Are Farm Subsidies At Risk?

With the supercommitee desperately seeking deficit reduction, it has alighted upon a sacred cow: farm subsidies. They're especially alluring considering that farmers are among the few economic groups doing well these days. But aggies — not to worry. What Congress might take away in $5 billion worth of direct payments, it's considering putting back in a new form of subsidy for crop insurance.

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ROBERT SIEGEL, host: Members of the congressional supercommittee are working to come up with a plan to cut the nation's debt by some $1.2 trillion, and agricultural subsidies make a tempting target. After all, these are good times in farm country. Crop prices are at or near record levels as are land values. Reformers say this is the time to finally end direct government payments to farmers, and many members of Congress seem to agree.

But NPR's Brian Naylor reports that while some lawmakers talk of cuts, others have proposed a new subsidy program.

BRIAN NAYLOR: According to the Department of Agriculture, net farm income is projected to reach $103.6 billion this year, that's some 31 percent higher than last year. So Ron Kind is optimistic. The Democratic Congressman from Wisconsin has been leading the fight in Congress to reduce ag subsidies.

Representative RON KIND: So I think we're seeing a convergence of politics and policies starting to happen for the very first time, which I think opens the door for significant reform of a lot of these outdated programs as they exist right now. And it's, hopefully, one moment in time that we're not going to allow to pass.

NAYLOR: The leaders of the Congressional Agriculture Committees have apparently seen the writing on the barn wall. They've given the supercommittee a recommendation for $23 billion in cuts from farm spending over 10 years.

The one ag subsidy in everyone's sights is direct payments. It's a remnant of legislation from 1996 called Freedom to Farm, a GOP initiative that was supposed to wean farmers off federal support. Instead, it's become a symbol of just how deeply entrenched subsidies have become in Washington. Direct payments cost taxpayers about $5 billion a year, and even farm lobbyists like Jon Doggett of the National Corn Growers Association support its demise.

JON DOGGETT: We realize the very serious place that our country's in with the deficit situation we have. And we have a responsibility to try to come up with a policy that meets that problem.

NAYLOR: But what the farm lobby wants to replace the direct payments with is another subsidy. Instead of paying farmers directly for growing certain crops, they're backing legislation that would provide farmers assistance only when crop prices fall. Doggett of the Corn Growers Association sees it as a fair exchange.

DOGGETT: I think we're putting across the table a dime and asking back for a nickel. I think that's not a bad deal.

NAYLOR: But Agricultural Economics Professor Vincent Smith of Montana State University has another phrase.

VINCENT SMITH: They look like they're being very generous, but it's more like a bait and switch world.

NAYLOR: Smith is a visiting scholar at the American Enterprise Institute, and a critic of ag subsidies. He says farmers are already better off than most Americans and don't need federal help.

SMITH: If I talked with my local friend who runs a bakery in Bozeman and said, what if we had a program that guaranteed you 90 percent of your average revenue when, for some reason, customers reduced their purchase of bread, he would say, oh, that'll be great. But...

(SOUNDBITE OF LAUGHTER)

SMITH: ...nobody is going to do that for me. But that's what the farm lobby is asking for.

NAYLOR: The new subsidy would protect farmers from what are called shallow losses when a sudden decline in prices occurs. Its backers say the program would only pay out when farmers need it. Senator Richard Lugar is a co-sponsor of the measure that would cut some 40 billion in farm spending over 10 years. The Indiana Republican, who operates his own farm near Indianapolis, has incorporated the shallow losses proposal into his bill. He argues it is reform.

Senator RICHARD LUGAR: It is no longer a subsidy, no longer a direct payment as they're often called, but rather, simply an opportunity in which the federal government does provide a level of insurance. Farmers can buy some more if they want more, and in most cases will - I certainly will - but it takes it away from this crop-by-crop specific situation.

NAYLOR: Still, if crop prices do decline, some estimates project the cost of the shallow loss insurance at as much as $40 billion over 10 years, not much less than the cost of the direct subsidy it would replace.

Brian Naylor, NPR News, Washington.

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