350 Agriculture:Eliminate the Agriculture Risk Coverage and Price Loss Coverage Programs
Savings based on CBO projections of program costs as found on pages 8 and 9 of “CBO’s April 2014 Baseline for Farm Programs,” April 14, 2014. Savings include those reported for “Price Loss Coverage,” “Agricultural Risk Coverage–County,” and “Agricultural Risk Coverage Individual.” The CBO’s projections are for 2016–2024. It is assumed that 2024 spending levels are held constant in 2025.×
Technical Notes on Scoring
Unless otherwise noted, calculations for savings for each recommendation relies on the most recent Congressional Budget Office baseline, as found in “An Update to the Budget and Economic Outlook: 2014 to 2024,” published August 27, 2014, has been used.
While totals for the five and 10 year savings are provided by section and for the complete set of recommendations, there are two reasons they should not be viewed as representing total savings for The Budget Book.
First, as noted in the introduction, The Heritage Foundation would recommend that the savings realized in the Function 050 Defense section would stay within the Department of Defense to strengthen the nation’s defense capabilities.
Second, the numbers cannot be deemed to represent the realized savings if every single recommendation were adopted because policy changes made in one program can impact spending levels in other programs. Thus, the numbers in the table do not reflect any potential interactions between the various policy changes affecting spending or savings.×
Eliminate the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. This proposal saves $4.7 billion in 2016, and $28.8 billion over 10 years.
Eliminate Agriculture bailouts.
In the 2014 farm bill, Congress eliminated the infamous direct payment program that paid farmers regardless of need. However, Congress also added two major new commodity programs, the ARC and PLC programs.
Eligible farmers can choose between the ARC and PLC programs. ARC is a shallow-loss program, meaning that it covers minor losses. Payments are provided when crop revenue falls below 86 percent of historical revenue. The concept of a safety net for farmers who suffer significant losses is being trumped by a new model of protecting farmers from virtually all risk.
PLC provides payments to farmers when prices for certain commodities, such as corn and wheat, fall below a fixed reference price set in statute. The reference prices were set so high that some commodities may receive payments at the outset, even though the program is only intended to cover deep losses.
Taxpayers are basically writing a blank check to farmers, with costs that could go well beyond CBO projections that assumed prices would stay at or near record highs. These two programs could cost more than the direct payment program, while continuing to promote harmful and unnecessary subsidies that discourage innovation and private risk-management solutions, and distort agricultural decisions.
Eliminate Agriculture bailouts.
Daren Bakst studies and writes about agriculture subsidies, property rights, environmental policy, food labeling and related issues as The Heritage Foundation’s research fellow in agricultural policy.
Daren BakstResearch Fellow in Agricultural Policy
Diane Katz, who has analyzed and written on public policy issues for more than two decades, is a research fellow in regulatory policy at The Heritage Foundation.
Diane KatzResearch Fellow in Regulatory Policy
- Daren Bakst, “Addressing Waste, Abuse, and Extremism in USDA Programs,” Heritage Foundation Backgrounder No. 2916, May 30, 2014.
- Daren Bakst and Rachel Sheffield, “The ‘Heat and Eat’ Food Stamp Loophole and the Outdated Cost Projections for Farm Programs,” Heritage Foundation Issue Brief No. 4193, April 7, 2014.