It has been hailed as bold, imaginative and other good things, but the administration's plan to give farmers surplus grain for not planting crops is not new: it has been used successfully again and again in U.S. agriculture.
On the other hand it also involves more costs and complications than the enthusiastic administration has suggested. That is one of the reasons it may not pass in the lame-duck Congress.
The idea is called payment-in-kind (PIK) and was used in the 1930s and again throughout the 1960s to deal with oversupplies of feed grains and cotton.
In both eras, farmers responded enthusiastically, and the PIK programs achieved their purposes--to lower stockpiles of government-held commodities, cut federal storage costs and, along the way, boost prices.
Now, with American farmers reeling from bumper production, low prices and depressed markets, the Reagan administration has resurrected PIK as its new antidote for the ailing farm economy.
The air of desperate frustration in the administration and on Capitol Hill over the farm situation is unmistakable. Supply is far outrunning demand, prices are low, government farm program costs are soaring, net farm income is at its lowest point in 50 years. And more of the same appears in store for 1983.
President Reagan endorsed PIK the same day it was explained to him by Agriculture Secretary John R. Block. The Senate Agriculture Committee approved it almost instantly, hoping to have it in effect in time for the 1983 crop. The House farm committee held a first hearing on it yesterday.
But some senators want some questions answered before they approve it on the floor, and House leaders are not sure there is time to pass it in this session. Mindful of this, Block said yesterday that he might try to carry it out even if Congress does not pass a bill; he said he thinks he may already have the authority.
In theory, the PIK idea is fairly simple. The new plan would operate on top of an existing acreage reduction program, which is not expected to cut production sufficiently to help prices.
Farmers who agreed to reduce their plantings would get federal commodities as compensation, for their use or resale. Although no more than half of a county's land could be idled, entire farms could be taken out of production.
In the view of John A. Schnittker, a farm economist in Democratic administrations, "the real news" about all this is the official recognition "that the recent paralysis on how to deal with farm surpluses must end. Payment-in-kind is simply a convenient instrument for doing what must be done."
But the rush to action on Capitol Hill has generated a swirl of questions about the program and its potential impact on farmers and markets, farm communities and suppliers. Answers to most of them will not be within reach until the Department of Agriculture finishes drafting its program.
A point lost in the debate so far is that while Block's PIK plan may achieve its goal of reducing direct federal spending on farm programs, which will hit a whopping $12 billion this year, it also carries a substantial hidden cost to the government.
Administration officials have stressed the savings that could result. But there is a flip side to that, although its budget implications are difficult to calculate. Beware of "magic solutions," as Schnittker put it.
The wheat, corn, feed grains, rice and cotton that the government will turn back to farmers, either as raw commodity or in the form of a marketable certificate, are assets the government will surrender and no longer be able to sell to replenish the coffers of the USDA's Commodity Credit Corp. (CCC).
CCC income from the sale of commodities forfeited to the agency by farmers does not show up in the federal budget. It returns to the CCC revolving fund to help finance future operations. Absent this income, the CCC will be forced to turn to Congress at some point for more operating capital.
Other questions have had few or hazy answers from USDA officials. As their colleagues rushed the PIK bill through in recent days, Sens. Howell Heflin (D-Ala.) and John Melcher (D-Mont.), among others, touched on some of them:
How will farmers who rent land be protected? How will fertilizer, seed and farm equipment dealers cope with reduced farming? What happens if farmers intensify cultivation on the lands they do not idle? What will prevent farmers, urgently needing cash, from all selling their grain certificates at the same time and further depressing prices?
These and other questions are being raised by farm supply groups, although they generally are supportive of the Block plan. Their line is clear: unless dramatic steps are taken to reduce oversupply, all agribusinesses will suffer more in the future than they are now.
"PIK could have a tremendous impact on retailers," said Donald N. Collins of the Fertilizer Institute, whose members report a 20 percent drop in sales compared with a year ago. "But many in our industry realize that we all are at a hard spot. If there is no hope in expanding exports, something else must be done for the farmer."
Jack Early of the National Agricultural Chemicals Association said, "There will be some turndown in chemical sales . . . but we'd rather see long-range improvement in the farm economy than what PIK might do to our industry on a short-term basis."
Thomas N. Urban, Pioneer's president, added a thought: "One must wonder about the effect on the tenant, the farmer who rents. Sixty to 65 percent of our farmers are renting part of the land they farm. This bill has the potential to break them."