USA: Agricultural cuts

President Obama introduced Monday the deficit reduction and economic growth plan. Some excerpts of the Agricultural Chapter are reproduced here.

Wednesday 21 September 2011 (6 years 10 months 2 days ago)

President Obama introduced Monday the deficit reduction and economic growth plan. Some excerpts of the Agricultural Chapter are reproduced here:

The Administration remains committed to a strong safety net for farmers, one that protects them from revenue losses that result from low yields or price declines, and strong crop insurance programs. But there are programs and places where funding is unnecessary or too generous. To reduce the deficit, the Administration proposes to eliminate or reduce those programs, while strengthening the safety net for those that need it most. The Administration is proposing to:

Eliminate direct payments. The direct payment program provides producers fixed annual income support payments for having historically planted crops that were supported by Government programs, regardless of whether the farmer is currently producing those crops—or producing any crop, for that matter. (...) In a period of severe fiscal restraint, these payments are no longer defensible, and eliminating them would save the Government roughly $3 billion per year.

Reduce subsidies to crop insurance companies. (...) currently 83 percent of eligible program crop acres are enrolled in the program. However, the program continues to be highly subsidized and costs the Government approximately $8 billion a year to run (...) A USDA commissioned study found that when compared to other private companies, crop insurance companies’ rate of return on investment (ROI) should be around 12 percent, but that it is currently expected to be 14 percent. The Administration is proposing to lower the crop insurance companies’ ROI to meet the 12 percent target, saving $2 billion over 10 years. (...) The Administration, therefore, proposes setting the cap at $0.9 billion adjusted annually for inflation, which would save $3.7 billion over 10 years. Finally, the Administration proposes to price more accurately the premium for catastrophic (CAT) coverage policies, which will slightly lower the reimbursement to crop insurance companies. The premium for CAT coverage is fully subsidized for the farmer, so the farmer is not impacted by the change. This change will save $600 million over 10 years.

The Administration also proposes modest changes in subsidies for producers. Today, producers only pay 40 percent of the cost of their crop insurance premium on average, with the Government paying for the remainder. (...) The proposal would shave two basis points off any coverage premium subsidy levels that are currently offered above 50 percent, saving $2 billion over 10 years. Farmers who have premium subsidies of 50 percent or less would not be affected.

Better target agricultural conservation assistance. (...) To reduce the deficit, the Administration proposes to reduce conservation funding by $2 billion over 10 years by better targeting conservation funding to the most cost-effective and environmentally beneficial programs and practices. Even under this proposal, conservation assistance is projected to grow by $60 billion over the next decade.

Extend mandatory disaster assistance. (...) The Food, Conservation, and Energy Act of 2008 provided producers with mandatory disaster assistance programs for the 2008 to 2011 crops. To strengthen the safety net, the Administration proposes to extend these programs, or similar types of disaster assistance that are of a similar cost, for the 2012 to 2016 crops.

White House
http://www.whitehouse.gov

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