‘USDA’s bank’ keeps trade aid flowing to farmers

The Trump administration can pay billions of dollars in trade aid to farmers and ranchers this year, and in 2020, too, if it wishes, because Congress quietly and reliably replenishes the funding of the “USDA’s bank.” The broad charter of the Commodity Credit Corp. (CCC) and its direct access to the Treasury mean that agriculture is the only sector of the U.S. economy to get a bailout during the Sino-U.S. trade war.

Created during the Depression, the CCC can spend up to $30 billion at a time in support of U.S. agriculture. Lawmakers are on track to bring it up to full funding this fall. In June, Sen. Debbie Stabenow said the CCC had $7.7 billion left in spending authority, an amount dwarfed by President Trump’s announcement of up to $16 billion in aid to mitigate the impact of the trade war on 2019 farm and ranch production.

The House has voted, as part of a mammoth appropriations bill, to provide “such sums as may be necessary to reimburse the Commodity Credit Corp. for net realized losses,” the bland language routinely used to pour billions of dollars into the CCC. The Senate is expected to draft its USDA funding bill, the usual vehicle for replenishing the CCC, after the August recess. The funding would ensure cash payments to producers while the trade war continues. Trump suggested on Tuesday that a third year of aid might be needed in 2020.

Senate Finance chairman Chuck Grassley, an Iowa farmer, said it was impossible to predict when the trade war would end. If China hopes to outlast Trump, who faces reelection in 2020, “then, obviously, we’re not going to have an agreement,” said Grassley. “I get the sense that farmers are sticking with the president and he’s going to continue to help them.”

Trump assailed China on Wednesday for “stealing intellectual property, targeting our farmers.” The president said, “We have to take on China. … And we’re in a very good position as to whether or not a deal will be made. I will tell you this: China would like to make a deal very badly.”

By drawing money from the CCC for Trump tariff payments, the administration in many ways is bypassing Congress in deciding how to spend federal money. Still, there are few objections from lawmakers. The CCC is “a convenient way to print money” without the internecine conflicts of drafting legislation on Capitol Hill, said an analyst. Farm groups have welcomed the aid while quietly asking for removal of the retaliatory tariffs that make the aid necessary.

“We heard loudly and clearly that farmers don’t want to get their revenue from the government, but we also know that we at the federal level have a responsibility to make sure folks aren’t left behind as a result of forces beyond their control,” said House Agriculture chairman Collin Peterson after a “listening session” at a farm show, the Minnesota Farmfest, on Wednesday.

The administration has been given an unusually free hand to use the CCC as a trade war tool. To date, it has spent $10 billion to mitigate trade losses on 2018 crops and livestock, and it says that up to $7.25 billion will be paid this month on 2019 production.

In the past, the White House budget office and strong-willed leaders of the House and Senate Appropriations committees kept a firm grip on CCC money. In 2012, Congress handcuffed the USDA’s use of CCC funds for emergency aid to growers. Some Republicans said a 2010 disaster package for southerners was intended to help Senate Agriculture chair Blanche Lincoln win reelection. Lawmakers removed the restrictions in 2018 at the request of Agriculture Secretary Sonny Perdue.

The CCC was created in 1933 to carry out the far-reaching farm programs of the New Deal. It is empowered to support commodity prices, buy and sell agricultural products, aid in the development of new domestic or foreign markets for U.S. goods, and enhance exports. The Reagan administration used the broad purposes of the CCC charter to create an export subsidy program in 1985 to help American farmers compete with European exports.

To read a Congressional Research Service report on the CCC, click here.