Tuesday, February 3, 2015

Five Decades of USDA Regulatory Spending

In previous posts I've discussed the history of USDA spending and the dramatic rise in regulatory restrictions imposed on agriculture by the EPA and USDA. In this post I'll focus on regulatory spending by the USDA since 1960. While I'm not qualified to give an in-depth history of USDA regulations, I'll explain some of the big swings in USDA regulatory spending. To do so, I'll use regulatory spending data from the Weidenbaum Center on the Economy, Government, and Public Policy at Washington University in St. Louis. The center is named for the late Murray Weidenbaum, a professional economist who spent much of his career studying regulation and its effects on the economy.

The graph below shows total USDA regulatory spending from 1960 to 2013 in billions of constant 2009 dollars. According to the data, seven sub-agencies of the USDA currently spend some portion of their budgets on regulatory activities. In 1960, only 3 of these sub-agencies existed. The Animal and Plant Health Inspection Service (APHIS) and the Agricultural Marketing Service (AMS) made up the bulk of regulatory spending with the Farm Credit Administration (FCA) making up just a small part. The Grain Inspection, Packers, and Stockyards Administration (GIPSA) came along in 1966 but has never made up a significant portion of USDA regulatory spending.

In 1977, the Food Safety Inspection Service was established (green line). One might expect that regulatory spending would accelerate with the establishment of a new regulatory agency. However, new spending by the FSIS was partially offset by a dramatic decline in APHIS spending. Total spending growth started to slow to the extent that spending dropped below trend in 1982 and remained below trend until 2000.

Spending was fairly constant from 1977 to 1996 when the Risk Management Agency (RMA) was established (red line). A combination of increasing spending by APHIS and FSIS and new spending by the Forest Service (1999) resulted in a dramatic rise in spending to its peak in 2006. Spending since 2006 has generally declined, with the exception of increases from 2007 to 2010, and fell below trend in 2013.

From 1960 to 2013, nominal USDA regulatory spending has increased about $48 million per year (a 433% overall increase). We can also compare regulatory spending to regulatory restrictions documented in a previous post, though the regulatory restriction data is more limited. Regulatory restrictions grew 26.7% from 1997 to 2012 while regulatory spending grew 59.5% over the same period. This illustrates the difference between these two measures. There's likely a story about bureaucratic inefficiency, featherbedding, or some other issue, but we can't evaluate causes with this data.

The Weidenbaum Center's documentation of regulatory spending is likely to be useful for agricultural economists in a number of ways. Evaluating the effectiveness of lobbying, determining the long-term impacts of regulation on farms and agribusinesses, and examining the effects of food and agribusiness regulation on food prices, are all possible using data like this.

Side note: For a little perspective, here's a graph of total USDA spending from 1962 to 2013. Regulation is a lot smaller share of total spending today than it used to be.

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