Costs for Agricultural Shallow Loss Programs Run Deep

Agriculture,  | Analysis
Jan 29, 2015  | 3 min read | Print Article

Just this week, CBO released an updated Farm Program baseline estimating that new agricultural income entitlement programs will cost taxpayers billions more than farm bill apologists promised. The new estimates and confirmed cost overruns for a number of programs in FY14 are further evidence that the 2014 Farm Bill’s final price tag, just like that of the last two, is likely to be much higher than advertised. 

Projected Costs of New Agriculture Entitlement Programs (FY2014-FY2023)

  10-year Estimate before Farm Bill Vote Updated 10-Year Estimate
Price Loss Coverage (PLC) $13.124 billion $24.147 billion
Agriculture Risk Coverage (ARC) $14.108 billion $12.587 billion
Total Entitlement Costs  $27.232 billion $36.734 billion

 

If CBO projections hold true, the PLC and ARC programs alone will cost taxpayers $9.5 billion more than originally estimated over the life of the 2014 farm bill. But predicting agricultural markets and projecting program costs one year into the future, let alone 10, is fraught with error. This is especially true for PLC and ARC, given that agricultural producers have until March 31 to elect to enroll in either program.

A better measure for evaluating Congressional management of taxpayer dollars is to compare how close bill “scores” (cost projections) come to actual spending once the scored years pass. The result of making that comparison for the largest federal “agricultural safety net” programs for FY14 should give taxpayers pause.

Comparing the baseline cost of federal agricultural support programs as calculated before adoption of The Agricultural Act of 2014 and actual FY14 spending on major agricultural programs:

($ in millions) May 2013 Baseline estimate of program in FY14

Actual FY14 Spending

Cost Overrun from changes due to 2014 Farm Bill and market conditions
Subsidized Crop Insurance $6,382

$8,244

$1,862
Supplemental Disaster Aid $0 $2,988 $2,988
Direct Payments  $4,538 $4,726 $188
Counter Cyclical Payments $54 $0 -$54
ACRE $70 $214 $144
Marketing Loans $47 $34 -$13
Total Additional cost      $5.115 billion

 

In a bill as large as the farm bill, cost increases in these programs may be somewhat offset by savings from other farm bill components, like conservation or nutrition assistance programs. But the CBO’s historical inability to predict agricultural markets and their effects on agricultural safety net programs, and this week’s nearly $10 billion increase in the PLC/ARC cost estimate, are further proof that the 2014 farm bill was in fact more business-as-usual for farm state special interests, at taxpayers’ expense. 

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