Bush's farm bill outlines bold move

The Bush administration's recent proposals for the next farm bill – due for reauthorization this fall – have been winning accolades and criticisms from some surprising quarters.

Environmentalists have lauded it as an important step in the right direction, even as the largely Republican agricultural community has met many of its proposals – such as a plan to scrap subsidies for any farmer with an adjusted gross income of more than $200,000 a year – with skepticism.

Conservation and energy programs get a boost in the administration's plan, while several billion dollars are cut from payments to some of the nation's largest farmers. In comparison with the 2002 farm bill, the overall bill would spend $10 billion less over the next five years, according to the Department of Agriculture.

"We have some major concerns," says Mary Kay Thatcher, director of public policy for the American Farm Bureau Federation, which bills itself as "the voice of agriculture." "We're supportive of [conservation, energy, and rural development] getting additional funding, but we don't think you ought to reduce farmers' safety net to do that."

One of the most significant elements of the proposed bill would change the countercyclical program – the means by which the federal government helps farmers in an off year. It would go from one that's price-based to one that's revenue-based. That responds to complaints some farmers have had for years that they can face, say, a disastrous drought – which lowers supply of a crop enough that prices go up – and receive no payments.

This way, says Ken McCauley, president of the National Corn Growers Association, "you're actually getting the money to the farmer who needs the support." Moreover, he notes that corn growers – who have seen prices roughly double in the past year – may be heading into an era of higher prices because of ethanol, but they will still shoulder significant risk. "We'll still need a safety net, and a revenue-based one is a good way to go into it," he says.

The American Farm Bureau Federation is skeptical of that shift, noting that what helps a corn farmer in Iowa might not be so good for a corn farmer in a place like Texas. Ultimately, says Ms. Thatcher, she worries this new method would reduce the overall safety net for farmers.

But her major concerns have to do with the new income limits and payment caps, which would limit payments to a single farmer to $360,000. They would also eliminate some of the ways the farmer could get around such limits before, by setting up different "entities" through which he or she was paid.

The new income limit – lowered from the previous limit of a $2.5 million adjusted gross income per farmer per year – would affect about 80,000 farmers, says Chuck Conner, deputy secretary of Agriculture. He says the decision was not a difficult one.

"These are income subsidies, pure and simple," Mr. Conner says. "We maintain that it's an important principle that we not be using these income subsidies for people who are some of the most well-to-do people out there."

Much of the pushback on the new limits is coming from the South, where it's not uncommon for large cotton and rice farmers to earn more than $200,000 in a year.

But some of them say that what may seem an obvious principle – that they make enough already – doesn't take into account the huge amount of risk and debt they need to shoulder, or how much operations can vary from year to year.

"I've been in farming all my life, but we've been in the expanding mode," says Stanley Reed, president of the Arkansas Farm Bureau Federation and a cotton farmer who works 4,000 acres in Marianna, Ark., with his son and daughter. "In the 1980s, we had an opportunity to load up on debt, and had to make land payments. If we'd had limits during that time on what our income could have been [in order to get subsidies], we wouldn't have gotten loans, and we wouldn't have been able to apply the earnings back to the land debt."

But others have applauded the fact that the limits will get subsidies into the hands of those who need it most, and free up some money for other programs: conservation, rural development, incentives and help for new and young farmers, and alternative energy development.

"There's really a groundswell of support on Capitol Hill for a farm safety net that helps more farmers, that is less costly, and that does much more to reward stewardship," says Scott Faber, farm policy director for Environmental Defense in Washington. "The secretary has hit all the right notes." Mr. Faber is particularly pleased about the increased emphasis on helping farmers who are producing for ethanol to develop best practices that minimize erosion and use less fertilizer. He also cites the loans and incentives for farmers to grow feedstock like switch grass for cellulosic ethanol. In addition, farmers who are tempted by the high corn prices to break into new, marginal land wouldn't get subsidies.

Conner says he's been happy with the reception the bill has received so far in Congress and among the key stakeholders. But some expect a battle over several key provisions.

"This is going to be interesting as we watch the debate unfold," says Michael Duffy, an agricultural economist at Iowa State University. "We may start seeing more of a regional push and pull, and regional conflicts, given who's affected."