Bloomberg News

House Bill Seen Cutting $40 Billion While Ending Farmer Payments

May 10, 2013

The House Agriculture Committee proposed legislation that would cut farm programs by an estimated $40 billion over 10 years and end direct payments to farmers in favor of a growers safety net tied to crop insurance.

The draft released today is mostly identical to last year’s bill approved by the committee that died without a floor vote. Majority Leader Eric Cantor, a Virginia Republican, has said the House will take up a farm bill in the next four months.

The bill would cut spending $39.7 billion over 10 years, according to a preliminary estimate by the Congressional Budget Office. A majority of the reduction would come from spending on nutrition programs, mostly on food stamps, which would drop $20.5 billion in 10 years.

The legislation proposes tightening eligibility for the Low Income Home Energy Assistance Program, which as been backed by Republicans. As with last year’s bill, the draft would bar food-stamp benefits for lottery-game winners and restrict eligibility for college students. The bill keeps an amendment to last year’s committee version to require immigration status checks as part of food-stamp eligibility.

The 576-page bill would reauthorize farm subsidies, federal conservation programs and nutrition programs through Sept. 30, 2018.

Crop Subsidies

Crop subsidies would be cut by 10 percent of total spending, more than the 2.5 percent drop for food stamps. About $6 billion of the projected reductions would come from cuts already enacted through required federal budget actions known as sequestration.

The draft measure retains most provisions for the cotton program from last year’s proposal, including the so-called stacked income protection plan for growers as proposed by the National Cotton Council. The draft eliminates floor prices in an effort to settle a trade dispute.

The U.S. currently pays cotton farmers in Brazil $147 million a year to settle a disagreement over cotton subsidies in exchange for the government of South America’s largest economy not retaliating against U.S. exports. Brazil had sought changes to the income plan in the 2012 farm bill, sending lawmakers in search of language that might resolve the World Trade Organization dispute.

Both the House bill and a draft Senate bill, circulated yesterday, would extend sugar price supports. Candy, snack food and beverage companies that oppose the subsidies have started campaigning to keep the provision out of the legislation. Cane-and beet-sugar growers support the program.

Sugar Supports

The U.S. limits sugar imports and sets prices for about 5,000 growers, raising consumer costs by $3.5 billion a year, according to an Iowa State University study. Because it helps farmers by setting artificially higher prices rather than with direct payments, government spending is minimal.

Because import restrictions limit competition, U.S. prices tend to be higher than the world market. Trade groups for food and beverage companies including PepsiCo Inc. (PEP:US), Mars Inc. and Hershey Co. (HSY:US) say quotas hurt profits and cost jobs -- leaving them with little enthusiasm for sugar programs.

The growers’ American Sugar Alliance says proposals to strip out the provision may cause some producers to fail.

The House and Senate drafts include the same dairy plan that stalled House action last year. Long championed by Collin Peterson, the ranking Democrat on the House Agriculture Committee, the proposal would attempt to stabilize milk prices by creating a mechanism to manage supplies.

Last time around, Speaker John Boehner described that plan as worse than current policy — and he’s no fan of the way it’s done now. He once called it a “Soviet-style” system for its intrusion into markets.

Both bills will be debated in committee next week -- the Senate on May 14, and the House the next day.

The current extension of U.S. farm policy, enacted as part of the New Year’s Eve spending deal, begins to expire Sept. 30.

To contact the reporter on this story: Derek Wallbank in Washington at dwallbank@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; Katherine Rizzo at krizzo5@bloomberg.net


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