House Republicans’ New Budget Proposal Would Cut Farm Subsidies

6 April 2011

A US federal budget proposal unveiled Tuesday by House Republicans provides for deep cuts to taxes and to domestic spending - including, unusually, to farm subsidies.

The proposal put forward by the chairman of the House Budget Committee, Paul Ryan, a Republican from Wisconsin, would cut $30 billion out of farm payments over a decade. The cuts would represent 20 percent of projected farm spending based on Congressional Budget Office estimates, according to Reuters.

The new long-term budget plan stands in contrast to the House Republicans' February proposal, which would have done nothing to slash farm payments, although it would have reduced spending on some nutritional programmes, according to the Environmental Working Group, which monitors US farm spending.

Citing high farm prices that create an opportune moment for reform, Ryan's plan would reduce some of the $5 billion-a-year in ‘direct payments' made to farmers each year irrespective of current production, price, or need. While such payments are seen as having relatively mild distortionary effects on production and trade - and are thus exempt from cuts in the WTO's Doha Round of global trade talks - they have been a target for fiscal hawks and advocates of agricultural policy reform. The budget committee also proposed to "reform the open-ended nature of the government's support for crop insurance, so that agricultural producers assume the same kind of responsibility for managing risk that other businesses do." Nutrition programmes such as food stamps - which account for some of the US agriculture department's biggest outlays - would be cut by 20 percent; land conservation funding would be reduced by a quarter.

Ryan's plan, with its controversial cuts to social programmes such as medical care for seniors and the unemployment, is unlikely to receive the House, Senate, and presidential approval necessary to become law.  Furthermore, any farm subsidy cuts would need to be written into a new US farm bill, due in 2012. The farm bill would be written in the House agriculture committee, where the pro-status quo farm lobby has traditionally been well represented. Frank Lucas, the Oklahoma Republican who currently chairs the committee, said that the Budget committee's ideas "are simply suggestions."

ICTSD reporting; "Cut farm subsidy, crop insurance by $30 bln-US GOP," REUTERS, 5 April 2011.

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