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Obama budget proposal targets direct payments

Obama budget proposal targets direct payments
Congress passed the Budget Control Act of 2011 on Aug. 2 as part of the compromise agreement on raising the federal debt ceiling. The law creates a Select Committee of 12 members of the House and Senate that is charged with writing a blueprint for reducing federal spending by $1.2 trillion over 10 years. President Obama's recommendations to the committee include eliminating direct payments and reducing crop insurance subsidies.

Direct payments appear to be going down for the count and, barring some miracle, will probably not be bouncing back off the congressional canvas this time around.

With congressional leaders and some commodity organizations already backing away from them, yesterday’s budget proposal announcement by President Obama may have sounded the death knell for the guaranteed annual payments for cotton and grain producers.

Republicans have vowed the president’s budget plans will be “dead on arrival” when they reach Congress. Still, the opportunity to knock out the $4.8 billion the government spends annually on direct payments seems like an increasingly easy decision for Democratic and Republican members of Congress.

The president’s call for requiring farmers to pay more for federal crop insurance faces a less certain future, although the potential savings of $8.3 billion over 10 years for reducing premium subsidies for crop coverage could make an inviting target.  

Besides ending direct payments and reducing crop insurance subsidies, the president is also calling for cuts in conservation programs of $2 billion over 10 years for a total savings of more than $40 billion over the next decade.

The move to eliminate direct payments, which were included in the 1996 Freedom to Farm bill as a means of “weaning farmers off government programs,” comes against a backdrop of farmers receiving unusually high grain prices. Cotton prices, which have fallen from their record highs of last spring, have also been attracting considerable attention.

The president, speaking at a White House ceremony, said his proposal would “reform agricultural subsidies – subsidies that a lot of times pay large farms for crops that they don’t grow.”

The White House said in its background paper on farm spending that more than 50 percent of the direct payments go to farmers with more than $100,000 in income. Farmers in Iowa received $473 million in direct payments in 2010, the most of any state.

In recent weeks, organizations like the National Cotton Council, have been lobbying for new farm programs based more on “an affordable, revenue-based crop insurance program than on traditional farm payments.

Citing passage of the Budget Control Act in August, the NCC said “it is clear that future deficit reduction efforts will place unprecedented pressure on the existing structure (of farm program payments).”

The National Corn Growers Association, meanwhile, has unveiled a new Agriculture Disaster Assistance Program that it says would modify and replace the existing Average Crop Revenue Election or ACRE program that has drawn a mixed response in different parts of the country.

“Responding to a charge by our voting delegates to investigate transitioning direct payments into programs that allow producers the ability to mitigate risk, our grower-led Public Policy Action Team developed a crop-specific, revenue-based risk management tool that provides a safety net when growers are facing a loss,” said NCGA President Bart Schott. “We are focusing on simplification and faster delivery of assistance when it is needed.” 

TAGS: Management
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