Friday, March 11, 2005

The Legislative Cycle--Payment Limitation--I

President Bush has proposed, in his budget, to change the payment limitation rules applicable to farm programs. This is an area I used to know pretty well, so I thought I'd blog on the steps involved in getting the idea implemented.

My guess is that OMB and USDA officials got together to discuss possible ways to save money (i.e., OMB told USDA to cut X billion dollars over Y years and USDA scurried around to come up with ideas.) Once someone, probably at the assistant secretary level had come up with the idea of changing payment limitation rules, they probably talked to the FSA administrator who talked to his economists. They did their crystal ball work and came up with a savings estimate.

The savings estimate would be very soft. Conceptually this is like changing tax law--the changes change behavior. It's like figuring you'll save money by making your own coffee instead of buying Starbucks. After a year you may find you've drunk lots more coffee and had to see the doctor for jumpy nerves.

To see the official explanation of current payment limitation and eligibility rules, see the PDF document here

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