Farm subsidies are coming under the gun

  • Article by: JIM SPENCER , Star Tribune
  • Updated: October 28, 2011 - 10:46 PM

The farm subsidy payments that have been worth billions to Minnesota farmers could soon give way to a far less costly program of expanded crop insurance.

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Ernie Oberg, of Moorehead, would not be in business if it weren't for farm subsidies. This wheat growing in one of the Oberg's fields. The Oberg Farm Cooperative, which is Ernie and his four sons, last year lost money growing wheat even with the farm subsidies.

Photo: Kyndell Harkness, Star Tribune

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WASHINGTON - The farm subsidy payments that have been worth billions to Minnesota farmers could soon give way to a far less costly program of expanded crop insurance.

The far-reaching change is outlined in a bipartisan plan expected to be submitted next week to the congressional deficit committee examining ways to cut federal spending, Minnesota Rep. Collin Peterson told the Star Tribune.

The changes could hold major implications in Minnesota, the nation's No. 4 crop-growing state, and other farm states.

Minnesota received nearly $10 billion in subsidies from 1995 through 2010. Minnesota crop farming generated $8.4 billion in cash receipts in 2009 alone.

The proposal is part of an ongoing effort by Senate and House leaders to pare $23 billion in agricultural spending over 10 years.

The elimination of so-called direct-payment subsidies to farmers could account for roughly $15 billion of that total, said Peterson, a Democrat who serves as the ranking minority member of the House Agriculture Committee. The new payment program would pay farmers only for planted acres when prices drop below certain thresholds.

"We don't want to pay people when they don't need it, and we don't want to pay people when they aren't growing a crop," Peterson said.

The Department of Agriculture projects that current farm subsidies, if not changed, would cost $52 billion from 2008 to 2017. The subsidies are paid based on past plantings, not current acres in production, and are paid regardless of the trend in commodity prices.

The new proposal would ensure that farmers can collect up to 90 percent of a preset value on their crops.

The rewrite of the farm bill by Agriculture Committee members has been done at relatively high speed and behind closed doors, provoking criticism. Among the most vocal critics is the Environmental Working Group (EWG), which complained that the agriculture committees did not hold public hearings to listen to groups and individuals affected by the legislation.

Craig Cox, the group's vice president for agriculture and natural resources, said he applauds the elimination of direct farm payments but said the expansion of the crop insurance program "looks like they're turning a safety net into a guaranteed income program."

The Minnesota Farm Bureau had not been told about the plan Peterson outlined and referred questions to its parent group, the American Farm Bureau.

"Our farmers would have preferred to continue the existing program," said Mary Kay Thatcher, the American Farm Bureau's director of congressional relations.

But Thatcher conceded that keeping the existing subsidy program would be nearly impossible because of the pressure to reduce federal spending. The Farm Bureau has pushed for an insurance program that was different than the one Peterson described.

The details of any farm program that will go to the 12-member super committee are not final, Thatcher insisted.

Fast in the making

The speed of the process has been extraordinary, but that isn't necessarily a bad thing, said congressional expert Norman Ornstein of the American Enterprise Institute.

"It is not like these are people who haven't thought about and debated these issues for years," Ornstein said. "The perversity of paying people not to plant crops makes change long overdue. And if you can get a bipartisan package to do anything at this point, it should be applauded."

Peterson said the Senate and House agriculture committees didn't establish the timetable.

"What's usually done in six months, we're doing in four weeks," Peterson acknowledged. "When I ran the [House agriculture] committee, we started off in subcommittees. That's the way it should be done. We did not set up this process. I didn't think the super committee was a good idea."

The super committee, composed of six senators and six representatives, was created after Congress struggled over deficit reduction and raising the debt ceiling. The group is supposed to come up with at least $1.2 trillion in federal budget cuts over the next 10 years and present them to the House and Senate by Nov. 23. Congress must act on the plan by year end.

If the super committee fails to develop a budget plan, or Congress doesn't pass it, automatic cuts to defense spending and social programs are to take effect in 2013.

Policy committees in the House and Senate are supposed to give detailed budget-cutting proposals to the super committee by Nov. 1. The House and Senate agriculture committees are likely to be the only ones that will come close to that deadline, Peterson said.

"We should get credit,'' he said.

Jim Spencer • 202-408-2752

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