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US House Ag Committee: Farm bill facts
Story Date: 1/29/2014
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Source: US HOUSE COMMITTEE ON AGRICULTURE, 1/28/14
Farm Bill Ends Direct Payment Subsidies
The Agricultural Act of 2014 Represents Major Reform of American Agriculture Policy
After nearly three years of working to create a 5-year Farm Bill that will reform agriculture policy, end unnecessary subsidies, save billions of taxpayer dollars, and help create American agriculture jobs, Members of Congress in the Senate and House have an agreement on a final bipartisan Farm Bill. Members of both parties have been trying to end direct payment subsidies for decades—and with the 2014 Farm Bill, the era of direct payments will finally come to an end.
2014 Farm Bill Finally Ends Needless Subsidies
Despite years of criticism and bipartisan demand that Congress end the wasteful direct payment subsidy program, they have continued to live on – at the expense of taxpayers. The 2014 Farm Bill ends these subsidies once and for all.
By ending direct payment and other unnecessary subsidies, which pay farmers even in good times when there is no actual need for assistance, the Farm Bill cuts farm subsidy spending by billions of dollars and creates more accountability in agriculture programs. This effort represents a landmark shift in federal agriculture policy:
“If signed into law, the subsidy cuts would mark one of the biggest changes to farm policy in years.” – The Wall Street Journal, 6/7/12
The Farm Bill is “genuinely a landmark shift … away from direct cash payments to farmers – a much-criticized system begun in the mid-90s – and toward a more market-oriented approach keyed to crop insurance ... The stakes are big: a bipartisan bill promising real savings and impacting an important part of the economy.” – Politico, 6/12/12
Ending direct payments “represents one of the biggest policy changes in generations.” – Bloomberg, 4/26/2012
Farm Bill Transitions from Subsidies to Risk Management
Direct payment subsidies are paid to farmers every year whether they need it or not. Bipartisan Senate and House negotiators have ended these payments in the final 2014 Farm Bill. Instead, the Farm Bill creates a commonsense risk management approach that provides support for farmers only when they are hit with weather disasters or market volatility. The new Farm Bill strengthens crop insurance, which is more cost-effective than traditional farm subsidies because it requires farmers to have skin in the game by purchasing insurance policies to help ensure they aren’t wiped out by disasters.
Because the cost of insuring entire farming operations is so great, the federal government helps farmers pay a portion of their crop insurance premiums. Transitioning from direct payment subsidies to crop insurance means farmers get a bill for their premium rather than a check every year. It means farmers are not paid in good times but are protected in the case of disaster, and that also means there is less need for Congress to pass ad hoc disaster relief after disasters strike. It also means consumers are protected from spikes in food prices that widespread farmer bankruptcy could create.
The importance of crop insurance was underscored during the historic droughts of 2012 which parched more than 80% of the country – devastating crops everywhere. Because most farmers have crop insurance policies, family businesses didn’t go under and farmers had the tools they needed to pick up the pieces and move forward. Taxpayers were not asked to foot the bill for a disaster relief bill as in past disasters, because farmers had purchased insurance policies.
2014 Farm Bill Consolidates and Streamlines Programs
Senate and House negotiators have also eliminated or consolidated nearly 100 programs or authorizations, and streamlined the remaining programs to get better results with fewer taxpayer dollars. Over the years, successive Farm Bills have created new programs and authorizations, sometimes with overlapping functions and duplicative objectives. The new Farm Bill combs through USDA’s programs and eliminates duplication and unnecessary efforts, to further save taxpayer money and make agriculture programs more accountable and efficient.
2014 Farm Bill: Addressing Misuse, Protecting Food Assistance
The Agricultural Act of 2014 achieves savings in the Supplemental Nutrition Assistance Program (SNAP) solely by stopping fraud and misuse, while maintaining critical assistance for families. Savings in this section are achieved without removing anyone from the SNAP program, and ensures that every person receives the benefits they are intended to get under the current rules of the program.
The 2014 Farm Bill stops lottery winners from continuing to receive assistance, increases program efficiency and cracks down on trafficking. The farm bill also closes a loophole being used by 17 states to artificially inflate benefits for a small number of recipients.
The Farm Bill’s $8 billion in nutrition savings:
The 2014 Farm Bill achieves virtually all of its $8 billion in nutrition program savings by addressing a program misuse, commonly referred to as “heat and eat,” whereby a small number of states are artificially inflating some people’s food assistance benefits by listing a utility bill they don’t actually have on their food assistance applications.
The amount of SNAP benefits a person receives is set by calculating a person’s monthly income and monthly expenses—which then determines how much in benefits the person receives to help purchase food each month.
Seventeen states are providing individuals who don’t have a heating a bill (often because their utilities are included in their rent and are already accounted for in the expense section of their application) with $1 per year in home heating (LIHEAP) assistance. This $1 per year is clearly not actually meant to help someone pay a heating bill.
However, it is assumed that if someone is receiving LIHEAP assistance, they must have a home heating bill, and thus they will automatically have a standard average heating bill listed on their SNAP application. Listing a heating bill on a SNAP application when a person doesn’t actually have a heating bill means that person will receive benefits above and beyond what they are intended to receive based on their actual expenses under the current rules of the SNAP program.
The Farm Bill addresses this misuse by preventing states from listing a utility bill on an individual’s food assistance application unless the person receives at least $20 in home heating assistance per year, or if the person produces his or her actual a utility bill.
In other words: for a SNAP recipient receiving more than $20 per year in home heating assistance, nothing changes. For a SNAP recipient receiving less than $20 per year in home heating assistance but who can produce their heating bill, nothing changes. If a SNAP recipient receives less than $20 per year in home heating assistance and does not have a heating bill, then a heating bill will not be listed for them on their SNAP application, but their application and benefit amount will accurately reflect their actual expenses.
This change does not affect 96% of SNAP recipients. All recipients will continue to receive 100 percent of the SNAP benefits their actual expenses call for under the current rules of the program. The 2014 Farm Bill does not remove anyone from the SNAP program.
This policy is supported by a bipartisan majority of Congress, and has been endorsed by major press outlets. The Washington Post wrote in their December 30 editorial, “Congress should close a food stamp loophole”:
• This is a “loophole … that costs taxpayers hundreds of millions of dollars each year — and gives an otherwise vital component of the social safety net a black eye.”
• “This maneuver results in many people receiving money based on utility expenses they did not actually incur.”
• The editorial also notes that while some Members of Congress are looking for any opportunity to gut the food stamp program, “heat and eat looks less like a clever way to help the poor and more like a political gift to SNAP’s perennial opponents.”
• The Post finally notes that this would impact “Only 4 percent of all SNAP families,” and “crucially, none would lose basic eligibility.”
Read the full editorial here: http://www.washingtonpost.com/opinions/congress-should-close-a-food-stamp-loophole/2013/12/30/23736316-699c-11e3-8b5b-a77187b716a3_story.html
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