CBO report finds potential $130 billion in savings from agriculture programs

By Derrick Cain

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Nov. 14, 2013 - Congress could save about $130 billion over 10 years from reductions or changes to several agriculture-related programs, the Congressional Budget Office (CBO) said in a report released Wednesday.

In its report, CBO lists 103 options to lawmakers that could decrease federal spending or increase federal revenues over the next decade. CBO periodically issues a compendium of policy options - not recommendations - that could lower the federal deficit. The 316-page report, which spans a large range of federal programs, contains six areas within the agriculture sector. Those include conservation, crop insurance, direct payments, food stamps, school lunches, and the Forest Service.

On conservation: The report said prohibiting new enrollment in the Conservation Stewardship Program could reduce federal spending by $8 billion from 2015 to 2023. The report said prohibiting new enrollment and reenrollment in the general enrollment portion of the Conservation Reserve Program could reduce spending by $5 billion during the same period. The amount of land enrolled in the CRP would likely drop to about 10 million acres by 2023, CBO said.

On crop insurance: The report said reducing crop insurance subsidies could save $27 billion. The reduction would involve lowering the federal government's subsidy to 40 percent of the crop insurance premiums, on average, from the current 60 percent. In addition, the report suggests limiting the federal reimbursement to crop insurance companies for administrative expenses to 9.25 percent of estimated premiums (or to an average of $915 million each year from 2015 through 2023) and limit the rate of return on investment for those companies to 12 percent each year, down from 14 percent.

On direct payments: CBO said eliminating direct payments could reduce overall spending on farm programs by $25 billion between 2015 and 2023, after factoring in some likely resulting cost increases from other programs. The CBO said if producers did not receive direct payments, they would probably increase their participation in other federal farm programs, such as the Average Crop Revenue Election (ACRE) program. CBO estimated a possible increase in ACRE payments of $13 billion between 2015 and 2023. Also, the report said, because USDA takes direct payments into account when it calculates countercyclical payments, eliminating direct payments would likely boost countercyclical payments by $3 billion. With savings of $41 billion in ending direct payments and partly offsetting costs of $16 billion, the CBO arrived at the $25 billion figure in overall savings.

On the Supplemental Nutrition Assistance Program (SNAP): The report said  three changes to the program could save $50 billion from 2015 to 2023. The first change would apply standard income and asset requirements to people who would otherwise be entitled to benefits through broad-based categorical eligibility - potentially saving $10 billion from 2015 to 2023. The second change would lower the income limit for households that are not categorically eligible for benefits and that have no elderly or disabled members. For those households, the approach would lower the limit from 130 percent of the federal poverty level to 100 percent. The approach could save $2 billion from 2015 to 2023, CBO said. The third change would be to eliminate the Low-Income Home Energy Assistance Program (LIHEAP) “loophole” that critics say allows states to “game the system” by securing more federal taxpayer dollars by sending token LIHEAP checks-some as low as $5-to increase SNAP benefits. This could save $11 billion in the same period. “CBO expects that implementing all three approaches simultaneously would yield savings of $50 billion through 2023, considerably more than the sum of the effects of the three approaches taken one at a time,” the report said.

On school lunches: The report suggested eliminating subsidies for school meals served to students from households with income greater than 185 percent of the federal poverty level beginning in July 2014. CBO said this could reduce spending by $10 billion.

On the Forest Service: The report said eliminating the Forest Service's programs in Forest and Rangeland Research and in State and Private Forestry could save $5 billion from 2015 through 2023. The Forest and Rangeland program addresses environmental and social concerns and provides information and tools to assist private industry and other stakeholders in the sustainable management and use of natural resources. The State and Private Forestry program, provides support to sustain forests and meet domestic and international demand for the goods and services that they provide. The program addresses forest health management, such as efforts to combat damaging insects, diseases, and invasive plants.

View the complete CBO report here.

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