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May 26, 2017

Trump Budget Cuts: A Troubling Sign of Things to Come

 |  By: Dairy Talk

Nobody expects President Donald Trump’s 2018 budget  to become law. The proposed cuts, a whopping $3.6 trillion over the next decade, were so draconian that both Democrats and Republicans came out against them.

Trump’s own Secretary of Agriculture, on the job now for just five weeks, said “You don’t try to fix something that isn’t broken.” The “something” was the Supplemental Nutrition Assistance Program, i.e. food stamps, in which Trump has proposed cutting $193 billion over the next 10 years, or nearly a fourth of the program’s budget.

Another $38 billion in cuts were proposed for farm programs, capping commodity payments and creating new limits on crop insurance.

When asked to respond to the proposal, Jim Mulhern, president and CEO of the National Milk Producers Federation, sent me this statement: "The president's proposed budget is troubling in the depth and breadth of proposed cuts in programs important to rural America. The proposed cuts in USDA's budget would harm the delivery of important farm services, reduce our ability to promote U.S. agricultural commodities abroad, slash programs that help provide important risk management assistance through the federal crop insurance program, and damage other important programs and services.

“Fortunately, the budget proposal has been met with bipartisan expressions of concern on Capitol Hill. We will share our own concerns with Congress and work with lawmakers on a more acceptable approach to managing spending on farm and food programs," says Mulhern.

There was work in early May, when Congress was considering its omnibus spending bill for fiscal year 2017, to tweak the dairy Margin Protection Program (MPP) by reducing premiums for farms with less than 4 million lb of annual production. Rep. Collin Peterson (D., Minn.), the ranking member on the House Agriculture Committee, proposed offering small farms $8 worth of margin protection for just 9¢/cwt, down from the current 47.5¢. The fix would have cost an additional $144 million over 10 years, or just $14 million per year, he says.

But a dispute with cotton and the Senate’s refusal to find a way to pay for the increase nixed the deal, leaving both dairy and cotton with the status quo. “If we can’t find $14 million, we might as well give up,” Peterson told AgriTalk’s Mike Adams.

The danger, says Peterson, is that the MPP is seeing so little participation now that it might be viewed as worthless by both dairy farmers and Congress when the next farm bill debate begins. And, as importantly, if both Houses of Congress remain Republican and Trump remains in the White House, the budget battles won’t be any less intense.

The irony, of course, is that the MPP program is paying its own way. Last year, for example, farmers paid in $22.8 million in premiums but claimed only about $12 million in indemnities.   And that came at a time when the milk-feed margin dropped to its lowest level in the program’s history last May and June. It’s the only time the milk-feed margin dropped below $6.

Unfortunately, that’s not the way federal budgets are built. They look forward, based on Congressional Budget Office scoring, to project what programs might cost over the next decade. And it’s in those numbers that Democrats and Republicans must find compromise. President Trump’s proposed budget and Congress’ recent squabble are not reasons for optimism.