What if there's no farm bill? Asked and Answered by American Enterprise Institute

Will the sky fall? What happens if there is no new farm bill by Oct. 1, 2012

The short answer: the sky won’t fall. The longer and more nuanced answer: Heck no, the sky won’t fall. To put pressure on the House Republican leadership, some farm lobby groups are arguing that the agricultural sector will face severe problems if a new farm bill is not in place by Sept. 30, two weeks from now. The truth is that very little would happen, either in agricultural commodity markets or on the farm, at least over the next eight months.

The reason: many important farm subsidy programs are authorized by other legislation, have their own appropriated funds or involve long term contracts that would be unaffected by the fact that the authorizing legislation, the 2008 farm bill, expires at the end of this month.

Such programs include the federal crop insurance program, through which the largest amount of federal subsidies (estimated by the Congressional Budget Office to be about $9 billion annually) are currently channeled to farmers, and most of the annual outlays under the Conservation Reserve Program (currently about $1.6 billion) which are typically dispersed through 10- or 15-year contracts with individual farmers. In addition, in October, farmers will still receive their 2012 crop-year welfare checks worth $5 billion through the Direct Payments program. This program will expire in 2013 if there is no new farm bill, but funds this year have already been appropriated to make those payments.

An extremely useful report by Congressional Research Service staff, published on July 25 of this year, lays out what would happen to each of the major farm subsidy programs if Congress took no action to extend the provisions of the 2008 farm bill for either a few weeks, a few months or up to a year. While programs that authorize for mandatory funding under the 2008 farm bill could be subject to suspension, the CRS report points out that many of those programs, including nutrition programs, have their own appropriated funds. The General Accounting Office has determined that programs with appropriated funds, which include many farm programs, do not have to be authorized by current legislation.

In fact, the problems created by an expiring farm bill have been easily addressed by Congress in the past. The 2008 farm bill should have been the 2007 farm bill (as its predecessor, the 2002 farm bill, expired on Sept. 30, 2007). However, while the House passed a farm bill in July 2007, the Senate did not get its “act” together until May 2008.

The solution to the potential “hiatus” problem was simple; to get from Oct. 1, 2007, to late May 2008, Congress passed six very short-term extensions of the 2002 farm bill provisions. Congress can, and as recently suggested by the ranking member on the Senate Agricultural Committee, Senator Pat Roberts, R-Kan., almost surely in the end will adopt a similar strategy now.

So the sky won’t fall, Chicken Little will mend the bump on his head from the acorn, and U.S. agricultural, which the USDA predicts will earn record revenues and profits from its 2012 crops, livestock sales and government subsidies, will continue to enjoy a banner year.

 

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