Office of Management and Budget. The plan would end crop subsidies for people with adjusted gross incomes (AGI) of more than $250,000 from off-farm sources or more than $500,000 in on-farm AGI. The caps now are set at $500,000 off-farm AGI and $750,000 on-farm AGI.

Besides the lower AGI ceiling, the administration would cap the direct-payment subsidy at $30,000 a year, down from the current $40,000 (double for a spouse). "This would allow USDA to target commodity 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," says OMB.

In the administration's fiscal 2011 budget proposal, Obama proposed $53 million in funds to develop markets overseas, counter-balanced by a 20 percent cut, or $40 million, in the market access program, which shares the cost with trade groups to promote U.S. goods.

The White House also requested a 25 percent cut –– to $1.2 billion –– in the environmental quality incentives program which shares the cost of controlling runoff from fields and feedlots. The green-payment conservation security program would be cut by roughly $1 million and enrollment held to 12 million acres instead of 12.8 million acres in fiscal 2011.

Overall, the administration is seeking $23.9 billion in discretionary USDA spending next year, a 5 percent decrease from the enacted 2010 spending level of $25 billion. Discretionary spending in fiscal 2009 was $22.6 billion, excluding $6.9 billion in stimulus funding and $1.4 billion in emergency spending.

Under mandatory spending, which is required by current law, the budget funds the food stamp program at a level of $75 billion in fiscal 2011, up from $56 billion that was enacted in fiscal 2009. Food stamp benefits have climbed from $45.9 billion in fiscal 2009 to an estimated $54.1 billion in fiscal 2010 and $57.1 billion in fiscal 2011.

Reactions to Program Cuts

The proposal is meeting stiff resistance from key farm-state lawmakers. "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 (D-Minn.).

Senate Agriculture Chairman Blanche Lincoln (D-Ark.) said she would oppose cuts to programs important to agriculture and rural communities in the president's budget proposal. In a statement, Lincoln said: "By targeting policies that rural America relies upon, this proposal places a disproportionate burden on the backs of farmers and rural communities. While I too believe we must reduce the federal deficit, we must all share in this responsibility…. The farm bill is a contract with our farmers that they depend on to make business decisions. Changing the rules in the middle of the game would be detrimental to their operations and would cost us even more jobs in rural America."

Sen. Saxby Chambliss (R-Ga.), ranking member on the Senate Ag panel, said: "While I commend the president on his effort to reign in government spending, the proposed budget request requires additional work to live up to his promise…. As with last year, the administration unfairly targets farmers and ranchers to achieve savings and fund Washington based programs.

Agriculture Secretary Tom Vilsack defended the proposed cuts in farm program payments, pointing out that the reductions would affect only a small percentage of farmers. At the same time, Vilsack also expressed a willingness to work with Peterson and other farm-state lawmakers on the issue.

In a statement, the secretary noted that "with the unsustainable debt accumulated over the past decade, it's time to get our fiscal house in order." Vilsack also pointed out that the administration was proposing a number of initiatives aimed not just the minority of rural residents who farm, but also the majority who do not.

Continuing, Vilsack said: "This budget will assist rural communities create prosperity so they are self-sustaining, economically thriving, and growing in population. We have already taken important steps in this effort. With help from the Recovery Act, we supported farmers and ranchers and helped rural businesses create jobs. We made investments in broadband, renewable energy, hospitals, water and waste water systems, and other critical infrastructure that will serve as a lasting foundation to ensure the long-term economic health of families in Rural America. This budget includes almost $26 billion to build on that down payment and focuses on new opportunities presented by producing renewable energy, developing local and regional food systems, capitalizing on environmental markets and generating green jobs through recreation and natural resource restoration, conservation and management."

Administration's Budget Request Would Freeze USTR Spending

The Obama administration's budget request would fund the Office of the U.S. Trade Representative at $48 million during FY 2011, a figure that essentially is unchanged from this year. Some trade analysts point out that the spending freeze appears to run counter to the president's pledge to expand trade and increase U.S. exports, both of which are key USTR functions.

Senate Finance Committee Chairman Max Baucus (D-Mont.) noted that USTR "plays a critical role in promoting U.S. exports, but that role is not reflected in today's budget" Accordingly, Baucus said, "During this time of economic crisis, I will work to ensure that all agencies with a role in improving the competitiveness of U.S. firms receive the funding they need." The Finance Committee oversees U.S. tax and trade policies.

Food, Drug Companies Could Face New Fees

Food companies and drug manufacturers makers could face more than $250 million in new fees under a proposal included in the administration's budget proposal for the Food and Drug Administration. The fees would be used to review applications for generic drugs, improve inspections of food facilities and cover the costs of re-inspecting 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. Food inspection and registration fees were in a House food-safety bill passed last year. The Senate hasn't moved forward on a companion bill.

Overall, the Obama budget would boost funding for FDA by $80 million to $2.43 billion for fiscal 2011. The overall budget figures don't include user fees the agency collects from companies to review product applications and inspect facilities. Including such fees, Obama's budget request totals $3.7 billion compared with $3.2 billion in fiscal 2010.

Obama Requests $261 Million for CFTC

The White House budget request for FY 2011 proposes that Congress fund the Commodity Futures Trading Commission with as much as $261 million, which would be an increase of more than $93 million, or 55 percent, over what the agency received for the current year. However, about half of the new funds — $45 million — are contingent on Congress passing a financial reform package that would put extra demands on the commission.

Of the $45 million, $18 million would go for information technology, including systems development, capital equipment, and IT mission support, and $27 million would allow CFTC to hire an additional 119 full-time staff positions and related overhead expenses.

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