With the farm-bill talks seemingly stuck in neutral, Secretary of Agriculture Ed Schafer found himself answering more questions Monday about what the administration wants in a farm-bill safety net.
Schafer, who has become more involved in the farm-bill talks recently, spoke Monday to about 350 members of the National Farmers Union, which is holding its annual meeting in Las Vegas. The NFU has played a key role in the farm bill this year and helped get the U.S. Senate to create a $5.1 billion permanent disaster program. Part of the money fight now going on in the farm bill revolves around finding money to pay for that program.
Schafer declined to say specifically if the Bush administration backs a permanent disaster program. The administration has not looked favorably on the program or the added spending it creates. Schafer added that House Agriculture Committee Chairman Collin Peterson, D-Minn., has recommended establishing an insurance-based program that a producer would buy into for the permanent disaster program.
"Importantly, we want to look at investment in the safety-net program," Schafer said. "I don't know what we are going to call it, but you can have a disaster fund that's related to certain things, or you will see a risk-management program that is strengthened even better."
The administration contends more reforms are needed in the farm bill, but much of that discussion now centers on making sure there are no increases in loan rates or target prices. Those programs are considered trade distorting by the World Trade Organization, and most farm bill observers speculate the Bush administration is holding a line on those programs mainly to protect the potential that a deal could happen in the WTO Doha Round talks.
"We think there are reforms in the subsidy programs that need to take place," Schafer said. "To start looking at loan rates and things like that goes away from principles that the administration set forth," Schafer said.
Currently, the 2002 farm bill would expire March 15. It appears unlikely that a new bill would be done by then, so some agreement must be reached that would create a third short-term extension of the current farm programs. Without a farm-bill agreement, Schafer said USDA is getting ready to "fire up the old-time machine" to potentially implement the 1949 farm bill. Schafer said implementing the old farm bill doesn't make sense, nor does a longer extension of the 2002 farm bill, given the need to invest more in conservation, nutrition program and renewable energy.
On Monday, Schafer did say that the Bush administration is willing to back down from its long-advocated position that farm payments should be limited to people with adjusted gross income under $200,000. In a letter to Congress last Friday, the administration offered to go along with a House plan for a $500,000 AGI.
"It isn't always the $200,000; it is what goes into picking the number," Schafer said. "A lot of the reform issues are spending issues. As we have come closer to a spending number, we thought it was appropriate to say we are willing to compromise here on what was already suggested is the $500,000 AGI limit."
Direct payments, which amount to $5.2 billion a year, are not being discussed in the farm bill for possible cuts. The main defense for the payments in times of projected record farm net income is that direct payments are non-trade distorting in the international arena, Schafer said. Still, Schafer acknowledged the average taxpayer in a coffee shop would not understand the continuation of direct payments right now.
"I don't think people not involved with agriculture understand that," Schafer said. "They think 'Gee, we're writing a check when we have got record-high prices and record farm income and by the way, that guy still gets a check whether he grows a crop, a good crop, a bad crop, it doesn't matter, when prices are good or bad, it doesn't matter.'"
But, Schafer said, public policy must make sense. Shifting programs from non-trade-distorting to trade-distorting programs affects U.S. trade. Non-trade-distorting subsidies increase economic activity and U.S. trade for other industries. That makes those payments better sound policy, he said.
"The important thing to taxpayers is they want to make sure their hard-earned dollars are spent wisely or appropriately and that people who get them, it means something," Schafer said.
Schafer also clarified the issue of finding budget offsets. One offset proposal from the administration that has raised eyebrows comes from Medicare reimbursement for oxygen tanks. Currently, Medicare reimburses companies for 36 months of oxygen usage for tanks. Schafer said lawmakers voted last year to cut that reimbursement to 18 months. The administration wants to cut that reimbursement to 13 months. Those reimbursement changes would generate up to $6.8 billion in savings in the federal budget. Schafer said Congress might as well use the money for the farm bill, otherwise "they are going to spend it on something else."
Peterson lamented the oxygen proposal on Sunday night when he spoke by teleconference to NFU members. Schafer acknowledged the objections, but noted that almost everything being debated right now in offsets has problems for someone.
"Everything we have put on the table, everything they have put on the table, has had some objection to it," Schafer said.DTNAg
