Senate Passes Farm Bill

The Senate passed the Agriculture Reform, Food, and Jobs Act (i.e. the 2012 Farm Bill) today on a 64-35 vote. The bill included $969 billion of spending over the next ten years, mostly for nutrition programs, but makes some changes to both farm and nutrition programs that would result in $24 billion of savings relative to CBO's baseline. Note, however, that CBO's estimate of the bill was completed a month ago, so it does not account for amendments or other changes to the bill since then -- and there have been several.

The previous Farm Bill's authorization ends July 31 for commodity programs and September 30 for the rest. President Obama has called for about $30 billion in savings in his budget and many groups feel that it is time to reduce farm subsidies to rein in the budget deficit.

The bill ends current commodity programs, which include direct payments with fixed rates based on acreage and yields and countercyclical payments based on market prices. These payments are replaced with an "agriculture risk coverage" program that would guarantee farmers a certain amount of revenue based on expected crop prices and yields. The combination of these changes result in $16 billion of savings, with other changes resulting in $20 billion of total commodity payment savings. However, one paper from the American Enterprise Institute noted that a decline in crop prices could leave taxpayers on the hook for much more money that would wipe out the projected savings.

Other changes include reductions in acreage eligibility and enrollment in conservation programs and a change that requires beneficiaries who receive energy assistance to get at least $10 of benefits to qualify for a utility allowance that increases Food Stamp benefits (currently, the minimum is $1). The May estimate of the bill shows savings of $6 billion in conservation programs and $4 billion in nutrition programs.

May Estimate of the Farm Bill (billions)
Area Savings/Costs (-)
Commodity Programs $20
Conservation Programs $6
Nutrition Programs $4
Crop Insurance -$5
Other -$1
Total $24

Source: CBO

Just because the Farm Bill has now passed the Senate does not mean it will be seeing the President's signature soon. The House has not moved as quickly in taking up Farm Bill reauthorization, preferring to deal with it after the July 4 recess. There will certainly be differences in how much should be cut and where those cuts should come from.