Cut farm subsidy, crop insurance by $30 bln-US GOP

Tue Apr 5, 2011 4:44pm EDT

Related Topics

* Proposed farm cut is 20 percent, CBO data indicate

* House Budget panel aims at $5 bln/year "direct payment"

* Farm supports equal 10 percent of net cash farm income

By Charles Abbott

WASHINGTON, April 5 (Reuters) - The House Budget Committee Chairman proposed to slash farm spending by $30 billion over 10 years in a package unveiled on Tuesday as part of his controversial plan to tackle the giant federal budget deficit.

Wisconsin Republican Paul Ryan called for a reduction in the $5 billion-a-year in "direct payments" made to growers each year regardless of need. The payments are based on past production of grain, cotton and soybeans.

"Second, 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," said the Budget Committee proposal, promoted by Ryan.

"These reforms will save taxpayers nearly $30 billion over the next decade," it said.

Overall, Ryan proposed nearly $6 trillion in savings over the next decade, with huge cuts in Medicare and Medicaid programs. Ryan unveiled his plan while House Republican leaders and the White House fought over spending cuts for this year.

The government could shut down if there is no agreement by Friday.

The cuts in farm subsidies and crop insurance would equal 20 percent of projected spending on them, according to Congressional Budget Office figures.

They would not take effect until an overhaul of U.S. farm law, scheduled for 2012, is completed. That will give the Agriculture Committee flexibility in writing the new farm law, said the Budget Committee.

Oklahoma Republican Frank Lucas, the Agriculture Committee chairman, said the Budget proposals "are simply suggestions."

"At the end of the day, members of the House Agriculture Committee and I will write the next farm bill," said Lucas.

Farmers are enjoying boom times, an ideal moment for reform of "numerous overlapping" farm supports, said the Budget Committee proposal.

Direct payments, created by the 1996 Freedom to Farm law, are a popular target for deficit hawks, reformers and farm activists. Among main-line farm groups, there are suggestions to move the money into revenue assurance programs.

Payments by the government to farmers amount to 10 percent of net cash farm income, an USDA gauge of solvency.

Public nutrition programs such as food stamps, nearly two-thirds of the USDA budget, would also face cuts of 20 percent and land stewardship would be cut by 25 percent, said a farm lobbyist.

Food stamps would get the same types of reforms as welfare did a decade ago, said the Budget Committee, such as "encouraging work, limiting the duration of benefits, and giving states more control over the money being spent."

Food stamps, formally named Supplemental Nutrition Assistance Program, are forecast to cost $80 billion this year. Enrollment is a record 44.2 million people, or one in seven Americans. (Reporting by Charles Abbott; Editing by Alden Bentley)

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