AMERICAN farm groups have called agricultural spending cuts in president George Bush’s 2006 budget proposal a betrayal and a disaster.
The cuts are part of a $2.57 trillion US proposed budget that preserves tax cuts, spends more on defence and security but reduces all other federal spending to limit the deficit that ballooned to $427 billion in 2004.
The cuts are less significant than the U.S. farm lobby makes out, but in the longer term, the budget could mark a watershed in American farm policy and even in world agricultural trade.
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If the broad direction of this budget proposal survives Washington’s lawmaking process, it would signal a move toward a smaller role for the U.S. government in agriculture and other areas of the economy.
It means that the U.S. would be forced to go beyond subsidy cutting rhetoric at the World Trade Organization and actually cut its own programs. That should be a good thing for Canadian farmers.
The proposed budget, which will undergo long scrutiny and many changes by Congress, cuts $587 million from farm spending in fiscal 2006.
This sounds like a lot but will result in only a five percent cut in fixed payments. Bush would also cap the maximum subsidy a farmer can collect at $250,000 from the current $360,000.
Overall, projected farm and food spending in 2006 would drop to $19 billion from $19.6 billion, hardly a devastating blow.
But more importantly, this budget’s recognition of the seriousness of the fiscal deficit might lay the groundwork for a smaller U.S. government in the future, with less capacity to be involved in agricultural support.
This budget shows the Bush administration’s priorities are security and preserving its first term tax cuts expected to total $1.1 trillion over 10 years.
After several surpluses in the Clinton years, the U.S. posted a deficit in 2002 that has grown quickly, fueled by tax cuts, a slow economy and increased spending on security, the military and other things, including the 2002 farm bill.
While the U.S. complained internationally about agricultural subsidies, the 2002 farm bill increased spending by 78 percent over the 1996 farm bill, climbing to $190 billion in farm and food subsidies over its 10 year life .
But the fiscal deficit and the current account trade deficit now threaten the U.S. economy and can no longer be ignored.
With security and tax cuts the priorities, the only alternative is to cut all other federal spending, a not unattractive option for a Republican administration that would like to reduce the role of government.
Canadian farmers can now hope that America’s international rhetoric about cutting farm subsidies will be given form and force at home by the need to slay its deficit.
