A 2010 law that was supposed to bring budget deficits under control theoretically could force USDA to slash farm program spending because of the budget reconciliation bill Republicans hope to push through Congress. But lawmakers have routinely waived automatic spending cuts before and likely will do so again, leading some to question why the law is still on the books.
The Pay-As-You-Go (PAYGO) Act would trigger cuts known as sequestration if an enacted bill raises deficits by $2.3 trillion in 10 years, CBO director Philip Swagel said in a letter on May 20.
The White House Office of Management and Budget is required to keep five- and 10-year scorecards with revenue and outlay changes from enacted legislation. If either scorecard were to indicate a net increase in the deficit, OMB would be required to order a sequestration to eliminate the overage, Swagel wrote.
Should Congress increase deficits by $2.3 trillion between 2025 and 2034, OMB would issue a sequestration order to reduce spending by $230 billion in fiscal 2026 without “enactment of subsequent legislation that would offset the deficit increase, waive the recordation of the bill’s effects on the scorecard, or otherwise mitigate or eliminate the statutory requirements,” Swagel said. The order would need to come no more than 14 days after the current session of Congress.
CBO is scheduled to release estimates of the bill's impact on deficits Wednesday.
Bill Hoagland, a senior vice president at the Bipartisan Policy Center and former Senate budget expert, estimates that about $240 billion would be added to the deficit for the upcoming fiscal year under the House-passed bill. He based his projection on CBO cost estimates.
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Sequestration of that amount could cut off funding to price support programs the day it were to occur, Hoagland said. Such sequestration has never been triggered, because Congress has always waived it to avert drastic cuts to farm programs, Medicare and defense spending.
“When you make the calculation today, the sequester is larger than the amount that’s available to be sequestered,” he said. “You’d wipe out all the spending for farm programs. You’d wipe out almost all the spending for any new student loans or things like that. So that’s why it’s always waived."
Should sequestration hit, it would be drastic for commodity, conservation and other farm bill programs, retired farm policy expert Ferd Hoefner told Agri-Pulse.
"All the programs that get some mandatory money in the farm bill, you'd have to cut all of them in their entirety," Hoefner said.
Hoagland expects Congress to attempt to waive the sequestration should reconciliation pass.
Still, Hoagland believes the continual waiving of statutory PAYGO is an indication the law is ineffective. “I would repeal this whole law because it hasn’t worked,” he said.
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