Yesterday, the Congressional Budget Office (CBO) released its February 2023 budget projections for a number of Federal programs, including farm-related programs and the Supplemental Nutrition Assistance Program (SNAP). All eyes are on the farm bill, which expires on September 30, 2023, and this latest update gives us an initial glimpse of the budget baseline that will be available to the farm bill authors this year.
CBO typically updates their budget projections early in the year, and yesterday’s release follows that pattern. Following the release of the President’s budget in February, CBO will often release a revised outlook in March. If the President’s budget is delayed, the updated outlook from CBO can stretch into late Spring or early summer – for example, in 2021, the update was released in July. Why does this matter? It is generally the update following the release of the President’s budget that is the baseline against which the cost of legislative proposals is “scored” throughout the year. In other words, while the current release will get a lot of attention, CBO may choose to update their projections again this spring; if they do, that baseline likely will be used for writing the farm bill. CBO will also typically release – at least to policymakers – their baseline projections by farm bill title.
In the meantime, there is much to glean from the information made publicly available in yesterday’s release. As we noted in a Southern Ag Today article last summer, if we look back to the April 2018 baseline (the scoring baseline for the 2018 Farm Bill), the spending projections for CCC Price Support and Related Activities, Conservation, SNAP, and Crop Insurance accounted for $865.9 billion (Table 1), or 99.85% of the $867.2 billion in projected total baseline outlays for the farm bill. Applying the same methodology to CBO’s most recent February 2023 baseline update, those four categories are projected to spend approximately $1.45 trillion over the next 10 years (Table 1). The significant increase is due to an 81.6% increase in projected spending on SNAP, with SNAP now projected to account for $1.2 trillion, or 83.3% of the total farm bill baseline. By contrast, the income support provisions for agricultural producers that make up the largest component of Title 1 – the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs – are projected to spend $48.6 billion over the next 10 years, or just 3.4% of the total farm bill baseline. Following are a few initial observations from Table 1:
- While some may look to the $71.8 billion in CCC Price Support & Related Activities (a $7.5 billion increase) as additional resources with which to write the farm bill, it’s not that simple. In January 2020, CBO began including $100 million per year in the baseline as an estimate of the amount they project the Secretary of Agriculture to spend using discretionary authority available under the CCC. In May 2022, CBO increased that amount to $1 billion per year (or $10 billion over 10 years). In other words, absent the amount that CBO includes in the baseline as a guess of what they expect the Secretary to spend using discretionary CCC authority, the baseline for CCC Price Support & Related Activities would be going down.
- These estimates would also likely be considerably lower if one were using USDA’s latest market projections which were also released yesterday. For example, USDA projects cotton prices in the long run that are 16% higher than CBO. If USDA’s projections were to materialize, ARC and PLC spending would be considerably less and the safety net would still be doing nothing to address the high cost of inputs.
- The increase in conservation spending is almost entirely due to the infusion provided in the Inflation Reduction Act (IRA) of 2022, although CBO has revised downward the amount they expect USDA to spend on these efforts (by roughly $1.5 billion).
- On crop insurance, the increase in projected spending is generally attributable to expanded product availability over the last 5 years along with projected increases in liability coverage due to higher market prices.
Table 1. Congressional Budget Office (CBO) 10-Year Outlays in Million$
|April 2018||February 2023||Change ($)||Change (%)|
|CCC Price Support & Related Activities 1/||64,305||71,806||+7,501||+11.7%|
Bottom line: the already relatively small 10-year baseline for writing Title 1 may ultimately be an overestimate, especially when comparing with USDA’s economic outlook. Even now, it pales in comparison to the almost $88 billion in unbudgeted ad hoc assistance that was provided to agricultural producers over the past 5 years alone. If Congress plans to move away from ad hoc assistance to a more sustainable risk management framework for producers, additional resources will be needed for the farm safety net.
Author: Bart L. Fischer
Research Assistant Professor and Co-Director Agricultural & Food Policy Center at Texas A&M University
Author: Joe Outlaw
Professor and Extension Economist
Co-Director Agricultural & Food Policy Center at Texas A&M University
Photo by Karolina Grabowska: https://www.pexels.com/photo/image-of-old-building-on-american-banknote-4386157/