FEDERAL BUDGET SITUATION

ASA Position

ASA supports achieving a balanced federal budget and reducing the national debt through a comprehensive approach to deficit reduction that includes all entitlement programs and all discretionary spending. ASA will oppose any reduction in spending on agriculture-related programs that is disproportionate to cuts in other programs.

Background

The estimated federal deficit for FY-2011 is a record $1.48 trillion, and Congress needs to raise the current $14.3 trillion ceiling on the national debt by August 2 to avoid default on U.S. obligations. If no action is taken to reduce federal spending or increase revenues, CBO projects the national debt will increase to $25 trillion by 2021.

House Republicans passed a Budget Resolution for FY-2012 on April 15 on a vote of 235 to 193 that would reduce spending by $6.3 trillion and cut taxes by $2.2 trillion in FY-2012/21, for a net reduction in annual deficits of $4.1 trillion. The spending reductions include $1.35 trillion from Medicare by replacing the current “fee for services” system with a privatized voucher-based plan, and $700 billion from block-granting Medicaid to the states. The House Budget was rejected by the Senate on a vote of 40 to 57 on May 25.

Senate Democrats have not offered an alternative Budget Resolution. A bipartisan “Gang of Six” Senators worked sporadically on a plan modeled after the President’s Commission on Debt and Fiscal Reform that reduced deficits by $4.1 trillion in FY-2012/21 and included revenue increases as well as entitlement and discretionary spending cuts, but was unable to reach consensus.

Another bipartisan effort chaired by Vice President Biden met for two months before Republican Congressional leaders pulled out after refusing to include revenue increases in the form of tax code reforms. Before the talks stalled, participants were reportedly looking at $500 billion in cuts in discretionary spending over ten years, including as much as $30 billion from agriculture commodity and conservation programs. Republicans have also said that they will not vote to increase the debt ceiling by more than the amount of deficit reduction. Since it would require an increase of $2.0 trillion in the debt ceiling to meet obligations through 2012, much more will need to be put on the table if agreement is going to be reached. President Obama has now become personally engaged in the process.

In a June 14 letter to the President, Speaker Boehner, and Majority Leader Reid, ASA and ten soybean state associations joined 122 other national and state agriculture organizations in opposing any deficit reduction package that would disproportionately cut farm programs, and urging that any reductions be determined by the Agriculture Committees in the context of the 2012 Farm Bill. The letter reflected the position that ASA, NCGA, NAWG and GSP took at Commodity Classic in February: “We believe any meaningful approach to deficit and debt reduction in the FY-2012 budget must encompass all entitlement programs and all discretionary spending.”