By CHARLES J. ABBOTT
1990 farm bill: 'Less of the same' for farmers?
Saturnine Sen. Robert Dole, who rarely passes an opportunity for a wicked quip, tossed a sharp barb in 1988 when Republican heavyweights were plumping for votes for George Bush. Said Dole (R-Kan.) of the farm policy offered by Democratic presidential nominee Michael Dukakis: It would be "nothing but a 'Trojan combine' " of misguided ideas.
During that campaign, the farm economy, hit hard by recession in the mid-1980s, was in the early stages of recovery, aided by a farm program that had the twin goals of regaining export sales while protecting farm income. Clayton Yeutter, then trade ambassador, vowed to farmers: "The answer of the Bush administration is more of the same."
Bush, of course, won the election and soon chose Yeutter as his agriculture secretary. But this spring with Congress midway through writing a new farm policy law, farmers could wind up with "less of the same" if the yardstick is federal spending on agriculture. The 1985 farm bill, written amid thundering battles over the direction of farm policy, has proved to be startlingly expensive: $80 billion in farm subsidies projected over its five-year life. Spending peaked at $25.8 billion in fiscal 1986 and is projected for $8.2 billion this year.
There is less money to spread around on federal programs these days, and less sentiment in Congress to increase spending in most areas. "We're talking about a huge deficit problem. This [the farm program] is an obvious place to look," said one urban congressman who wants to save about $1 billion by banning government payments to large-scale farmers.
It will be difficult — very likely impossible — for farm-state congressmen to hold farm program spending at the levels of the 1985 bill, despite rising production costs and complaints that recovery is missing many parts of rural America. The case for larger government spending is not helped by projections for net cash farm income this year to exceed a healthy $50 billion for the fifth year in a row.
"Our view is we should not change the existing legislation a great deal," Yeutter told an audience in early June when defending the administration's proposals. Its centerpiece was a plan to give farmers more freedom in deciding which crops to grow — so-called planting flexibility — by allowing them to vary their mix of crops on land devoted to wheat, feed grains, cotton, rice and oilseeds (such as soybeans) without affecting eligibility for crop support payments.
While Yeutter talks about planting flexibility, the House and Senate Agriculture committees want to know exactly how much money will be available for a new farm bill. The Bush administration has studiously avoided any comment on the amount it is willing to spend on the farm bill.
Indeed, for strategic reasons, the administration chose not to submit a farm bill at all, a rare choice. It is clear, however, that the White House expects lower farm spending in coming years. Bush's fiscal 1991 budget projects five-year costs of $47 billion, which is less than the $53 billion-to-$55 billion level if the current law were in place another year. "It will be the first time we've ever been to mark-up on a farm bill where we didn't have an administration proposal, which is a bit frustrating," said Senate Agriculture chairman Patrick Leahy (D-Vt). "Everybody's kind of guessing. [It's] asking everybody to bid against themselves."
The Hill was not entirely in the dark, however. The House budget resolution called for $8.5 billion in reductions in farm spending over the coming five years. While the Senate Budget Committee did not require farm cuts as part of its budget blueprint, it was clear that agriculture is expected to contribute a budget cut later.
Since its creation during the Depression, the farm program has been a safety net for agriculture. In exchange for idling a portion of their wheat, feed grain, cotton and rice land, farmers are eligible for benefits such as crop loans and crop support payments — so-called deficiency payments or subsidies. Acreage set-asides are intended to curtail overproduction. Crops are used as collateral for the loans. Subsidies are based on the gap between market prices and the government-set "target price" for a crop.
The 1985 farm policy law set in motion a series of annual reductions in loan rates and target prices in order to make U.S. crops price-competitive. There is little appetite among farm-state congressmen for further reductions in target prices.
Some argue that target prices reached unrealistic levels in the past. Sen. Richard Lugar (R-Ind.), for instance, notes that the season-average corn price has exceeded the target price only three times in the past 17 years. Activist farm organizations say small farmers face ruin if the government lowers its guaranteed prices. Their allies in Congress have suggested higher government supports. That idea must be balanced with the role of exports, which now provide a market for nearly one-fifth of U.S. farm production. Critics say high government-guaranteed prices carry the threat of pricing the United States out of the market.
Yeutter has touted planting flexibility as the answer to a multitude of problems. It would allow farmers to look for
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money-making crops while shaping a more efficient farm system. "Most farmers would prefer to get. . . their income out of the marketplace," Yeutter says. More income from sales would mean less reliance on federal subsidies.
Critics of the current farm program say it now locks farmers into growing the same crop year after year in order to maintain eligibility for support payments. With farmers enrolling three-fourths of the 217 million acres eligible for crop subsidies in the farm program, government rules can have far-reaching effects. Rigid farm program rules have been cited as a culprit in "the soybean problem," the 10 million-acre decline in U.S. soybean acreage in the past decade despite burgeoning world demand for oilseeds. In that analysis, the target price for corn guarantees a farmer more money than the market price for soybeans.
This spring, after flirting with higher target prices and a very expensive soybean marketing loan, House Agriculture Committee members decided they had a better chance of success on the House floor with a package that would cost no more than current law. So they endorsed a plan to freeze target prices, increase crop loan rates slightly, create a soybean marketing loan at a rate low enough to avoid adding government costs and offer planting flexibility on up to 25 percent of a farmer's land. Under the planting flexibility program, a farmer would not be paid crop subsidies on what he planted on his "flex" acres, but he could get government loans on those crops.
"We're not offering this because we'd like to. We're looking for ways to stay within the budget guidelines," said Rep. Edward Madigan (R-15th, Lincoln, Ill.). It was one of the few comments from Madigan, the committee's Republican leader and its only Illinois member, during drafting of the bill. Madigan has played his cards close to the vest, apparently reserving maneuvering room for himself.
The Senate Agriculture Committee lagged behind the House in writing its version of the farm bill, but in early June it seemed headed in the same direction.
Little noticed in the early thrashing over the farm bill was the back-channel game being played by leaders on the House side. They deliberately wrote a farm bill that would match the budget baseline, reasoning that there was no need for unilateral reduction of the cost of the farm program before the outcome of the budget summit still going on between Congress and the President. If they don't agree on a total budget within Gramm-Rudman guidelines, more cuts might come eventually via sequestering of funds across the board. "We don't want to come in and make our cuts . . . and then have a sequester on top," said Rep. Charles Stenholm (D-Texas). "We may be dumb, but we don't claim to be stupid."
The real intrigue, one congressional economist said, was how to write good farm policy without getting burned if budget cuts are required later. If they are, according to Stenholm and fellow subcommittee chairman Jerry Huckaby (D-La.), Congress will simply make flexibility mandatory — telling farmers that supports will not be paid on a portion of their land but letting them plant whatever they want on it. Stenholm, who originated a similar idea a couple of years ago, calls it "true flexibility" because there would be no question of target prices distorting a farmer's crop selections.
Despite official administration silence, Yeutter offered insight in May on what Congress may have to do to meet budget targets. With crop subsidies to farmers based on a formula that multiplies crop yield times target price times the farmers' eligible base acreage, Yeutter said: ". . . you either cut target prices or [farm acreage] bases, one or the other, or some combination of the two. It's really not all that complicated. It's a question of where ultimately one wants the numbers to lie."
The outcome of the flexibility debate could have an important impact in a state like Illinois, which leads the nation in soybean production and is second in corn. Most analyses show flexibility would increase soybean acreage, perhaps by as much as 4.4 million acres. The U.S. Department of Agriculture estimates the House approach of limited crop flexibility and a marketing loan of about $5.25 a bushel will bring an additional 1.1 million acres into soybeans nationwide. Corn acreage would drop 700,000 acres.
One farm lobbyist took a similar view: "I don't know how many corn farmers are going to give up deficiency payments on corn just to get the loan on soybeans." But even a low loan rate is more attractive to northern farmers, who get higher yields, than to Southerners, who don't. If there is a shift, soybean acreage would expand in the Midwest.
Marketing loans can be expensive because they allow a farmer with a crop loan (let's say a loan based on $6 per bushel) to sell the crop at the usually lower world price (at $5.50 for example) and pocket the difference. The House tried to avoid that
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1990 farm bill (continued from page 26)
pitfall by specifying a low loan rate. The Department of Agriculture thinks market prices will fall below even that rate, meaning $3 billion in government costs over five years.
With all the money going into agriculture, Congress has begun to ask farmers to do more than limit crop acreage. It linked environmental and farm program goals in the 1985 farm law, which generally requires farmers to practice conservation in order to be eligible for farm program benefits. This time around, large-scale expansions were forecast for environmental farm rules, but only modest alterations were made in the early rounds. Most were aimed at making environmental safeguards more palatable to farmers by paying them to alter farming practices on sensitive land or by purchasing long-term conservation easements from them to preserve or restore wetlands.
In the Senate Agriculture Committee, language was approved to require farmers to keep records of '"restricted use" pesticides and to toughen the "swampbuster" program. Under the latter, farmers risk loss of all program benefits if they drain a wetland and plant crops on it. The House committee, however, voted to change the definition of land covered by swampbuster, a change that could exempt 10 million acres now covered.
Consumer and environmental groups wanted much more. They want farmers to keep records of fertilizer and pesticide use and to take steps by 1995 to reduce the risk that farming operations on sensitive land would contaminate groundwater. They also wanted stronger rules against chemical residue in food, and they wanted the rules in the farm bill.
Despite the vaunted power of the farm bloc, farm-state congressmen are worried by potential unrest among urban colleagues. The most vocal critic, Rep. Richard Armey (R-Texas), views the farm program as wasteful, and his goal is to bar payments to farmers with more than $500,000 in sales. "When you talk about [slaughtering] sacred cows, you start with the little ones," Armey said when he announced that a loose-knit coalition would take aim at the farm program. Although the idea of payment limits was raised one evening in the House Agriculture Committee, it went nowhere. Rep. Glenn English (D-Okla.), said excluding farmers on the basis of income would "turn this into a welfare program."
Other farm congressmen worry about the budget crunch, potshots from Armey and lack of such items as food safety reforms to attract urban votes to a new farm bill. If the new farm bill bogs down this summer, they see a one-year extension of the current law as a last-ditch alternative. Because this is a budget-driven farm bill, whatever is enacted will likely mean that farmers will get "less of the same."
Charles J. Abbott is farm editor for the United Press International in Washington. D.C.
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