Why US Tobacco Subsidies Endure

HIS forearms darkened by a muddy mixture of sweat and soil, Ed Kasheta rubs a hatchet blade with his thumb and apologizes for getting angry. But he makes his point anyway.

''The government has no business being on the farm,'' he says, taking a few minutes away from harvesting his family's tobacco fields. There are big corporations down South collecting ''big subsidies,'' he says ''but the small family farmer is not getting ahead by being in the [government tobacco] program.''

Mr. Kasheta's sentiments are echoed throughout the Connecticut River Valley, where farmers have grown cigar tobacco for generations. A decade ago, they threw Uncle Sam and his price supports off their land, deciding they could do better on their own.

So why not do the same south of the Mason-Dixon Line, where growers cultivate cigarette leaf on the hillsides of Tennessee and North Carolina?

Republicans in Congress are eliminating scores of federal programs and questioning whether Washington has any role on wheat or peanut farms. But tobacco supports - a program that benefits growers, landowners, and cigarette manufacturers - have survived.

The House voted last month to maintain funding in its annual Agriculture spending bill. When Congress returns in September to consider perhaps the most significant market-based agriculture reforms since the New Deal, tobacco will be exempt. Permanently authorized in 1938, it remains outside the domain of the Farm Bill. (See farm subsidies on campus, Page 4.)

The longevity of tobacco subsidies - in the face of the budget cutting steamroller and the public backlash against smoking - is a study in Washington politics and the economics of tobacco farming.

Supporters of the program argue that the benefits far out-

weigh the costs. Since 1982, when Congress required that tobacco subsidies run at a ''no-net cost,'' growers have paid into the system.

Taxpayers put up only $16 million in administration costs, and $26 million in marketing promotion, crop insurance, and miscellany. In return, the country benefits from billions of dollars of tobacco revenues and ''economic stability in many poor counties'' in the rural South, says Charles Hatcher, program administrator at the US Department of Agriculture.

Critics of the program lodge two complaints.

Some free-marketeers say tobacco growers will be better off in the long run by surviving on their own. Tobacco supports are a relic of the New Deal, they say, and were never intended to be permanent.

Other opponents argue the moral and health side. As Rep. Richard Durbin (D) of Illinois points out, the government spends some $50 billion in smoking-related health costs and loses billions of dollars more if lost productivity is included in the tally.

From Ed Kasheta's point of view, the future of the small American family farmer depends on the farmer himself, not the government.

Under the tobacco program, farmers vote every three years to limit their production. They pay into a cooperative association that makes federal loans available. If the market price plummets below the government supported price, the grower's coop will borrow money from the US Department of Agriculture to buy the farmer's surplus.

The decision of tobacco farmers in the Connecticut River Valley to disband their cooperative and eschew government price supports, was influenced by industry trends. Thirty years earlier, in 1955, the cigar industry had developed a cheap, homogenized outer cigar wrapper to replace the expensive broadleaf grown here, and many farmers went broke.

Those who survived, diversified. Today, a few large farms - 100 acres or more - raise only tobacco. But many, such as the Kashetas, make ends meet by going off farm.

''You can't survive only on the farm,'' says Ed Kasheta. ''We also do landscaping, snowplowing, and sell power equipment. When one is slow, another picks up the slack.''

But advocates of tobacco subsidies say Southern growers don't have the luxury to broaden their operation. The average size farm in West Virginia is 2.1 acres, for example, compared with 33.9 in Connecticut. Hilly terrain in Tennessee and sandy soil in North Carolina complicate growing other crops. Expanding requires capital that many rural family farms don't have.

And competition makes diversifying difficult. In the mid-1980s, for example, the Virginia Department of Agriculture (VDA) supported an initiative to help some tobacco farmers branch into broccoli. It didn't work.

''There's nothing to replace the economic impact that tobacco has down here,'' says Stan Duffer, VDA regional marketing development manager. ''Tobacco money allows farmers to try other vegetables, but they ran into market problems and lacked the volume to carry them through on a yearly basis.

''It is nothing new to talk about diversifying,'' he adds. ''A lot of farmers here have. But those enterprises aren't what pays the bills. Tobacco pays the bills.''

According to the Tobacco Cooperative Stabilization Corp. in Raleigh, Va., 152,000 farms are enrolled in the support program. Most of those farms are small and family owned.

Lisa Eddington, assistant to the corporation's chief, argues that the program preserves family farms and protects the South from economic upheaval. Without the program, a few bad crop years or a glut in the market would drive the small farmer out of business.

That day may come. Although the program has survived for now, it is only a matter of time before Congress shifts the full cost to those who participate in it, or does away with it, according to one senior House Republican staff member.

And as Kasheta looks southward, he defies the doomsayers and warns his fellow farmers. ''The good ones will survive,''he says ''But nobody makes a living on five acres. You have to go off farm. We've all done it.''