While the Trump Administration continues using the DOGE to slash personnel and shutter government agencies, its policy choices are on a path to actually increase Washington’s role in farming and ranching. The U.S. Department of Agriculture’s (USDA) announcement this week of how it will dole out $10 billion in “emergency” subsidies that caught a ride on the December Continuing Resolution is likely just a downpayment. With the President threatening to impose reciprocal trade tariffs on nearly all imports on April 2nd, the farm subsidy price tag could grow astronomically. Lawmakers who want to set federal farm policy and those who want to rein in deficits need to reassert their authority. Sitting idly by could mean both efforts to promote trade and a 2025 farm bill could buy the farm.
Businesses involved in agriculture are expected to be highly dependent on federal subsidies in 2025. $10 billion is just for starters. USDA is expected to release details of $20.8 billion in additional subsidies in the coming weeks. This batch of cash, also included in the December Continuing Resolution, is intended for losses due to natural disasters in 2023 and 2024. Coupled with the farm bill commodity and disaster programs, USDA projects $42 billion or 24 percent of farm income to come from federal subsidies this year. This would be the highest rate since the unprecedented response to COVID-19 shot subsidies up to 46 percent of income and well above the 20-year average of 17 percent annually.
This official number undersells Washington’s deep reach into the balance sheet of farm businesses. The government’s numbers don’t include federal crop insurance payouts because those are not “direct” government payments but funneled through private insurance companies. Add crop insurance payouts, after subtracting out the insurance premiums paid by farm businesses, and the subsidy becomes $59 billion or 33 percent of net farm income.
Depending on how 2025 unfolds, $59 billion could be a drop in the bucket. Just as in the first Trump Administration, U.S. agricultural products are expected to be a primary target of retaliatory tariffs. As the largest industry in most “red” states, and with a group of operators that disproportionately voted for President Trump, foreign countries know how to hit where it exacts the most political pain. It’s already started. Social media abounds with pictures of U.S. strawberries lying untouched and Kentucky bourbon being pulled from Canadian supermarket shelves. If a new regime of tariffs and retaliatory tariffs goes into effect, the question isn’t whether economic pain can be expected, but how much pain, for how long, and to what end?
What’s not up for question is how the Trump Administration will respond. During her confirmation hearing in January, now Secretary of Agriculture Brooke Rollins told Senators that in a trade war, the administration was “prepared to execute something similar” to how the first Trump Administration responded. In early March, at the Commodity Classic, the annual gathering of corn, soybean, wheat, and sorghum associations, USDA representatives reiterated that work had begun building on what they had done last time.
What the Trump Administration did the last time around was tap the Commodity Credit Corporation (CCC) Charter Act to flood the sector with $28 billion in deficit-financed spending. Most of this federal aid-in-place-of-trade came by utilizing the Orwellian-sounding “Market Facilitation Program,” where checks were sent directly from the Treasury to farm businesses. It also included a $1.5 billion increase in the government directly purchasing then redistributing “excess” commodities (only excess because retaliatory tariffs made them too expensive to export) to food banks. But past isn’t prologue. This time, the scope of the predicted tariffs and the potential response by foreign governments is broader. It’s the entirety of foreign trade.
Tapping the CCC to compensate farm businesses for lost sales from a trade war would be a mistake. Presidential administrations can spend from the CCC without getting prior approval from Congress. The Biden, Trump 1, and Obama Administrations all misused this power to create programs and spend billions on programs they were unable, or unwilling, to get authorized by Congress. Beyond the spending ramifications, the CCC also costs Congress its opportunity to set farm policy. When utilizing the CCC authority, the Secretary of Agriculture is able to pick which commodities to support, the formula for making payments, the level (if any) of payment limits, income means tests, or any other parameters. All of these are contentious topics at the center of each farm bill debate. Using the CCC eliminates all of this debate to the detriment of Congress and taxpayers.
Congress needs to reassert itself. There is too much deference to the Executive branch in trade and agricultural policy. Even if you support the president’s trade agenda and want to compensate farming businesses for any actual losses that occur, there is no need to hand the administration a blank check via the CCC.
Congress has included some amount of “emergency” financial assistance for agriculture annually since 2017—that’s nearly a decade straight of emergencies. Washington’s response to COVID showed they can move large amounts of cash if deemed necessary. That’s the entire point of a supplemental appropriations process; though any losses that materialize from a trade war would fail the Office of Management and Budget’s definition of “emergency” – notably, they are not unforeseen, sudden, nor (at least we’d argue) necessary. As such, any new farm subsidies due to the renewed trade war should be budgeted and paid for with cuts to non-essential programs or increases in revenue. Lawmakers and, more importantly, taxpayers can’t afford to hand blank checks to any administration.
Taxpayers can afford to provide a financial safety net for agriculture, and Congress is responsible for designing that net. Lawmakers concerned with agriculture and lawmakers concerned with our nation’s unsustainable debt should both be deeply involved in any new spending in response to the trade war. The Constitution gives Congress the power of the purse. It’s time they actually use it.
- Photo by TopSphere Media on Unsplash
Get Social