Trump Budget Proposal Calls for Farm Program Cuts
On Monday, February 10th, the Trump Administration submitted to Congress its 2021 fiscal year budget proposal. The proposal called for reforms to crop insurance, commodity programs and conservation programs in an effort to provide significant budget savings. The proposal kickstarts the process in Congress for providing funding for the upcoming fiscal year, which begins October 1, 2020.
Proposed cuts to farm programs include: 1) limit eligibility for crop insurance, conservation, and commodity programs to only those with Adjusted Gross Income (AGI) of less than $500,000; 2) reductions in payment limitations to a strict single maximum amount of $125,000; 3) further reductions in premium subsidy amounts for crop insurance policies; 4) additional cuts to conservation programs; and 5) elimination of other agriculture industry support programs.
While the budget proposal included many cuts, there were also areas where increases were sought, including infrastructure and defense.
PROPOSED REFORMS TO AGRICULTURAL SUBSIDIES, PAYMENTS, AND OTHER PROGRAMS
Limit benefits to producers with an Adjusted Gross Income (AGI) of less than $500,000—The Budget proposes to eliminate premium subsidies, commodity payments, and conservation program eligibility for farmers with AGIs over $500,000. It is hard to justify to taxpayers why the Government should provide assistance to farmers with incomes over half a million dollars. Doing so undermines the credibility and purpose of farm programs. In 2013 (a year of record-high farm income), only 2.1 percent of farmers had AGIs in excess of this amount.
Tighten payment limits and eliminate loopholes—The Budget proposes to tighten payment limits for farmers and eliminate payment limit loopholes. There is no need for any one producer to receive more than $125,000 in commodity support payments per year ($250,000 for married couples), or for peanut producers, who already benefit from higher price supports than most producers,1 to get special treatment so they
are eligible for $250,000 in payments ($500,000 for married couples) if they produce other crops.
Limit crop insurance premium subsidies—The subsidy the Government currently provides farmers averages 62 percent of their crop insurance premiums. The premium reduction proposal would bring the average premium subsidy down to a more reasonable 48 percent. According to the Government Accountability Office, data show that the impact on a farmer’s average per-acre production costs would be limited to between one and two percent depending on the crop.
Eliminate reimbursements and automatic implementation for 508(h) crop insurance product development—Few products for large crops are left to develop, and the Farm Bill often directs the development of commodity-specific products when there is a gap. In addition, the Risk Management Agency can still develop products internally. Moreover, the 2014 Farm Bill authorized buy-up coverage for the Non-Insured Assistance Program, which is for crops that are not covered by crop insurance. For those reasons, the Budget proposes to eliminate the reimbursements to the private sector for the development of new crop insurance products and also proposes to make the approval of new products under 508(h) at the discretion of the Federal Crop Insurance Corporation Board rather than mandatory. In addition, the Budget includes language that would remove the ability for producers to receive payments from both the Commodity Credit Corporation permanent disaster programs and crop insurance.
Reform and streamline conservation programs—The Budget proposes to maximize the efficient use of conservation program funding by prioritizing funding for those programs that have shown positive outcomes and eliminating funding for those programs with limited outcomes. A 2016 Department of Agriculture Office of Inspector General report found that over 30 percent of Conservation Stewardship Program (CSP) contracts reviewed as part of an audit contained errors or inconsistencies. The errors were due to “ineligible participants receiving CSP contracts and eligible participants receiving excessive program payments.”2 These indicators demonstrate that CSP funding is not always spent in the taxpayers’ best interest. In addition, the Budget also proposes a modest reduction of $40 million to the Agricultural Conservation Easement Program. The Budget’s proposed reduction would address restoration work while continuing to enroll priority easement acres.
Eliminate lower-priority and duplicative programs—The Federal Government should not be singling out select commodities such as cotton and wool for special assistance, particularly with a poorly designed Economic Adjustment Assistance for textile mills program where the purpose is unclear.3 In addition, the Federal Government should not be providing mandatory feed assistance for livestock when producers can purchase subsidized pasture, rangeland, and forage insurance to protect against feed losses from drought.