Media Briefing: Remarks by Agriculture Secretary Vilsack on President's Proposed FY 2012 Budget

Press Conference

MODERATOR: Good afternoon, everyone, and thank you for joining us today. Agriculture Secretary Tom Vilsack is here in this studio to talk about the proposed 2012 budget as it relates to agriculture. If you would like to ask a question of him, let us know by pressing Star/1 on your touchtone pad, and with that, we go straight to the Secretary.

SECRETARY VILSACK: Susan, thank you very much, and thank you all for joining. I am going to take a few minutes of your time this afternoon to talk about a very challenging and difficult budget that we presented today. In fact, there are several different challenges or realities that the USDA budget has to face in this year.

I think it's no surprise that folks at USDA and across the country have become very concerned about the deficits, and the President has instructed us to take a look, a very close look, at our budget to find ways in which we can provide opportunities for reducing the deficit. USDA stepped up to the plate last year and steps up to the plate this year as well. Whenever you are talking about deficit reduction or eliminating or reducing programs, you are obviously talking about difficult and tough choices, both to reduce budgets and to reallocate resources. That's one reality we had to face in this budget.

Another reality is that the ag economy across the board is relatively strong. There's strong demand. Prices are good for many commodities. We've seen a record amount of ag exports in the last year and an expansion of value-added opportunities. We obviously need to continue that momentum, so the budget has to reflect resources directed in that area.

Unfortunately, not every operation in agriculture and not every segment of agriculture is experiencing good times. We obviously are keeping an eye on feed cost and the impact it has on livestock and dairy producers. Our specialty crop producers are obviously challenged as well, and certainly, the size of operations matters. When we look at the intermediate-sized or medium-sized operations in the recent farm income projections, we note that they are still very much in need of assistance and help, and particularly off-farm income. So it's necessary for us to have a strong safety net in place to make sure that we can deal with any contingencies that may arise as a result of weather or poor prices.

We are in a recovering economy. One of the great challenges in Rural America is how we continue to promote job growth. That obviously has to be a top priority as this economy continues to recover, and so that means that we have to focus our resources in the most effective way we can to promote rural development and economic development in Rural America.

Because we are in a recovering economy, there are still families and people who are in need, so part of our budget has to reflect that reality of a recovering economy and the need for assistance with food purchases or housing. Regardless of economic conditions, some things remain constant. There is certainly the need for safe food as well as the need for us to continue focusing on the conservation and preservation of our natural resources. That, too, has to be reflected in a USDA budget.

And finally, in terms of the long term, as the President has indicated, we are in a global competition, and we have to out-innovate, out-educate, out-build, and out-hustle our global competitors, and so USDA's budget also has to reflect a commitment to winning the future, to long-term growth and stability of our agricultural economy as well as our rural economy. So, when we put a budget together, we essentially have to address all of these realities and these challenges, so let me specifically talk about several of the steps we've taken to reflect these realities.

It is true that the overall discretionary budget for 2012 proposed by USDA provides for less discretionary spending than the 2011 proposed budget. On the outlay side, discretionary spending is $4 billion less proposed in 2012 than in 2011. Total outlays are $7 billion less. When we talk about steps that we have taken within this budget to address some of the need for budget reductions and deficit reduction, we start with the crop insurance savings that we realized last year and carry over into this year. Additional changes in catastrophic policies in terms of the premium assistance will net additional savings as a result.

We have taken a look at some of the operating loans that we provide our farmers and decided to eliminate the Guaranteed Operating Loan with Interesting Assistance Program. It is a relatively small program. We think we can handle the operating loan needs of farmers without necessarily providing interest assistance.

We again propose the direct payment reforms that have been proposed in previous budgets, reducing the adjusted gross income requirements and eligibility requirements, as well as capping the overall payments at $30,000. This impacts and affects a small percentage of our farm families, roughly 2 percent of our producers.

We anticipate because of the strong agricultural economy that there will be very little need for counter-cyclical or loan deficiency programs. We are proposing an elimination of congressional earmarks, persistent and consistent with the President's direction, both on the research side and on the conservation earmark side.

A number of programs like the Watershed and Flood Prevention Operations Program and the Watershed Rehabilitation Program are suggested to be eliminated simply because they are the responsibilities of other jurisdictions and are not large enough to really make a significant impact. We are proposing reductions in some conservation programs, while increasing others. Reductions in the Wildlife Habitat Incentive Program and the Grassland Reserve Program will be offset by continued increases in equip and adequately funding the CSP program.

Inherent in this budget are also workforce reductions and administrative efficiencies that will allow us to more effectively manage our business through process improvement, the better use of intellectual and IT, technology, as well as taking a look at natural attrition, temporary workforces and the like, and a way of better managing our resources.

On the rural development side, we are proposing and suggesting some tailoring of our housing programs, reducing some of the programs and eliminating others, but still try to meet the overall housing needs through a very aggressive Guaranteed Loan Program.

On the area of expansion of markets and value-added opportunities, we are going to continue to promote exports. This budget actually proposes an increase in export assistance for every dollar that we invest in export assistance. We see a return of $35 of economic activity. That is something obviously that will help create jobs and create additional opportunities for our producers. We will continue to promote bioenergy opportunities, local and regional food systems, as not only job opportunities but also enhanced income opportunities for producers. We will maintain a strong safety net by the use of our guaranteed and direct loan programs for ownership and operating loans, an expanded crop insurance program, as well as adequately funding our disaster programs under the 2008 Farm Bill.

In terms of jobs in Rural America, our budget does focus resources and priorities on small business development with a number of programs that are going to be increased in the small business development area. We are also going to provide additional flexibility for our Rural Utilities Service, provide additional opportunities for community facility construction to put people to work building new schools, libraries, and hospitals, and continuing to make sure that we invest adequately in research and development.

The budget reflects the reality of the fact that there are still people struggling in this economy, so we continue to provide food assistance, as well as adequately funding the school lunch and school breakfast program, and continuing a strong but somewhat focused commitment on rural housing.

In the area of safe food, two initiatives are going to receive attention to ensure that we continue working on improving food safety. The development of a public health information system and a uniform incident command system and structure will allow us to get better information and data to identify trends in food safety that might allow us to prevent problems to begin with, and the uniform incident command structure will allow us to respond more effectively to foodborne illness outbreaks that might be multiagency in scope.

On the conservation side, while there are some programs that are being reduced or eliminated, the overall impact of our investment and conservation will continue. We anticipate a record number of acres enrolled in a variety of conservation programs and a continued increase in the number of acres involved in those programs.

We will also continue to adequately fund not only the maintenance budget for our Forest Service but also the firefighting budget, working off of a 10-year average cost for firefighting. We meet that 10-year average with the proposal in this budget.

And in terms of winning the future and focusing on long-term growth, we continue to target and focus additional research dollars in key areas, biofuel feedstocks, livestock and crop production and protection, ecosystem market foundations, as well as a continued effort to do a better job of reviewing and analyzing the opportunities in biotechnology.

Budgets are always difficult. They involve a variety of choices. This budget basically tries to deal with all of the realities and challenges I have mentioned in a balanced way, and with that, I will be happy to answer questions.

MODERATOR: Reporters, if you want to ask a question of the Secretary, let us know by pressing Star/1 on your touchtone pad. Our first call comes from Chris Clayton from DTN. Chris?

QUESTIONER (DTN/The Progressive Farmer): Good afternoon, Secretary. I wanted to ask about some language that was used in the White House on direct payments. The White House stated that direct payments distort production, but we argue in the WTO that they do not distort production, and they're least trade distorting. Do you see any kind of conflicting language there in terms of how we are characterizing the use of direct payments?

SECRETARY VILSACK: Chris, I haven't had a chance to review that specific document. Let me just simply say that we released today our income forecast for 2011, and what that basically showed was that while there is overall income growth in agriculture, it is not necessarily equitably distributed among all-sized operations. And I think what we are suggesting with this proposal and reform is that the safety net is an important, very, very important part of our overall commitment to agriculture in this country and Rural America, but that it needs to be targeted and focused on the people who need it the most.

With incomes rising roughly 30 percent and some of that increase being basically directed at some of the larger operations, we feel that this is a proposal that merits consideration. I know during the last couple of years, there's been some indication from representatives on the House Ag Appropriations Committee, particularly on the Republican side, of some interest in this, and so we propose it again in the hopes that we can get consensus on this. So, to me, it's really about making sure that the safety net does what it needs to do, and at the same time, we need to be focused as well not just on reducing budgets in this respect but also increasing investments in ways in which we can help producers sell more.

That's why we're promoting additional export assistance because that is really targeted towards the larger commercial enterprises. It is the reason why we continue to focus on regional and local food systems because that helps the small producer, and that's why we continue to focus additional resources on things like biofuels because that can be targeted and conservation payments can be targeted to those folks in the middle.

So, if you understand the breakdown of the size of operations and commodities and so forth, you can see that there is a need for a safety net, but it needs to be targeted and focused.

MODERATOR: Our next call is from Sally Schuff with Feedstuffs. Sally?

QUESTIONER (Feedstuffs): Yes. Thank you for taking my call. Mr. Secretary, my question surrounds the whole issue of earmarks. I know that they have fallen into ill repute, but many times congressional earmarks address a local plant or animal disease problem, sometimes a multistate problem. I am harkening back several years to a Russian wheat aphid outbreak in the High Plain States where Federal funds were needed to respond to an issue that went both to farmer profitability and food security. How will you address those issues, such issues of those, without engaging in the earmark?

SECRETARY VILSACK: Well, within APHIS in particular, we invest roughly a billion dollars a year in a variety of efforts to eradicate, prevent, or mitigate the impact of pests, invasive species, and diseases. At the same time, we are also focusing a significant amount of our research dollars on additional research in these areas, and essentially, what we attempt to do is to make an informed judgment about what is the best strategy for dealing with a particular pest or illness or disease.

There are times when our work is successful, which means we can reallocate and redirect resources to a particular disease or pest that is causing significant problems, and we have had some success with the screw-worm. We've had some success with some of the cotton pests. On the other hand, we see the gypsy moth, we see the grapevine moth that are causing problems and issues, so we may have to redirect resources to address those emerging issues.

There may be circumstances where we thought an eradication solution was the best, when we find that it's not working as well and maybe we ought to be maybe minimizing the impact of one disease and taking resources and directing it towards something where we can have even greater success.

So I don't think it necessarily requires a Member of Congress to specifically earmark something that goes into their district. These earmarks that we're talking about being eliminated are essentially building projects, some of which may very well be very, very important for the government to have, but it ought to be discussed in a context of a national need, not necessarily just a congressional district need.

MODERATOR: We continue on the line. Tom Karst with The Packer newspaper, followed by Jeff Nalley from Cromwell Ag Radio. Tom?

QUESTIONER (The Packer): Yes, good afternoon. Thanks for taking this question. I had a question about the Market Access Program. Is that intact for this budget year? I know last year, it was targeted for a 20-percent reduction, but is the view that these export programs are a good investment for the USDA?

SECRETARY VILSACK: In fairness, to be candid about this, there was a proposal to reduce it last year, but it was offset by increases in other export assistance programs. We had not provided additional resources for cooperators for sometime and felt that there needed to be a proper balance. In this particular budget, we have kept the Market Access Program at its budgeted level from last year, so there is no reduction, and we have actually added an additional $20 million to our national export initiative efforts to try to see if we can get more resources to cooperate, more opportunities for trade shows, more opportunities for exhibits. Why? Because we are seeing a very, very strong demand for American agricultural products, which is one of the reasons why we are seeing good prices right now for a lot of our commodities and livestock.

MODERATOR: Up next on the line, Jeff Nalley with Cromwell Ag Radio. Jeff?

QUESTIONER (Cromwell Ag Radio Network): Mr. Secretary, thanks for your time today. Two-part question coming your way. Most of the major commodity groups, including American Farm Bureau, have been opposed over time to a means test in regard to farm support with that, and then the second side, no counter-cyclical payment in this past year, so while the money had been allocated, it wasn't used. Will you get credit for that as you look ahead to propose budget cuts of the monies that are not being used but were in the budget?

SECRETARY VILSACK: As it relates to counter-cyclical reflects the reality that you have just mentioned in the 2011 circumstance, we don't have a budget yet in 2011, so it is kind of tough to compare the current budget year because we flat out don't have a budget. But the budget that we are proposing does not provide for any counter-cyclical payments based on where commodity prices and so forth are.

In terms of the means test, I mean, this is the reality that I was talking about earlier. You have, on the one hand, a consensus, a national consensus, Republican, Democrat, Independent, whatever, that we have got to get the deficits under control, and so you have got to make some tough choices and decisions about precisely where you can look at reductions. At the same time, there is an acknowledgment of the need based on the fact that in certain commodity circumstances or certain areas of the country or certain-sized operations are struggling or having greater difficulty than the general ag community, so you do need a safety net.

You do need loan programs. You do need crop insurance programs. You do need disaster program, and to a certain extent, you need some kind of payment structure. The question is who ought to get those payments, given the current circumstance and the reality of a very strong ag economy generally, particularly for larger producers with cotton prices up, with corn and bean prices up, with wheat prices being relatively strong, who should receive the benefit of those payments. And budgets are just a series of tough choices, and this budget is probably one of the tougher budgets that all of us have faced.

And we got to do this in a way that, at the same time we are reducing, we don't necessarily compromise the capacity of agriculture to continue to grow, which is why we provide for additional resources for export assistance, which will help some of those larger producers continue to have strong markets, why we focused our research dollars on crop and livestock protection and productivity. That will benefit a lot of those larger producers.

So you have to look at the budget in total. It is easy, I suppose, to focus on one aspect of the budget, but you really got to take a look at the entire budget to fully understand the difficult balancing act that any budget is, particularly in a circumstance where you got deficits that are just out of control.

MODERATOR: We continue with calls. Jerry Hagstrom with The Hagstrom Report. Jerry?

QUESTIONER (The Hagstrom Report): Good morning, Mr. Secretary -- or good afternoon, I guess. Two questions. First of all, as I understand it, the budget includes a restoration of the cut in the SNAP benefit that was used to fund the child nutrition bill. Can you confirm that and tell me how much money that would be?

And secondly, have you had a chance to look at the cuts proposed by the House Republicans, and do you have any reaction to their proposal?

SECRETARY VILSACK: Jerry, let me talk, first of all, about the SNAP program. It is important to understand that the offset that was used by Congress to fund the Healthy, Hunger-Free Kids Act of 2010 was based on increases in SNAP that were to continue beyond 2013-2014, and what this budget proposes is to essentially reinstate those increases. It has no impact and effect on the 2012 budget. It would simply have an impact and effect on future budgets.

This budget does reflect an increase in SNAP simply because that was part of the Recovery Act, so that was not impacted or affected by congressional action. So there's no change in 2012 to what Congress has already passed. We are just suggesting that in future years, there be a restoring of that reduction. We will get you the number -- I don't remember the number offhand -- that triggers in 2014 in terms of that increase.

On the House proposal, look, we obviously want to work with folks because we understand and appreciate that everybody is serious about trying to tackle these deficits. At the same time, I think we have to be smart about how we go about it. We have to be responsible how we go about it, and we have got to make sure that we don't essentially compromise our ability to continue to invest in growth opportunities.

You know, the growth opportunities in the 2012 budget are biofuels and additional research on livestock production and protection and crop production and protection and the work potentially in conservation, ecosystem markets and exports. Those are all growth opportunities, small business development on the rural development side. Those are all growth opportunities, and we want to make sure that we don't jeopardize our capacity to grow our way out of this deficit in addition to cutting our way out of this deficit, and so it's a balance. So we are going to work with our friends in Congress over the course of the next several weeks and several months to try to find out where that proper balance is.

MODERATOR: Up next on the line, Bob Meyer with Brownfield Ag News, followed by Joseph Morton with Omaha World-Herald. Bob?

QUESTIONER (Brownfield Ag News): Hi. Thanks you. Mr. Secretary, what about manpower-wise at USDA? Will this affect the number of people you have at the Headquarters and also those county offices out there?

SECRETARY VILSACK: Bob, the budget proposes a reduction of staff years, but I want to be careful how I say this because there are ways in which you can manage reductions without necessarily impacting folks who obviously need and want employment opportunities.

We have normal attrition that occurs every year. We have a very aggressive process improvement effort under way which is identifying ways in which we can do our work more efficiently, which can free up resources, and we have a commitment to technology that obviously makes us be able to do our jobs more effectively and efficiently. So, when you combine all of those and you look at management tools like early retirement programs and things of that sort, you can manage the reduction of a workforce without necessarily focusing on layoffs or things of that nature, and that is what we have proposed to do. We have normal attrition every year, and rather than filling those jobs or filling those jobs with a person at the same level, there are ways in which we can look at our supervisor-to-employee ratio. These are all management techniques and processes that are important to do when you are dealing more efficient and more effective government, but it sometimes takes time to institute them.

So what this budget reflects is a commitment to process improvement, to using technology, to taking a look at the decisions we make when folks retire and the normal attrition, and how we respond in the past, this will be a little bit different, but I think it will end up being the right way to do it and end up being such that we don't negatively impact the services that are important to people.

MODERATOR: As we wrap up, our last call comes from Joseph Morton with Omaha World-Herald.

QUESTIONER (Omaha World-Herald): Yes. Thank you, Mr. Secretary, for taking the call. I was hoping to ask you about -- I don't know if this is drilling down too far for you -- but ask you about the proposed Agricultural Research Center at the University of Nebraska. There was some money in there that was earmarked in the previous omnibus that died for that to move forward, and I was just wondering if you could say whether there's any money in this budget for that project. And more generally, you know, in a world without earmarks, how are those kinds of projects going to move forward, if at all?

SECRETARY VILSACK: Well, we don't have resources for facilities, and specifically this year, we are very careful in terms of our commitment on the research, education, and economic side in terms of buildings and facilities. We do provide additional resources for maintenance, high-priority maintenance, but no new building construction projects.

The President has been very insistent about his attitude about earmarks, and I think his view is that in order for something to be constructed or built, it obviously has to be extremely important and has to sort of compete with a lot of other projects. We have been very consistent about this position, and we are going to continue to reflect that in the budget. So it is not just this project, but it's all of those projects.

Again, these are difficult choices, and everyone has to recognize that we have got to make difficult choices. This sets out the priorities. It sets out what I think is a proper balance between a budget that significantly reduces the deficit and continues the work we started last year with the crop insurance reductions, $4 billion, continues that work, but at the same time doesn't compromise our capacity to grow and expand job growth and continue a strong ag economy, which is important.

MODERATOR: We want to thank everybody who called in and those of you who were able to ask questions, and if you want more information, don't hesitate to go on www.usda.gov. That concludes today's media briefing. Thank you.

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