The White House's Expensive "Cuts"

The President’s budget costs taxpayers, hurts rural communities, and misses opportunities for real savings.

Earlier today, the White House released its 2018 budget, which includes a 21% cut to the US Department of Agriculture.  As my colleague Lara explains here, the cuts proposed would hurt rural communities. This "skinny budget" only focused on discretionary spending; more details are expected about mandatory spending later this spring.  Many USDA expenditures are mandatory, including the most expensive federal farm subsidy—crop insurance—which costs around $6 billion annually.  But surprisingly, given the President’s purported focus on cost-savings, some the proposed changes in the "skinny budget" will make this expensive program even more costly:

  • Reducing technical assistance via the Service Center Agencies will likely cause farmers to lose more crops, driving up indemnities and the federal cost of crop insurance.  That’s because the Service Centers provide key technical assistance to set farmers up for success and help farmers create plans to deal with things like erosion, which is exacerbated by extreme weather.
  • Reducing USAID expenditures will drive down crop prices, in turn, driving up the federal cost of crop insurance, which insures farmers against low prices. That’s because the government typically buys up extra commodities to use for foreign aid, school lunches, etc., in an attempt to stabilize prices.  So instead of spending money to feed hungry people, we’ll be spending money to insure farmers against low prices while extra crops sit in grain bins around the country.

What makes these expensive “cuts” particularly mind-boggling is that there actually are opportunities to achieve real cost savings in the USDA, while strengthening the farm safety net and protecting our natural resources.  NRDC thinks crop insurance should incentivize cover cropping, which reduces the risk that farmers lose their crops due to bad weather, saving taxpayer dollars.  Oh yeah, and cleaning up polluted water, sequestering carbon, and providing critical pollinator and wildlife habitat in the process.

And to stabilize prices and reduce crop insurance payouts due to low prices, crop insurance could encourage diversified farms, the old-fashioned price hedging strategy. But federal crop insurance actually has resulted in more monoculture, increasing oversupply of some crops and driving down prices. Research shows that farms that grow three or four different crops have outsized environmental benefits and equivalent income compared to their monoculture counterparts. Farmers with diversified farms spend less on chemical inputs but more on farm labor—wait, did this just turn into a rural jobs policy?

The President’s budget is unacceptable, and rural communities like the one I grew up in will suffer from these policy choices.  If the President were serious about saving taxpayer dollars, he would turn his red pen toward making some real changes to federal crop insurance that would strengthen rural communities, not harm them.

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