Some people see a glass half empty; others, one half full. Acting Agriculture Secretary Chuck Conner, clearly a member of the former camp, thinks it’s time for Congress to seize on a glass full of high prices and “reform” farm programs.
With market prices at or near record levels for most of the major commodities, some economists are predicting net cash farm income could exceed $85 billion in 2007, an increase of $18 billion over the previous year, Conner notes.
“This kind of success does give us an opportunity, we believe, to enact some reforms that are necessary for us to maintain the strength of the farm economy we are seeing today,” Conner told the Agribusiness Club of Washington, whose members include the Washington lobbyists of the major commodity organizations.
“That is our goal, ladies and gentlemen: To maintain this strength and not have it simply represent a peak followed by a cliff, that some would have us believe, will come immediately after.”
Apologizing in advance in case he offended any of the commodity organizations with his comments, Conner said the farm bill that passed the Senate by a vote of 79-14 a few days before he spoke “falls far, far short of where we need to be.”
He called both the farm bill passed by the House last July and the bill approved by the Senate in December “fundamentally flawed.” (Both Houses passed their respective bills by the highest margins in many years.)
“Neither one provides the kind of reforms we believe represent forward-looking farm policy at a time of record strength in our farm economy,” said Conner. “If we can’t help agriculture become more market-driven and competitive now, when farmers are enjoying the kind of economic times we have today, we have to ask: Is there ever a time?”
Conner repeated Bush administration claims that the House and Senate versions of the farm bill would raise taxes to pay for expanded programs for the first time since 1933. “I can’t imagine a time when we have $85 billion of net farm income to be talking about this being a good time to raise taxes.”
According to administration analysts, the Senate bill would increase taxes by $15 billion to pay for farm bill programs, including a new $5-billion permanent disaster assistance program that would allow Congress to avoid having to fight with the administration over ad hoc disaster relief.
Administration officials have also said the Senate bill contains $22 billion in “unfunded commitments and budget gimmicks,” although Senate leaders claim their bill would cost $2 billion less than the farm bill proposed by the administration in January 2007.
“The House bill also relied upon tax increases of $7 billion to fund certain farm bill priorities while claiming an additional $5 billion of illusionary savings by changing the timing of payments. And of course all these illusionary savings do not change one dollar of federal government obligations.
(House leaders have said their $7 billion would come from closing tax loopholes that allow foreign corporations to move their earnings offshore to avoid U.S. taxes and increased royalties from offshore oil drilling. Such practices as the former are permitted under reciprocal agreements with foreign governments.
The secretary also criticized the House and Senate for failing to significantly lower the adjusted gross income eligibility ceiling that currently bars farm program payments to individuals with an AGI of more than $2.5 million. Both the House and Senate bills reduce the adjusted gross income ceiling but not to the $200,000 level recommended by the administration.
“We estimated our change would remove about 38,000 of the wealthiest Americans from our farm program rolls,” he said. “We’re simply saying we shouldn’t take middle income tax dollars and give it in the form of an income support payment to the richest Americans.
Conner said Congress could save more than $1 billion by the change. “I continue to be amazed at the opposition there has been to this. I believe we risk jeopardizing our entire agricultural safety net in the future unless we are willing to say to the richest Americans, "No. Find other means.”
He also criticized the House and Senate for increasing the loan rates and the target prices on nearly half a dozen crops, although the changes were sought by a number of commodity organizations.
“Simply put, that is trade-distorting, and we are going to hear about it from our WTO trading partners,” he noted. “Is there anyone in this room who thinks we will not pay an enormous price internationally for this action? And all because a few farm groups who have long-standing policies favoring higher loan rates.”
Conner cited the days-earlier announcement of an opinion by a WTO Compliance Panel suggesting that changes to the U.S. cotton program were insufficient to bring the United States into conformity with the new WTO standards.
He pledged to continue to defend U.S. farm programs, including the cotton program, against WTO challenges. “We have worked to bring our programs into full compliance with our WTO recommendations following the original cotton case, and we believe our support and our export credit guarantee programs are consistent and in line with our agreements with the WTO.”
For those reasons, he said, President Bush’s senior advisors are recommending he veto the farm bill unless significant changes are made in the House-Senate conference committee convened to resolve the differences in the two versions of the bill.
“We need a farm bill that will allow us to make continued progress in areas like conservation, renewable energy, food and nutrition programs as well,” he said. “All this year we’ve made the case to significantly expand the funding for research and development of renewable energy, particularly as it relates to cellulosic ethanol.”
He acknowledged that renewable energy sources have come under criticism in recent weeks for supposedly increasing feed and food prices, claims that have been refuted by farm groups such as the National Corn Growers Association.
“Let me just tell you, I don’t think there’s been one moment of waiver from the people you talk to out on the ground,” said Conner. “There’s strong support of our country producing more of our energy from sources here at home. That has not wavered one bit in the countryside.”
The House and the Senate bill recognize this, he said. “Chairman Peterson actually provided more than what we recommended, and we appreciate that effort. The Senate added a strong energy title as well. So we need to give them a lot of credit for recognizing that vision for the future.”
Senate leaders from farm states have acknowledged the administration’s displeasure with the bill but say they believe they can prevail.
“Passage of the farm bill in the Senate was a big victory,” said Conrad “But we face tough negotiations with the House and an administration that is unfriendly to rural America.”