Function 350 - Agriculture
Eliminate Title I Agriculture Programs
CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.
|Billions of Dollars||2017||2018||2019||2020||2021||2022||2023||2024||2025||2026||2017-2021||2017-2026|
|Change in Outlays||0||0||*||-0.3||-4.5||-4.1||-4.2||-4.0||-4.0||-4.3||-4.8||-25.4|
This option would take effect in October 2018.
* = between zero and $50 million.
Since 1933, lawmakers have enacted and often modified various programs to support commodity prices and supplies, farm income, and producer liquidity. The Agricultural Act of 2014 (the 2014 farm bill) was the most recent comprehensive legislation addressing farm income and price support programs. Title I of that bill authorized those programs through 2018 for producers of major commodities (such as corn, soybeans, wheat, and cotton) and specialized programs for dairy and sugar.
Beginning with the 2019 marketing year—when most programs expire and after existing contracts end—this option would eliminate all Title I commodity support programs. (For example, that period begins on June 1, 2019, for wheat and September 1, 2019, for corn.) Under this option, the permanent agriculture legislation enacted in 1938 and 1949 also would be repealed. (That permanent legislation would offer producers price and income support at a relatively high level after the 2014 farm bill expired.)
Although authorization for the Title I programs expires in October 2018, the option would generate savings with respect to the Congressional Budget Office’s baseline projections because, in its baseline, CBO is required by law to assume that those programs continue beyond their expiration date. Reductions in government spending with respect to CBO’s baseline would begin in fiscal year 2020 and savings would rise sharply in fiscal year 2021, when most outlays for the 2019 marketing year appear in the baseline. CBO estimates that this option would reduce spending by $25 billion, with respect to that baseline, over the 2019–2026 period.
During the Great Depression of the 1930s, the 25 percent of the U.S. population who lived on farms had less than half the average household income of urban households; federal commodity programs came about to alleviate that income disparity. One argument for eliminating Title I commodity support programs is that the structure of U.S. farms has changed dramatically since then: The significant income disparity between farm and urban populations no longer exists. In 2014, about 97 percent of all farm households (which now constitute about 2 percent of the U.S. population) were wealthier than the median U.S. household. Farm income, excluding program payments, was 58 percent higher than median U.S. household income. Moreover, commodity payments today are concentrated among a relatively small portion of farms. Three-quarters of all farms received no farm-related government payments in 2014; most program payments, in total, went to mid- to large-scale farms (those with annual sales above $350,000).
Moreover, agricultural producers would continue to have access to other federal assistance programs, such as subsidized crop insurance and farm credit assistance. In addition, eliminating Title I programs would limit spending that may distort trade, thereby reducing the risk that the World Trade Organization might again challenge U.S. agricultural support (as it did with the U.S. cotton program).
An argument against eliminating commodity programs is that despite relatively high average income among farmers, the farm sector still faces significant challenges. Farm income fluctuates markedly and depends on the vagaries of the weather and international markets. Commodity programs try to stabilize crop revenues over time. Also, much of U.S. agricultural production is exported to markets where foreign governments subsidize their producers. Without support from commodity programs, U.S. producers may not be able to compete fairly in those export markets. Finally, many years of continual government payments from commodity programs have been capitalized into the fixed assets of farm operations (primarily land); abruptly removing that income stream would cause farmers’ wealth to drop significantly.