The Obama Administration Submits a 'Mini Farm Bill' After All With Maximim Impact

September 20, 2011 03:08 AM

via a special arrangement with Informa Economics, Inc.

Revealing internet blog posted by Doug McKalip, Senior Policy Advisor for Rural Affairs in White House Domestic Policy Council

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

The following was posted on the Internet by Doug McKalip, Senior Policy Advisor for Rural Affairs in the White House Domestic Policy Council.

'Someday' is Now: Direct Farm Payments, and the President's Plan for Economic Growth and Deficit Reduction

For nearly two decades, I have served in agriculture policy capacities for the federal government – most of those years with the United States Department Agriculture. Today, I am reminded of a quote by Will Rogers. The outspoken Oklahoman once remarked, "An onion can make people cry, but there has never been a vegetable invented to make them laugh." Instead, Rogers made so many Americans laugh during some of the most difficult times in the history of rural America, sometimes pointing out irony in the activities of government.

Today marks a truly historic action, as President Obama proposes dramatic, yet common sense reform to what has become over the years, a product of conventional politics and longstanding irony in the landscape of government. As part of the President’s Plan for Economic Growth and Deficit Reduction announced today, President Obama is proposing to terminate direct farm subsidies. At nearly $5 billion in funding per year, the Direct Payments program is certainly no laughing matter. And if a vegetable were ever developed per the Rogers quote above, it wouldn’t qualify for direct payments, because vegetables are not deemed to be "program crops". (more on that in a moment)

As the lead advisor on rural issues for the President’s Domestic Policy Council, some will ask me "why advocate for the reduction of an agriculture program?" In short, I believe the President’s proposal seeks to establish new policy that has been long overdue, and takes action that conventional thinking would regard as either too difficult, or too controversial.

As the proposal goes forward, it is important to consider the following characteristics of direct farm payments:

  • The federal government pays owners of cropland $4.9 billion in "direct payment" subsidies each year. These payments are not tied to the actual production of crops, but rather are based upon historic crop acres and yields on farms.


  • Many recipients of Direct Farm subsidies are located in large metropolitan areas, far from agricultural production.


  • Direct payments are distributed by the federal government every year despite rising federal deficits and a healthy farm economy that saw net farm income grow by 28 percent in 2010.


  • A small share of commodities — corn, sorghum, barley, oats, cotton, wheat, rice, soybeans, and peanuts -- received 72 percent, or $160 billion, of all U.S. farm payments and nearly 100 percent of direct payments since 1996. Even among this small group of commodities there are widespread disparities.


  • Livestock producers, fruit and vegetable growers, and the majority of other agricultural producers in the United States receive minimal direct subsidies.


  • Direct payments are linked to the amount of acreage historically under production, thus the program benefits larger farm operations with more acreage. Direct payments also inflate land values making it more difficult for new and beginning farmers to expand and succeed.


  • The Department of Agriculture found that 62 percent of farm payments, including direct payments, went to the largest 12 percent of farms in 2008.


  • The Government Accountability Office found that 305 farm operations received $200,000 or more in direct payments.


  • The GAO found that recipients of direct payments and other farm program payments in 2008 were more than "twice as likely to have higher incomes as other tax filers."


  • President Obama has worked aggressively to reform direct payment subsidies. Early in this Administration, the President recommended that non-farmers with an Adjusted Gross Income greater than $250,000, or farmers with an AGI greater than $500,000 be ineligible for direct farm payments.


The points outlined above demonstrate the need for a new approach. The President’s plan will make a massive, but necessary change in the framework through which we work on agriculture and farm programs. As we have heard so often, most recently on the President’s Midwest Rural Tour, there are many young Americans who want to get into farming, or want to work and raise families in rural places. The President’s proposal will reshape the discussion on farm policy, and help focus attention and resources on how to support rural areas and better build capacity of those areas for future economic growth and development. That is the kind of approach to rural areas that will truly benefit everyone and provide contributions back to the economy and the nation.

Will Rogers also said, "Even if you're on the right track, you'll get run over if you just sit there." It is time for all of us to work to get this done. President Obama has set the policy and dialogue on the right track for the future of agriculture and rural resources. Now it is time for us to move on this and build a better rural America for tomorrow.

"Someday" is now.

Doug McKalip is Senior Policy Advisor for Rural Affairs in the White House Domestic Policy Council.


Comments: The Obama administration has now proposed a mini farm bill of its own. It is not comprehensive, but the proposed $30.8 billion cuts if not elimination of direct payments, another $8.3 billion of reductions for the crop insurance sector, a $2.148 billion whack at conservation, and a move to actually spend $8 billion for the SURE program (likely to gain some support from key lawmakers like Senate Finance Chairman Max Baucus (D-Mont.) and Senate Budget Chairman Kent Conrad (D-N.D.), has all the markings of the Office of Management and Budget all over it.

The one major item of bipartisan support going into the writing of a new farm bill is that the current crop insurance program works and is seen by many farmers as the best safety net to build farm policy around. Yet President Obama offers more of the same -- sucking the life out of the program. Some observers inside and outside of government tell me the long-term plan is to eventually make the crop insurance program a total government program by bringing the delivery of the policies into the Farm Service Agency (FSA). I have heard such suggestions before but thought those belonged in the conspiratorial category. I am now beginning to rethink that position. Some FSA staffers inside and outside Washington apparently fret that their jobs could be on the line in the years ahead, what with the need to have fewer county FSA offices, and the rise of computerizing farm program information. Think about it. And this administration now has a trend of going back and finding more and more cuts to crop insurance. With the need ahead to find additional program budget cuts, will they stop trying to cut more out of crop insurance? No.

As for the $8 billion President Obama wants to actually spend on a farm program, SURE, there are likely behind-the-scenes action on this one, too. The SURE program has a budget baseline problem going into the farm bill debate, and would need $16 billion in additional spending for a 10-year baseline (thus the $8 billion cost for Obama's five-year extension). This SURE funding was not just an OMB and USDA suggestion to Obama and others at the White House. It likely had some congressional supporters wooing into the ears of White House brass. Of course there will be denials about that.

As for direct payments, some tell me the $30.8 billion cut would eliminate the program under the assumption that farmers would scurry to the ACRE program for participation, thus causing payments for that program to soar and limiting the impact of killing direct payments to "just" $30.8 billion.

As for USDA's involvement in this, it will be interesting to hear Secretary Vilsack's comments about crop insurance. But this USDA is a follower. What the White House wants, they support -- before and after a decision is made.

The political implications of this hatchet approach to farm policy could be significant. Election-year watchers tell me that any House, Senate or presidential race that depends on winning a close contest in key rural states will be confronted with the recommendations released by the president.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


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