Will the 2011 Budget Finally Cut Farm Subsidies?

By Nicole Allan

Tucked into the proposed budget is an overhaul of the farm subsidy and crop insurance program that would save the government nearly $11 billion over ten years. Calls for these cuts have historically been drowned out by the all-powerful agriculture lobby, leading to such spineless legislation as the 2008 Farm Bill. Now a deficit crisis could give farm subsidy reform a shot.


The Obama administration wants to lower the eligibility ceilings for farmers in the program by $250,000. Currently farmers with up to $750,000 in off-farm adjusted gross income and $500,000 in on-farm AGI can receive subsidies.

The administration has also proposed docking the amount of subsidies an individual farmer can collect by 25 percent, from $40,000 to $30,000. These changes would be implemented over the course of three years and would reduce government pay-outs by $2.5 billion.

The FDA has also been renegotiating terms with crop insurers. If successful, these changes could save an additional $8 billion.

Last year, Obama unsuccessfully proposed smaller reductions in subsidies. Legislators opted to incorporate any such changes into a new farm bill, such as the one the House Agriculture Committee is projecting for 2012. This committee, however, is filled with representatives whose districts directly benefit from subsidies. Not surprisingly, both Democratic and Republican senators from the states who received the most in farm subsidies in 2007--Iowa, Illinois, and Texas--voted for the 2008 bill.

This political climate has bred excessive pessimism about Congress' ability to cut subsidies, but our current deficit crisis could be the perfect opportunity for reform. Since lawmakers on both sides of the aisle oppose subsidy reform, making cuts would be a bipartisan sacrifice of the kind the deficit commission has been tasked with identifying.

UPDATE: Megan responds to an Andrew reader on the stubbornly bipartisan staying power of subsidies: "George Bush I tried to trim back farm subsidies. Bill Clinton 'ended' them. Next decade, George Bush II also made a run at killing them off. Obama's freeze will founder on the same two problems:  farm states wield disproportionate, bipartisan power in the Senate, and Americans think that farmers are really, really cute."

This article available online at:

http://www.theatlantic.com/business/archive/2010/02/will-the-2011-budget-finally-cut-farm-subsidies/35148/