USDA Outlines a Plan To Cut Farm Subsidies

By Dan Morgan and Gilbert M. Gaul
Washington Post Staff Writers
Thursday, February 1, 2007

The Bush administration yesterday proposed ending farm subsidies for an estimated 80,000 wealthy individuals as part of a broad plan that would close loopholes and cut traditional farm programs by $4.5 billion over the next 10 years.

The proposal unveiled by Agriculture Secretary Mike Johanns was the administration's opening move in what will be a lengthy tug of war with Congress over a new multi-year farm bill. The current bill, one of the most generous to farmers in history, expires Sept. 30.

Debate on the new legislation comes at a time of major changes in agriculture. Booming demand from new ethanol plants has pushed corn prices to near-record levels. At the same time, U.S. trade partners are threatening retaliation unless the United States curbs crop subsidies that are said to promote overproduction here and low prices for farmers abroad.

"Times have changed," Johanns said, adding that commodity prices are strong, exports are up and farmers have the lowest debt-to-asset ratio in history.

The administration proposal addressed a number of problems raised last year in a nine-part series in The Washington Post.

The Post found, for example, that wealthy commercial farmers were easily able to legally avoid the limits on government subsidy payments. The Johanns plan would save $1.5 billion over 10 years by eliminating subsidies to people with adjusted gross incomes of more than $200,000 -- income after subtracting farm expenses and certain deductions. Deputy Agriculture Secretary Charles F. Conner said that if a farmer is at that level "you're the richest guy in the county."

The administration also promised to tighten rules that have enabled distant relatives of a farmer or a friend in a far-off city to collect payments on the farmer's behalf while doing little or no work.

The plan would close a major loophole highlighted by The Post that in 2005 allowed corn farmers to receive $3.8 billion more than needed to ensure they got the government-guaranteed price. Farmers would no longer be able to collect these "loan deficiency payments" when prices are low and then sell later when prices rise.

Johanns also proposed changes in a program that since 2000 has enabled some landowners who do not farm to still collect $1.3 billion in "direct" farm payments. The Post detailed how some Texas homeowners were drawing these payments on back yards once used as rice fields and known as "cowboy starter kits." The new plan reduces the amount of land eligible for the direct payments after farmland is sold.

Offsetting the reductions in traditional subsidies is nearly $10 billion in new spending for conservation, wetlands restoration and the development of new biofuels.

The current farm programs, which favor large growers of a few crops in a handful of states, retain strong backing in the congressional agricultural committees.

"We've got a long way to go to the finish line," Johanns acknowledged.

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