Farm Bill’s Phantom Savings

Weekly WastebasketFarm Bill’s Phantom Savings

Agriculture,  | Weekly Wastebasket
Feb 13, 2015  | 6 min read | Print Article

Repeatedly we warned lawmakers to not be fooled by farm bill apologists’ absurd claims that passing the nearly $1 trillion 2014 farm bill would sow the seeds for reducing the deficit. Recent reports by government agencies confirm the legislation, just like the last two, is on pace to be a budget buster. But saying “told you so,” isn’t enough. It’s time for Congress to stop using fuzzy math and fake offsets to hide the true cost of agricultural program spending.

Generally legislation is “scored” by a nonpartisan arm of Congress, the Congressional Budget Office (CBO). When scoring, CBO looks at current law and market conditions to establish a 10-year baseline then estimates any spending or revenue changes resulting from a proposed bill.  In this tight budgetary environment, bills that increase future deficits against the baseline have to find offsets, bills that don’t or even reduce projected deficits get the green light. According to CBO’s analysis of the farm bill as introduced in January 2014, the bill came out at $956 billion—$16.6 billion less than the cost of extending the current law. Proponents patted themselves on the back for this bipartisan deficit reduction success!

It’s a year later and lo and behold, it turns out the celebration was a tad premature. Many of the new programs created are projected to be much more expensive. CBO has upped the estimated price tag on just two new income entitlement programs by $9.5 billion (35%). And it turns out there were cost overruns in 2014 because of farm bill changes. Federally subsidized crop insurance—$1.8 billion more than expected. Supplemental disaster programs—projected to cost $0 before the farm bill was passed-$2.99 billion in 2014. Even the cancelled direct payments program, where checks went to farmland owners simply because they owned land, cost $188 million more than anticipated in its last year. Add it all up and the commodities supports in 2014 cost $5.115 billion more than the baseline. That’s money out the door.

But anyone with a modicum of common sense and an understanding of basic math could have seen this coming. The agriculture committees resorted to sleight of hand and legislative technicalities to hide the cost of the bill. CBO’s January 2014 score used crop planting, harvesting, and price assumptions calculated in May 2013, assumptions disproven over the following eight months. The committees consciously ignored market realities for calculated fantasies. Most farm programs incur costs over the time period between planting and harvest (crop year) but checks are sent to farmers in a fiscal year (October 1 to September 30). This is how programs, like new income and price guarantees, will cover crops in 2015 but have no spending until 2016, only “costing” money in the last eight of the ten fiscal years CBO analyzed. And some items were just left out. Most notably $300 million to bribe Brazil into not slapping retaliatory tariffs on our products, and letting trade-distorting subsidies to  cotton growers continue.

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Like any good snake oil salesman, advocates of spending big on farm programs point to promises of greener budgetary pastures in the nine remaining years from the CBO score. But gamesmanship and fuzzy math have a way of catching up. The track record of farm bills (the last two were more than $400 billion above their original score) makes future savings unlikely. So lawmakers are rightfully looking to re-open the farm bill debate to find the savings they were promised. Senators Flake (R-AZ) and Shaheen (D-NH) and Representative Duncan (R-TN) have introduced a bill to eliminate subsidies for the Harvest Price Option. This provision increases the amount of revenue taxpayers are on the hook for guaranteeing to an agricultural business if prices are higher at harvest than was anticipated at planting (note, revenue guarantees cannot be calculated down).  Even the president’s budget calls for finding more savings from agriculture.

When given the choice between bowing to special interests or fighting for taxpayers, farm bill negotiators said no to no one except those wanting to save taxpayer dollars. As this farm bill is proving to be yet another budget buster, it’s time to re-open agriculture programs to find some of the nearly $90 billion in Agriculture savings we’ve identified. Lawmakers have the chance to create a cost-effective and transparent agricultural safety net that is responsive to current needs and accountable to taxpayers. But you have to clear away the smoke and mirrors before taxpayers will harvest the reforms and savings we were promised.

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