Official cost estimate confirms that the House farm bill will increase the deficit

The House Agriculture Committee’s farm bill would increase the federal government’s budget deficit by $33 billion over 10 years, according to an official cost estimate released Friday by the Congressional Budget Office, which refused to change its stance on a budget reconciliation bill designed to fund changes to commodity programs.

The funding gap could force Republican leaders in the House to either order the CBO to change its budget estimate or amend legislation if they want to pass the bill in the House.

At issue is a provision in the bill that seeks to suspend the application of Section 5 under the U.S. Department of Agriculture’s (USDA) spending authority of the Commodity Credit Corporation – essentially a revolving fund.

The CBO’s estimate of potential savings is well below what House Agriculture Committee Chairman Glenn “GT” Thompson (R-Pa.) estimates is needed to cover the costs of several commodity program measures, including higher reference prices under the Price Loss Coverage program.

The CBO disagrees on how much the USDA is likely to spend from the account and how much would be saved by the farm bill’s provision. Because the provision “could be interpreted in multiple ways,” the CBO said in the 27-page document that it was not clear whether the bill’s language “would prevent the USDA from spending funds under its Section 5 authority.”

Ultimately, the CBO estimated that the CCC rule could save $3.6 billion in fiscal years 2025 through 2033 with a 50% probability.

Meanwhile, the CBO estimated that the bill would increase the cost of the extractive programs by $43.4 billion over the same period. Other cuts in the bill reduce the net cost increase to $33 billion.

In a statement, Thompson said he would work with the CBO and the House Budget Committee, chaired by Texas Republican Jodey Arrington, who represents a major cotton-growing district, “to achieve a clear and defensible interpretation of the Section 5 discretionary power limitation.”

In theory, Arrington could order the CBO to give the CCC provision the budgetary rating Republicans want, but doing so would risk a political backlash in the House of Representatives and would not gain acceptance in the Democratic-dominated Senate anyway.

“Passing a five-year agriculture bill is a long process that involves many steps and requires a lot of hard work,” Thompson said. “Today’s CBO assessment is part of that process, but tells me that more work needs to be done to ensure the bill – which has been consistently praised by everyone along the agriculture value chain – can be brought across the finish line.”

House Agriculture Committee leader David Scott of Georgia and Senate Agriculture Committee Chair Debbie Stabenow (D-Michigan) immediately issued statements urging Thompson to abandon his efforts to pass this version of the bill.

Improvements to the PLC program, as well as a provision that would allow enrollment of up to 30 million acres of base area, would increase PLC payments by $34.9 billion, the CBO said. Payments for agriculture risk coverage would increase by $9.7 billion. Increases in marketing credit interest rates and changes to cotton marketing credits would add another $700 million to the bill’s cost.

The cost of the Dairy Margin Coverage program would increase by $300 million, in part because the bill would give participating producers the opportunity to update the amount of eligible production.

The cost of the federal crop insurance program will be increased by $3.5 billion, in part through increased premium subsidies for the supplemental insurance option. About $1.5 billion of this increase would be covered by increased administrative and operating funds for the insurance industry.

The bill would incorporate $13.2 billion in conservation funding from the Inflation Reduction Act into the bill, resulting in permanent increases in funding levels for several other conservation programs.

Funding for the Environmental Quality Incentives Program would be increased from $2 billion per year under current law to $2.5 billion annually, for a total increase of $2.6 billion by 2033.

Funding for the Conservation Stewardship Program would increase from $1 billion to $1.4 billion, for a total increase of $2.1 billion.

While the Conservation Reserve Program does not benefit from IRA funds, its costs would increase by $1.6 billion by 2033 due to changes made by the law, which include increased benefits for landowners.

The bill cuts the nutrition budget by a net $20 billion by placing restrictions on future updates to the Thrifty Food Plan, which would save an estimated $29.4 billion. TFP is an economic model of nutrition costs used to determine Supplemental Nutrition Assistance Program benefits.

For more news, visit Agri-Pulse.com.