The Senate's Farm Bill

IN ITS MANAGEMENT of the economy the administration has created enormous strains for the political system. Nowhere is this more evident than in the farm bill now before the Senate. To finance his tax and defense programs, the president has borrowed heavily. The federal demand for dollars has helped push up both interest rates and the value of the dollar overseas. The higher dollar has raised the price of U.S. products abroad and hurt their sales. Farmers, who both borrow and export a lot, have been badly damaged.

The farm bill cannot overcome these fundamentals; in some ways the costly support systems may make the problem worse. But the supports are all that Congress has, and next year is an election year. Thirty-four Senate seats will be at stake, 22 of them Republican and 14 of these in farm states. The administration argues that higher supports both add to the deficit and serve to stimulate production when the problem is surplus. But no member wants to expose himself to the charge next year that it was he who pulled the plug on hurting constituents or a shaky farm credit system. And so, though no one ever knows precisely what a farm bill will cost -- costs are inversely proportional to prices, and prices depend in turn on weather and harvests -- the Agriculture Department now estimates the Senate bill might cost $60 billion over the next three years. That would be $25 billion more than the amount allotted in the congressional budget resolution. On this as on other major bills now working their way through Congress -- all of them related in some way to his deficit -- the president has threatened a veto. Having created the problem, he heightens it.

The Senate bill would actually go further toward restructuring the support systems than its estimated cost suggests. Milk prirts are now too high, calling forth excess production, which, under the terms of the program, the government must buy. The bill would lower them (by contrast, the Democrats who wrote the bill passed by the House bowed to the dairy lobby and raised supports). The Senate bill would also steadily reduce the so-called loan rates the government will pay for major crops when the markets are low. When loan rates are too high, farmers turn to the government instead of the market; support costs go up and exports down.

The sticking point in the bill has to do with another form of support called deficiency payments, which participating farmers also receive when markets are low. These are pure income supplements, the difference between legislated "target prices" and prices received. They are also the costliest part of the bill. A majority of the Senate Agriculture Committee -- all the Democrats and two Republicans -- insisted on keeping them essentially at current levels over the next four years. Their argument is that a cut in income support would threaten family farmers and possibly jeopardize the farm credit structure as well. The administration and Jesse Helms, chairman of the Agriculture Committee, will seek instead both to phase down the payments and to target them better. The department and senator make the point that most of the money continues to go to big farmers and farmers not dangerously in debt.

The Democrats and the administration should both give ground on this issue. Targeting -- one proposal is to move the cap on deficiency payments down from $50,000 to $25,000 -- is a fairness issue

IN ITS MANAGEMENT of the economy the administration has created enormous strains for the political system. Nowhere is this more evident than in the farm bill now before the Senate. To finance his tax and defense programs, the president has borrowed heavily. The federal demand for dollars has helped push up both interest rates and the value of the dollar overseas. The higher dollar has raised the price of U.S. products abroad and hurt their sales. Farmers, who both borrow and export a lot, have been badly damaged.

The farm bill cannot overcome these fundamentals; in some ways the costly support systems may make the problem worse. But the supports are all that Congress has, and next year is an election year. Thirty-four Senate seats will be at stake, 22 of them Republican and 14 of these in farm states. The administration argues that higher supports both add to the deficit and serve to stimulate production when the problem is surplus. But no member wants to expose himself to the charge next year that it was he who pulled the plug on hurting constituents or a shaky farm credit system. And so, though no one ever knows precisely what a farm bill will cost -- costs are inversely proportional to prices, and prices depend in turn on weather and harvests -- the Agriculture Department now estimates the Senate bill might cost $60 billion over the next three years. That would be $25 billion more than the amount allotted in the congressional budget resolution. On this as on other major bills now working their way through Congress -- all of them related in some way to his deficit -- the president has threatened a veto. Having created the problem, he heightens it.

The Senate bill would actually go further toward restructuring the support systems than its estimated cost suggests. Milk prirts are now too high, calling forth excess production, which, under the terms of the program, the government must buy. The bill would lower them (by contrast, the Democrats who wrote the bill passed by the House bowed to the dairy lobby and raised supports). The Senate bill would also steadily reduce the so-called loan rates the government will pay for major crops when the markets are low. When loan rates are too high, farmers turn to the government instead of the market; support costs go up and exports down.

The sticking point in the bill has to do with another form of support called deficiency payments, which participating farmers also receive when markets are low. These are pure income supplements, the difference between legislated "target prices" and prices received. They are also the costliest part of the bill. A majority of the Senate Agriculture Committee -- all the Democrats and two Republicans -- insisted on keeping them essentially at current levels over the next four years. Their argument is that a cut in income support would threaten family farmers and possibly jeopardize the farm credit structure as well. The administration and Jesse Helms, chairman of the Agriculture Committee, will seek instead both to phase down the payments and to target them better. The department and senator make the point that most of the money continues to go to big farmers and farmers not dangerously in debt.

The Democrats and the administration should both give ground on this issue. Targeting -- one proposal is to move the cap on deficiency payments down from $50,000 to $25,000 -- is a fairness issue that Democrats should warmly embrace. The administration, for its part, should not expect this bill to stay within the budget. With the budget and dollar as bent out of shape as they are, it can't.