Senate to debate farm subsidy cut

  • Article by: KEVIN DIAZ and NINA PETERSEN-PERLMAN , Star Tribune staff writers
  • Updated: December 2, 2007 - 11:47 PM

While Minnesota's senators take opposing sides on limiting subsidies for the wealthiest, farmers watch with concern.

WASHINGTON - From Minnesota to Texas, farmers across America's midsection are watching what the Senate does this week with a multiyear behemoth known as the farm bill.

Some think this could be the year Congress cuts back on decades-old farm subsidies that have been decried by reformers for years. Others predict the status quo will endure.

This time, Minnesota's freshman Sen. Amy Klobuchar is at the center of the reform tempest.

The Minnesota Democrat has her name on a controversial proposal to deny government payments to farmers with more than $750,000 in adjusted gross income. The cap is aimed at the Ted Turners and Scottie Pippens -- millionaires who have famously invested in farmland and reaped the benefits of government programs meant for family farmers.

But the very idea of income tests and payment limits worries many full-time farmers in Minnesota. The state has harvested more than $9.5 billion from government farm programs over the past decade -- fifth most among all the states.

Among the concerned Minnesotans is Brian Molitor, who represents the fifth generation of a Cannon Falls family farm that now stretches over more than 10,000 acres of corn and soybeans in southeastern Minnesota.

Molitor Bros. Farm, which four families operate, was one of the state's top three recipients of government subsidies in 2005, the latest year for which data is available. It pulled in nearly $1.2 million.

But Molitor, hoping that his children will become the farm's sixth generation, said that without the government money, his farm wouldn't be able to break even some years.

"If you look at the last few years, subsidies have been what's been able to keep people at zero and keep them from losing money," he said.

Full time vs. part time

Klobuchar's proposed income qualifications could be paired with a separate payment cap of $250,000, which would set maximum payment limits no matter how much a farm earns.

Like Klobuchar's plan, the payment limit, championed by Sens. Chuck Grassley, R-Iowa, and Byron Dorgan, D-N.D., is opposed by many of the nation's big farm groups, including the Minnesota Farm Bureau.

Sen. Norm Coleman, a Minnesota Republican who faces reelection next year, is opposed to both payment caps and income limits for full-time farmers, saying the dispute could break up the fragile coalition of regional farm interests that is trying to win passage of a $288 billion bill to fund nutrition, conservation and farm programs for the next five years.

Coleman is backing a more modest set of reforms that has come out of the Senate Agriculture Committee, including one that would lower the income limit for "part-time" farmers -- those who derive less than two-thirds of their income from farming -- from the current $2.5 million to $750,000.

Some analysts believe that income or payment limits for full-time farmers would spark a revolt among farm interests in the South, particularly among cotton and rice growers who benefit the most.

"If we proceed unwisely on this matter, we could jeopardize the entire farm bill and invite legislative attacks on Minnesota's farmers," Coleman said. "Minnesota has a lot to lose if that occurs."

That assessment is not shared by Klobuchar, who is being advised by Dave Frederickson. He is the former head of the National Farmers Union, which has long supported cutbacks in subsidies to the nation's largest farms, where government payments are concentrated.

"Limits that would hurt family farmers would blow up the farm bill," Klobuchar said, "but I don't think an income limit of $750,000 is going to blow it up."

Klobuchar says she wants to return to the original aims of farm programs created during the Great Depression. "The purpose of the farm bill is to make sure there's a safety net," she said.

Few state farms affected

Current farm policy, last updated in 2002, reflects the hard times of the 1980s and 1990s, when commodity prices hit many more lows than highs. But in recent years, farm prices have rebounded, in part because of growing export markets and the rising demand for ethanol and other biofuels.

A growing chorus of critics says it is an ideal time to scrutinize the price supports and commodity payments of years past. "Now is a time to take a serious, close look at it," Frederickson said, "because there's a basic issue of fairness."

President Bush has suggested barring payments to any farmer whose annual income exceeds $200,000; the House version of the farm bill, brokered by Minnesota Democrat Collin Peterson, chairman of the House Agriculture Committee, would set the income limit at $1 million.

But some analysts fear that prices will eventually fall. Putting the squeeze on farm payments, they say, could come back to haunt farm country, and not just millionaires collecting farm payments on Wall Street.

"If we have low prices, and we will if history is any guide, you'll see Minnesota farmers up against those [payment] limits," said Jeff Harrison, a former agriculture staffer for Coleman and former Minnesota Sen. Dave Durenberger. "Anybody who lived through the '80s can appreciate that."

As it is, some 100 Minnesota farms would exceed the proposed $250,000 limit on annual farm payments, Molitor's among them.

But according to Klobuchar, few if any Minnesota farmers would run afoul of her plan to cut off payments to those with adjusted gross incomes above $750,000.

The average income of a Minnesota farm, she says, is a modest $54,000, after expenses.

Kent Olson, a University of Minnesota applied economics professor, estimates that an income limit of $1 million would affect about 150 Minnesota farm returns, or 0.2 percent of all individual Minnesota farm returns.

Analyzing Internal Revenue Service data from 2004, the latest year available, Olson also found that a $200,000 income limit would apply to fewer than 1,800 Minnesotans who filed individual farm returns, which was about 2.4 percent of all individual farm returns that year.

"In general, Minnesota farmers are much less concerned about that than southern farmers, which are much larger," Olson said. "Ninety-seven percent wouldn't be bothered."

Kevin Diaz • 202-408-2753

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