The Congressional Budget Office (CBO) is every political budget analyst’s favorite punching bag. Truth be told, they have an impossible job. At its core, CBO is responsible for forecasting spending by the Federal government.[1] In some cases, this involves forecasting macroeconomic variables and the resulting Federal spending. For example, CBO forecasts marketing year average prices for commodities covered by the farm bill and the resulting Price Loss Coverage (PLC) payments. In other cases, CBO looks into its crystal ball to estimate spending that Executive Branch agencies will undertake using discretionary authority granted to them by Congress. For example, Section 5 of the CCC Charter Act vests USDA with eight categories of specific powers ranging from supporting the prices of agricultural commodities to increasing the domestic consumption of agricultural commodities. While some of these authorities are used to carry out programs explicitly authorized by Congress (e.g., carrying out conservation or environmental programs authorized by law), the authority has been used to deliver a number of new programs at the discretion of the Secretary. CBO’s efforts to forecast spending under the latter is the focus of this article.
From fiscal years 2012 to 2017, Congress restricted the Secretary’s discretionary use of the CCC Charter Act.[2] Since the restriction was dropped in fiscal year 2018, both the Trump and Biden Administrations have used Section 5 of the Charter Act in a number of creative ways. For example, in the midst of the trade war with China, the Trump Administration authorized a combined $28 billion in assistance to producers via the Market Facilitation Program (MFP).[3] More recently, the Biden Administration has used Section 5 to fund over $3 billion in Partnerships for Climate-Smart Commodities[4] along with $1.2 billion for the new Regional Agricultural Promotion Program to “enable exporters to diversify into new markets and increase market share in growth markets.”[5]
While CBO tries to reflect such spending in their regular baseline updates (for example, the January 2019 baseline explicitly listed $9.799 billion in spending for fiscal year 2019 under MFP), the baseline historically has not included an explicit (i.e., separate line item) forecast of additional spending. That changed with the January 2020 baseline which – beyond merely reflecting significant additional spending under MFP – included a long-term forecast of $100 million per year in “Other CCC Spending” under the CCC Charter Act Authority. To CBO’s credit, it presumably was attempting to account for the likelihood that spending at the discretion of the Secretary would continue into the future – and continue it did, as noted in Figure 1. As a result, in its May 2022 baseline, CBO increased the long-term estimate to $1 billion per year. At this point, the main question is whether $1 billion per year is a reasonable/sufficient estimate of future spending.
Figure 1. Actual versus Projected Spending under USDA’s Discretionary Use of CCC
As noted in Figure 1, spending under Section 5 has averaged $10.7 billion over the last 6 years since Congress restored the Secretary’s full authority under the CCC Charter Act. That is significantly higher than the $1 billion per year currently being forecasted by CBO. Even if you consider the most recent 3 years under a different administration – while treating MFP as an outlier – spending still averages almost $4 billion per year, 4 times higher than CBO’s forecast.
While an estimate of $1 billion per year would indicate CBO is projecting a return to “normal,” reality seems to paint a different picture. By our estimates, use of Section 5 authorities of the CCC has resulted in spending in excess of $64 billion over the last 6 years. If the current administration were re-elected, it’s hard to imagine a reduction in spending for the priorities noted above, indicating that recent spending levels could become the status quo. Further, a second Trump Administration could result in an expansion of tariffs and elevated spending under Section 5 in response. Regardless of the election outcome, recent hearings before the Select Committee on the Chinese Communist Party have indicated a significant interest in a resumption of tariffs on Chinese products.
All of this leads us to question the direction CBO will take in its Spring baseline update. In light of recent spending and ongoing priorities, if the CBO baseline is intended to be realistic, we would anticipate a significant increase in forecasted spending under CCC Charter Act Authority.
[1] It likely goes without saying that this understates the scope of CBO’s duties. For example, on a recurring basis, CBO projects Federal spending as a “baseline” against which authorizing committees consider changes (e.g., farm bill). CBO must also estimate the budget impact of those proposed changes, a process colloquially known as “scoring.” All of this involves CBO predicting into the future.
[2] https://crsreports.congress.gov/product/pdf/R/R44606/4
[3] https://crsreports.congress.gov/product/pdf/IF/IF11289
[4] https://www.usda.gov/climate-solutions/climate-smart-commodities/faqs
[5] https://fas.usda.gov/programs/regional-agricultural-promotion-program
Fischer, Bart L., and Joe Outlaw. “Forecasting Discretionary Spending by the Commodity Credit Corporation (CCC).“ Southern Ag Today 3(49.4). December 7, 2023. Permalink
