USA - Crop Insurance Subsidies Prove Cutting Budget Is Easier Said Than Done
In April, Republicans newly in control of Congress celebrated their agreement on a plan to save $5 trillion — that’s trillion, with a “T” — and balance the budget in a decade. “We continue to get things done for the American people,” boasted the House speaker at the time, John A. Boehner.
Yet as the year closes, Congress instead is planning to repeal one of the few spending cuts it has passed into law since approving that budget resolution: $3 billion over a decade from subsidies for crop insurers.
That’s billion, with a “B,” and just 0.06 percent of the promised $5 trillion total. Republican leaders agreed to hold a vote next month to delete the savings after lawmakers from agricultural states complained that the cut would hurt farmers.
“It just highlights that no one took the budget resolution seriously, or ever intended to actually produce the spending cuts necessary to balance the budget,” said Ed Lorenzen, a senior adviser at the Committee for a Responsible Federal Budget, a center-right group in Washington.
The case of the crop insurance subsidies is just the latest evidence that talking about balancing the budget is far easier than doing it. When self-professed budget hawks in Congress (and Republican presidential candidates) call for balancing the budget, they almost never provide the inevitably unpopular details. And the annual budget resolution is nonbinding, so lawmakers typically do not follow through with legislation that would fill in the blanks and could become law.
Congressional Republicans’ budget resolution in April included spending targets for broad categories of programs like agriculture and transportation, leaving the particulars to House and Senate committees.
Among the savings anticipated was $20 billion from total farm spending over 10 years.
Yet the agriculture committees, like most others, had no intention of turning budget-balancing numbers into policy reality by voting for cuts that would anger constituents, contributors and influential interest groups — not the $20 billion that the budget resolution recommended, nor even the $3 billion reduction from crop insurers, a cut that administration officials and Republican leaders tucked into the bipartisan budget deal Congress passed in October.
That cut was a reduced version of savings that President Obama has proposed in past annual budgets. But to clear a path to a vote on the budget deal, the House and Senate leaders — Senator Mitch McConnell of Kentucky and Mr. Boehner — agreed to a demand by leaders of the agriculture committees that Congress would vote on a repeal of the cut in crop insurance subsidies in December, when it debated a year-end measure to finance government operations for this fiscal year.
Mr. Boehner retired from Congress days later. His successor as speaker, Representative Paul D. Ryan of Wisconsin, will honor the commitment for a repeal vote, his office said. While repeal is not assured, it is expected.
Forget the old saw about the ink not even being dry, said Senator Jeff Flake, Republican of Arizona. He is one of the few lawmakers who have objected to reversing course on crop insurance subsidies, which he called “a feathered nest.”
“The ink hadn’t even been applied here,” Mr. Flake said in an interview. “We were reversing this before we even voted on it.”
Federal crop insurance is a public-private program. The government subsidizes insurers, many of them subsidiaries of multinational companies, to cushion farmers against losses from drought, floods, other natural disasters and low market prices.
Taxpayers cover about 60 percent of farmers’ premiums, while insurers get federal reimbursements for their operating costs. A target rate of return on their investment is set at 14.5 percent — “higher than that of other private companies, on average,” the Congressional Budget Office reported.
The provision in the October budget deal cut that rate to 8.9 percent. The outcry from farm-state lawmakers was immediate.
“If you do this, you’re going to devastate crop insurance, and a lot of farmers are going to be out of business, and small banks are going to be out of business,” Senator Pat Roberts, Republican of Kansas and chairman of the Senate Agriculture Committee, told reporters.
In a Senate speech, Steve Daines, Republican of Montana, perhaps best captured the gulf between budget talk and action. He began by noting that after a long business career, he was elected last year to “get Washington, D.C.’s reckless spending and record debt under control,” and that his first bill was for a balanced budget.
Then he segued to an attack on the budget deal. “The crop insurance program was gutted as a way to make this deal work,” Mr. Daines said. “Where was the voice of Montana? Where was the voice of rural America as this back-room deal was cut?”
At least two voices from Montana had been raised, and not in opposition. “The sky is not falling” was the headline on a widely shared endorsement of the crop insurance proposal written by Eric J. Belasco and Vincent H. Smith, agricultural economists at Montana State University who are visiting scholars at the American Enterprise Institute, a conservative think tank.
Mr. Belasco said in an interview that he and Mr. Smith supported the proposal because it would save money by reducing insurance companies’ relatively high returns while “not really affecting farmers and ranchers.” When they heard farm-state lawmakers arguing otherwise, he said, “it motivated us to set the record straight.”
Another professor of agricultural economics, Bruce A. Babcock of Iowa State University, was moved to come to Washington last week to lobby congressional offices in support of the savings, joining Scott Faber, the vice president of government affairs at the liberal-leaning Environmental Working Group.
“I’ve been looking at this issue for quite a while, so it was kind of alarming to see the ‘sky is falling’ analogies,” Mr. Babcock said in an interview.
“I’m sick of the hypocrisy of people out there saying: ‘Balance the budget, balance the budget, and don’t raise taxes.’ Well, what are you going to cut? If you can’t cut this, what can you cut?”
The agriculture committees counter that a 2014 law reauthorizing farm programs for several years cut billions of dollars. “We’ve done our part,” Representative Collin C. Peterson of Minnesota, the senior Democrat on the House Agriculture Committee, said in a statement.
But recent analyses, including one by the Committee for a Responsible Federal Budget, show that the farm law’s projected savings have been wiped out by higher-than-expected spending for farm price supports.
Representative K. Michael Conaway, Republican of Texas and chairman of the House Agriculture Committee, predicted in an interview that crop insurance companies would get out of the business unless the cut was reversed. They are, he said, “a vital cog in keeping these farmers in business.”
“So let’s be real careful before we start automatically tossing production of agriculture under the bus in some sort of point of balancing the budget,” Mr. Conaway said. “I’m as much of a spending hawk as anybody else. But at the end of the day we need to be smart about how we do it.”
As for finding $3 billion in alternative savings, Mr. Conaway said that was a problem for congressional leaders.
But, he added, the cuts “are going to be found somewhere other than the ag jurisdiction.”
Source - http://www.nytimes.com
