What Sequestration Could Mean for Agriculture

On Friday, September 14, the White House Office of Management and Budget (OMB) released a preliminary outline of how it would implement automatic budget cuts (known as sequestration) across government programs, as required by the Budget Control Act of 2011 (BCA).  Intended to reduce the national debt, the $1.2 trillion in cuts are scheduled to begin in 2013 and will be equally divided over the next nine years. The cuts are split evenly between defense spending and discretionary domestic spending on a pro rata basis relative to the underlying cost of each program. Exemptions exist for wars and entitlements like Social Security and Medicaid, as the Bipartisan Policy Center explains here>>.

In the introduction to the report, the Obama Administration makes clear its dislike of sequestration as a budget enforcement tool, saying it is “bad policy” and “a blunt and indiscriminate instrument.” Defense spending cuts under the sequester are particularly contentious in a time when continued military strength is a hot-button topic. On the other side of the debate, U.S. Secretary of Agriculture Tom Vilsack said Friday that protecting the defense budget from cuts would further endanger agricultural programs, particularly if Congress doesn’t pass a new farm bill by the expiration of the current bill on Sept. 30.

The sequester can be avoided, but only if Congress passes another budget deal that would achieve at least $1.2 trillion in deficit reduction. Both Democrats and Republicans have offered proposals to do so, but there isn’t likely to be any progress on the deal  before Election Day. After Nov. 6, Congress will have just a few weeks to compromise on an alternative to the sequester.

Farm Bill

The sequestration report details automatic cuts of approximately $8 billion to Farm Bill programs over the next decade.  Cuts include $4.6 billion from commodity programs and $2.8 billion from conservation programs, with the remainder primarily in very small amounts from food purchasing and nutrition programs. Farm Bill programs that are exempt from cuts would include commodity loan programs, the Conservation Reserve Program, and nearly all crop insurance subsidies.

According to analysis by the National Sustainable Agriculture Coalition, the size of the automatic cuts under sequestration pales in comparison to those in the Senate-passed and House Committee-passed proposed Farm Bills.  Even after subtracting the cuts to exempt programs such as food stamps and the Conservation Reserve Program, and adding in the new spending proposed for crop insurance and other titles of the farm bill, both the Senate and House bills would cut $15 billion worth of spending – almost twice the level of the automatic sequestration cuts.

It has long been assumed that if a long-term farm bill were to pass and become law while sequestration was still the law of the land, the final farm bill would contain a provision to exempt farm bill accounts from sequestration, having gone further in terms of total savings than required by the automatic cuts. That doesn’t mean that Farm Bill programs would be unaffected by sequestration, however.

Agriculture Secretary Vilsack is still very concerned about the effects the sequester could have on agriculture. According to Vilsack, the real danger to the Farm Bill is steeper all-around cuts congress could make in an attempt to offset tax cuts or defense spending cuts the automatic sequestration process would trigger.

Agricultural Appropriations

All USDA discretionary line items would be cut by 8.2 percent each year.  The percentage and the absolute dollar amounts of the cuts assume that Congress keeps appropriations on autopilot at 2012 levels.  The numbers change if and when Congress adopts actual appropriations bills (adjusting accounts on an annual basis) rather than simple continuing resolutions (keeping current spending constant).

Overall, the approximately $22 billion a year agricultural appropriations bill — which covers all of USDA except for the Forest Service, plus the Food and Drug Administration, Commodity Futures Trading Commission, and the Farm Credit System — would be reduced by some $1.9 billion.

According to NSAC, sequestration would result in the following cuts:

• WIC – $543 million
• FDA (including both drug and food safety activities) – $318 million
• Extension – $210 million
• Rural development –  $196 million
• International food aid – $150 million

Other major cuts would fall on Farm Service Agency credit programs, Natural Resource Conservation Service conservation operations, and Food Safety Inspection Service meat inspections. According to NSAC, due to the difficulty of keeping effective agencies functioning with steady attrition and reduced services, sequestration has the potential to shut down USDA functions over a fairly short period of time.