The Congressional Budget Office’s (CBO) Nov. 26 cost estimate projects that the current tax reform bill would increase off-budget deficits by roughly $1.44 trillion between 2018 and 2027. The CBO report has raised concerns about the potential impact the congressional tax bills could have on farm programs and the farm bill.

Some Democrat lawmakers and farm groups have expressed concern that failure to waive statutory "PAYGO" requirements in the tax reform bill could require deep sequestration cuts later on to Medicare, military retirement, border security, farm policy and other programs. 

PAYGO rules could force the Office of Management & Budget (OMB) to sequester many farm program payments by 100% to offset the $1.44 trillion in new deficit. CBO estimated that OMB would be required by law to sequester $136 billion in fiscal 2018 and similar funds each successive year.

“Given the limited number of non-exempt mandatory accounts that can be sequestered, non-exempt programs would need to be sequestered at 100,” National Farmers Union president Roger Johnson explained. “That sequestration would eliminate important aspects of the farm safety net, including the Agricultural Risk Coverage and Price Loss Coverage programs. Such a scenario would be devastating to family farmers.”

For their part, Republicans responded by declaring that they will waive PAYGO in a subsequent bill this year, averting such sequestration cuts. Republicans cannot include such a waiver in the tax bill for procedural reasons because the legislation is operating under rules governing reconciliation, including the Byrd Rule.

Johnson also said previous tax reform efforts have at least begun with the goal of being deficit neutral. “We believe it is a grave mistake to abandon such an important goal,” he said.

The Senate is poised to advance its tax reform bill (at the time of this writing, the Senate had not yet voted on its version). Then, the House and Senate will have to reconcile the differences between their two bills.

Jonathan Coppess, Gary Schnitkey and Nick Paulson of the University of Illinois department of agricultural and consumer economics and Carl Zulauf at Ohio State University’s department of agricultural, environmental and developmental economics recently penned an article detailing some of the impact the tax legislation could have on future farm bill discussions.

“All indications are that if sequestration is implemented, it would effectively eliminate all spending on farm programs,” the economists wrote. It would also eliminate all conservation program spending other than existing (prior obligated) Conservation Reserve Program contracts.”

They also noted that it would presumably affect administrative and operating funding for crop insurance but appears unlikely to impact the funds for premium discount or subsidy -- the bulk of crop insurance outlays. If sequestration were to be implemented, it would be expected to zero out spending on these programs.

“The next farm bill will be written using the 10-year baseline estimated by CBO in 2018. Therefore, the concern is that sequestration would eliminate the entire baseline for commodity programs as well as a substantial portion of the baseline for conservation programs,” they added.

The economists noted that Republicans in Congress in 1981 made an unprecedented use of budget reconciliation to push through then-President Ronald Reagan’s tax cuts.

“Doing so greatly complicated writing a farm bill that year,” they explained. “If the current tax bill requires offsets in spending, it could add substantial complications that would make writing the next farm bill difficult.”