Latest Plan To Cut Farm Subsidies Likely Dead

By: Associated Press Email
By: Associated Press Email

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Wednesday, February 10, 2010

If history and the political lineup are any guides, President Barack Obama's latest effort to cut subsidies for wealthy farmers likely will fare no better than his first try — or his predecessor's attempt.

Congress twice overrode President George W. Bush's veto of the 2008 Farm Bill. When President Obama tried reforming the system last year, his proposal was dead on arrival on Capitol Hill, where farm state lawmakers largely control the agriculture committees.

House Agriculture Committee Chairman Collin Peterson, D-Minn., said he'd oppose significant changes to the current Farm Bill. To Peterson, most criticism of subsidies is based more on ideology — whether it be small-farms-are-better or free trade — than sound policy considerations.

Others, though, said as federal deficits soar above $1 trillion a year, it's time to take another look.

Critics argue subsidies to wealthy farmers aren't justified, especially when crop prices are relatively high and farmers' incomes tend to be higher than the national average. And they ask why federal money flows primarily to growers of five crops — corn, soybeans, wheat, cotton and rice — while livestock, poultry and produce farmers get by without subsidy checks.

Congress hasn't tried to significantly wean farmers off subsidies since the ill-fated Freedom to Farm bill of 1996. After commodity prices fell and caused a crisis, Congress returned to a more traditional approach with the 2002 Farm Bill, which also provided the framework for the 2008 legislation.

The 2008 bill prohibited all subsidies to anyone whose non-farm adjusted gross income exceeds $500,000. They also ended a major "direct payments" program for anyone with more than $750,000 in adjusted gross income from farming.

And the Agriculture Department recently said it will work with the Internal Revenue Service to stop payments to people who exceed the income limits after learning 2,702 millionaires received farm payments from 2003 to 2006 and were probably ineligible.

But critics say the 2008 bill largely maintained the status quo. Steve Ellis, spokesman for Taxpayers for Common Sense, called the lower income limits a "Swiss cheese cap," easy to avoid with accounting changes.

The 2009 crop is the first subject to the new rules, and data aren't available on whether the changes have significantly altered who gets subsidies.

The Obama administration said its proposed farm subsidy cuts would save $2.3 billion over 10 years. Its new budget proposal would lower the cap on direct payments from $40,000 per person per year to $30,000. It would also reduce income eligibility limits over three years to $250,000 for non-farm adjusted gross income and $500,000 for farm adjusted gross income.

But most think the proposal is dead.

Senate Agriculture Committee Chairwoman Blanche Lincoln, D-Ark., said farmers have already based their business decisions on the existing legislation.

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