House Farm bill supporters are pushing the Congressional Budget Office (CBO) to drastically increase its estimate of savings from one provision included in the draft Farm, Food, and National Security Act of 2024. Sec. 1608 Limitation on CCC Authority, would restrict the Secretary of Agriculture’s discretionary spending authority under the Commodity Credit Corporation Charter Act. Purported savings from this restriction is sought as a means of paying for increased spending in mandatory farm income entitlement programs.

Regardless of one’s view on farm income subsidy programs or the Secretary of Agriculture’s Charter Act Authority, if this effort is successful, it will create a dangerous and costly precedent. Lawmakers and taxpayers must have confidence that revenue and cost estimates of proposed legislation are derived from a transparent, consistent, unbiased economic and fiscal analysis. Replacing CBO’s estimates with those of the authors of this legislation would do more than undermine confidence in the projected cost of the farm bill, it could erode the independence of the CBO, damage the budget scoring process, and stymy efforts to only craft policies our nation can afford.

USDA’s Charter Act Authority

Charter Act Authority refers to the ability of the Secretary of Agriculture to spend money through USDA’s Commodity Credit Corporation (CCC) without first seeking authorization or appropriations from Congress. The CCC is the financing mechanism used to cut and track checks for many mandatory farm bill programs, including most programs in the Commodities, Conservation, and Trade titles of the Farm Bill. It has a standing $30 billion line of credit with the Treasury. In recent years these CCC financed farm bill programs have generally cost $15-20 billion annually. The full line of credit is reimbursed during annual appropriations.

The Charter Act establishing the CCC in 1948, however, also gives the Secretary of Agriculture broad authority to draw on the CCC line of credit to create additional programs in aid of agriculture. Aid simply needs to be directed toward a number of ironically named “specific powers” articulated in 15 U.S.C. 714c, including increasing domestic consumption, removing “surplus” commodities or supporting prices through loans, purchases, payments, and other operations. Exercise of this authority is at the complete discretion of the Secretary. The only potential limits are 1) a $30 billion cap on CCC borrowing authority and 2) any limitations and restrictions articulated in statute.

Charter Act authority – Recent Use

Secretary Vilsack and his predecessor Secretary Perdue have utilized their discretionary authority extensively.

• Prior to FY2012 most activity through the CCC was aimed at disaster response and limited in scope.
• From FY2012-FY2017, appropriations bills included a rider restricting funds from any surplus removal or price support activity, effectively limiting most charter act activity.
• Secretary Perdue used the Charter Act to direct $25 billion in Market Facilitation Payments as part of President Trump’s tariff war with China.
• Charter Act authority is the mechanism funding the $3 billion Partnership for Climate Smart Commodities (PCSC). It has also directed subsidies to a number of other special interests ranging from ethanol and cotton ginners to seafood companies and foreign agricultural aid.

Charter Act Authority is Phantom Baseline

According to the CBO, the House Farm Bill Sec. 1608 Limitation on CCC Authority will produce scorable savings because of a quirk in CBO scoring and irony.

Spending outlays labeled as “CCC Charter Act Authority” made their first appearance in CBO’s Baseline for Farm Programs accompanying the January 2020 update to the Budget and Economic Outlook. CBO stated at the time that charter act outlays, excluding the unprecedented trade war assistance, averaged approximately $100 million annually over the previous decade. Anticipating the Trump Administration would use the charter act to make additional tariff relief payments and other spending, CBO included $100 million in annual outlays moving forward. It was an effort to record and inform Congress of likely spending but had the effect of manufacturing an increase in baseline without a vote or spending offset.

After Secretary Vilsack’s use of the charter act for PCSC, response to COVID-19, and other activities, the CBO’s May 2023 baseline increased the annual projection of CCC outlays to $1 billion. But the $1 billion is not derived from statute. It’s an attempt to account for possible spending that is at the sole discretion of future Secretaries of Agriculture. It is a phantom baseline willed into existence.

Limiting Charter Act Authority is a Fake Pay-For

The House farm bill “suspends” the Secretary’s discretion to spend under the Charter Act. CBO calculates the savings is slightly offset by increased spending under a different spending account (Section 32) resulting in a net $8 billion in deficit reduction (FY25-34).

House Agriculture Committee leaders, however, are lobbying CBO to instead score the savings as $53 billion. The claim being that the unprecedented spending by the Trump Administration is a new precedent and should be included in the baseline. While CBO has thus far resisted, the House Budget Committee could overrule CBO and simply “deem” the savings at $53 billion. Much as the Charter Act authority lets the Secretary of Agriculture place his spending priorities in place of Congress’s, deeming higher savings will place the Agriculture Committee’s self-interested assumptions in place of CBO’s.

Future Potential actions must not offset future Mandatory spending.

Lawmakers must resist efforts to undermine the integrity of CBO’s scoring system. CBO’s scores are inherently subjective but are based on observable assumptions: Market prices, average yields, and overall economic conditions included in Budget and Economic Updates.  Projecting actions of future Secretaries of Agriculture requires a crystal ball. The farm bill’s FY25-34 scoring baseline will cross two presidential elections (2028 and 2032) and five Congresses. There is no statute, regulation, or even tradition that compels the Secretary to use his discretion to spend beyond the Congressionally mandated farm bill programs.

Whether one supports this authority or not, suspending the discretion of the Secretary to spend money is not a credible pay for. Cutting up the Secretary’s Charter Act credit card keeps him from unilaterally adding to our nation’s debt. It does not create any actual, measurable savings, let alone $53 billion.

The House Agriculture committee needs to respect the scoring process and craft a farm bill that reflects economic and fiscal reality.