Cost of 2008 Farm Bill
The Farm, Conservation, and Energy Act of 2008 (2008 Farm Act) covers a wide range of agricultural policies, including programs that cover the following:
- income and commodity price support
- farm credit and risk management
- conservation through land retirement, farmland protection, and stewardship of land and water resources
- food assistance, international agricultural development efforts, and promotion of international access to American farm products
- food and nutrition assistance, domestic food distribution, and nutrition initiatives
- rural community and economic development initiatives, including regional development, rural energy efficiency, water and waste facilities, and access to broadband technology
- research on critical areas of the agricultural and food sector
- accessibility and sustainability of forests
- encouragement of the production and use of agricultural and rural renewable energy sources
- initiatives for attracting and retaining beginning and socially disadvantaged farmers and ranchers
Cost Estimates and Budget Baselines
Congressional budget rules require that legislation be scored over a 10-year time horizon even when legislation, as with a farm bill, covers a shorter time period. Rather then focusing on the total cost of a bill, a Congressional Budget Office (CBO) cost estimate focuses on the expected change in future Federal costs if new legislation is enacted.
In writing the farm bill in 2008, one of the constraints congressional negotiators faced was that the bill was required to comply with so-called "pay-go" rules, a self-imposed constraint that Congress has operated under for most of the past few years, under which a bill with spending increases in one area must identify spending reductions and/or revenue enhancements in other areas such that the overall effect of the bill is budget neutral.
CBO began its budget analysis for the 2008 farm bill by developing a baseline, or benchmark that estimated the expected 10-year costs of existing programs in the absence of new legislation. The baseline assumed that the then-current farm legislation, the Farm Security and Rural Investment Act of 2002 (2002 Farm Act), would remain in effect for the projected period.
To estimate these baseline costs, CBO analysts used projections of supply, demand, and prices of selected agricultural commodities that would affect commodity program spending. They also used projections of macroeconomic conditions that would affect both agricultural program and food and nutrition assistance program spending.
Cost estimates can be sensitive to baseline assumptions. Higher commodity price forecasts will reduce projected cost estimates for commodity programs. Improved macroeconomic conditions will reduce projected food assistance spending. When Congress considers new legislation, it is scored relative to the most recent baseline in effect at the time, which in this case was the March 2008 CBO baseline.
2008 Farm Bill Budget Estimates
In the March 2008 CBO baseline--which assumed a continuation of the provisions of the 2002 Farm Act for 10 years--budget expenditures were projected to be $636.2 billion 2008-17 for all programs included in the 2008 farm bill (see column A in the table). Note that the majority of farm act spending is for food and nutrition entitlement programs (food stamps, child nutrition, etc.)
Estimated cost of farm bill mandatory programs-Congressional Budget Office (CBO) baseline assumptions 1/
Estimated cost under March 2008 baseline
Estimated cost for baseline plus 2008 farm bill cost
Commodities 75.8 74.8
Conservation 52.5 57.7
Crop insurance 66.1 61.6
Agricultural trade programs, new horticulture and organic spending, and supplemental disaster assistance in the 2008 farm bill 3.2 7.1
Nutrition 432.2 441.8
Other spending/offsets 6.5 -3.0
Total 636.2 640.0
1/ Excludes funding for discretionary programs, which is provided through annual appropriations.
Source: CBO projections for outlays.
Final CBO budgetary cost estimates for the 2008 farm bill were projected to be $640.7 billion over 2008-17 (see column B in the table). Cost estimates for commodity programs, conservation programs, crop insurance programs, trade programs, new horticulture and organic spending, and supplemental disaster assistance was projected at $201.2 billion.
The distribution of spending in these agriculture-specific areas under the 2008 farm bill reflects minor changes from projected spending in the baseline (excluding nutrition spending), as illustrated in the charts that follow.
Under the 2008 farm bill provisions, relatively less spending is dedicated to commodity and crop insurance programs, and more spending is dedicated to conservation and other programs, such as trade, horticulture and organic, and supplemental disaster assistance programs.
As economic conditions change over time, the actual costs of the 2008 Farm Act will reflect changes in the agricultural sector and in underlying macroeconomic conditions.