Deeper Cuts Seen as Congress Returns to Farms, Food Stamps

That could set up a struggle to pass a farm bill that will satisfy farmers, environmentalists and nutrition advocates.

Lawmakers who last year failed to complete a rewrite of U.S. agricultural policy will restart their effort this week with pressure building for even bigger cuts for farmers and food-stamp recipients.

Federal budget-cutting and criticism that aid has been too lavish during a time of record revenue are driving proposals in the Senate and House agriculture committees to end direct payments to farmers and save $23 billion and $40 billion, respectively, over the next 10 years.

This could set up a struggle to pass a bill that will satisfy farmers, environmentalists and nutrition advocates, said Mark McMinimy, an analyst at Guggenheim Washington Research Group in Washington. "It’s going to become a lot of nibbling among programs, trying to keep the core programs intact," he said in an interview. "Everyone has to be on board, but there are fewer incentives to keep everyone together."

Both panels are scheduled this week to draft their versions of a new five-year law reauthorizing a half-trillion dollars in U.S. Department of Agriculture programs. The Senate is scheduled to begin today and the House a day later.

Crop subsidies benefiting buyers such as Archer-Daniels-Midland Co. and food stamps subsidizing purchases at Supervalu Inc. are prime targets for lawmakers seeking to trim the deficit.

2012 Bill

Last year, a bill passed the Senate that would have resulted in the first major reductions in farm aid since 1996. The measure fizzled in the House, where leaders wanted deeper cuts to food stamps, the biggest USDA expense. The current law, passed in 2008, was extended in January until Sept. 30, after concerns were raised that a lapse in farm programs would double the price of milk.

Senate Majority Leader Harry Reid, a Nevada Democrat, has said his chamber will vote on the committee proposal this month, while House Majority Leader Eric Cantor, Virginia Republican, said he plans floor action this summer, giving both parties time to negotiate a final package before the current law expires.

Senate Agriculture Chairwoman Debbie Stabenow, a Michigan Democrat, said the bill being crafted in her committee creates risk-management tools to protect farmers against market gyrations or weather disasters without subsidies that pay out even in good times.

Deficit Reduction

"By ending unnecessary subsidies, streamlining and consolidating programs and cracking down on abuse, the bill reduces the deficit by billions," she said in a statement last week.

In March, the Congressional Budget Office said the plans approved by the full Senate and the House Agriculture Committee last year would save less money than originally estimated, which has lawmakers pursuing more savings. Both committees have said they’ll eliminate a program that pays growers of corn, rice and other major crops regardless of market prices, while using some of the savings to insure farmer revenues in less-profitable years. Food stamps will also see cuts.

"We all knew that if we didn’t pass a farm bill last year, this was going to happen," said Mary Kay Thatcher, chief lobbyist for the American Farm Bureau Federation, the biggest U.S. farmer organization, in a telephone interview. Subsidies will need to be balanced "so that no one commodity gets too rich compared to another one," she said.

Crop Insurance

To do that, lawmakers on both committees have added payment programs for southern cotton, rice and peanut farmers to compensate for remaining subsidies seen as being more generous to northern-grown crops like corn and soybeans.

Expanding crop insurance is the main goal of nearly every grower group, she said. "Crop insurance is the most important part of the farm bill," she said.

That priority is misplaced, said Ken Cook, president of Environmental Working Group, a conservation advocate based in Washington.

As record prices have lowered some subsidies to farmers, spending government-subsidized crop insurance sold by Wells Fargo & Co., Ace Ltd. and others have zoomed to records, raising the attention of groups fighting for less farm aid. Government payments, excluding crop insurance, are predicted to reach $10.9 billion this year. Net farm income may reach a record $128.2 billion this year, the USDA said in February.

Drought Damages

Indemnities for last year’s Corn Belt drought, the worst since the 1930s, are at $17.1 billion so far, with taxpayers on the hook for up to 75 percent of the cost, according to Environmental World Group. Both the House and Senate proposals would expand crop insurance and introduce some form of "shallow loss" protection for farmers with revenue reductions not covered by indemnities.

"We really need to spend some of that money in different ways," Cook said in an interview. "We could take money that’s being sent to crop insurance companies and spent on large farmers to underwrite their profits and eliminate the need" for cuts to conservation and food stamps, he said. "We could even return some to taxpayers. What a concept!"

Food stamps present the other major problem for both agriculture committees, McMinimy said, because of the need to attract votes from urban areas to pass the bills in Congress.

Senate Plan

The Senate plan introduced by Stabenow would lower spending on the Supplemental Nutrition Assistance Program -- which funds food stamps -- by about $4 billion over 10 years. The House proposal backed by her counterpart, Republican Representative Frank Lucas of Oklahoma, would lower those costs by more than $20 billion.

Nutrition advocates want no cuts at all. "They are absolutely unnecessary. It will be difficult for any farm bill to pass the Senate with cuts that take food from hungry people," said David Beckmann, head of Bread for the World, an anti-hunger group, in an interview.

Some give on food stamps will be unavoidable, with the House likely moving toward the Senate position to get adequate bipartisan support, McMinimy said.

Other disputes, over a dairy program that House Speaker John Boehner has called worse than current policy he considers "Soviet-style," whether cotton programs will comply with trade rules enough to end a years-long dispute with Brazil, and restrictions on sugar trade, will also affect committee and floor debate, McMinimy said.

Subsidies Defended

Lawmakers who don’t serve on the agriculture committees including Senator Jeanne Shaheen of New Hampshire are trying to roll back sweetener subsidies created in the 2008 farm bill as low prices may force the government to buy crops. Candy makers including Mars Inc. and J.M. Smucker Co. say U.S. policies are increasing consumer costs, while domestic sugar producers say the assistance is needed as prices fall and companies prosper.

"Food makers pocket cheap sugar prices as a profit," Jack Roney, director of economics and policy analysis, American Sugar Alliance, an Arlington, Virginia-based advocate for producers, said in a news conference today defending current programs. "You just don’t see any pass-through of sugar prices to consumers."

The main advantage a bill has in its chance of becoming law this year is the support of leadership for passing one, he said -- assurances from the House, where last year’s attempt stalled, increase the chance of passage.

"I’m 80 percent that they’re going to get a farm bill done in 2013," though a short-term extension after the Sept. 30 expiration may be necessary, he said. "There’s more desire to complete one this year."