The Reagan administration yesterday unveiled details of its controversial long-range proposals to cut government spending on agriculture by radically reducing the system of federal farm supports created during the New Deal.
Its main features include lower crop-support loan rates, which in effect set minimum prices for basic commodities such as corn and wheat, and a reduction in cash payments to grain and cotton farmers. It also would cut dairy price-support rates, end guaranteed federal purchase of surplus milk and phase out direct operating loans to farmers.
The administration announcement came as farm-state senators continued a filibuster over a separate short-term farm plan to provide stopgap credit legislation for farmers who need loans immediately for spring planting. The filibuster is holding up a vote on President Reagan's nomination of Edwin Meese III to be attorney general Details on Page A6 .
In explaining the Reagan farm plan, Agriculture Secretary John R. Block said the administration's long-range legislative proposal "will propel agriculture into a new and more responsible era. We have been saddled far too long with brush-fire-mentality farm policies which attempt to deal with short-term problems without providing effective long-term solutions."
Most major farm groups have roundly criticized the legislation. Block conceded that opposition building on Capitol Hill spells trouble for the plan and that farm legislation designed to replace the law that expires this year "won't be exactly like we are proposing today."
Yesterday's formal unveiling set the stage for a debate that could be the bloodiest in years over federal farm policy, coming at a time when the farm economy is under the triple stress of low prices, high interest rates and plummeting land values.
A taste of things to come, pitting growers against users of their products, surfaced quickly after Block met with reporters to outline the program: Peanut farmers denounced it as more costly than current law; peanut product manufacturers applauded it as elimination of a $250 million "hidden tax" on the nation's peanut eaters.
Many farm-state legislators, including Republicans, along with nearly every major commodity group and farmer organization, have attacked the White House proposals on grounds that they would reduce farm income drastically and hasten the departure of tens of thousands of farmers from agriculture.
The administration saved itself from additional political heat on Capitol Hill by dropping plans to include in the bill a phase-out of the tobacco price-support program. Tobacco-state Republicans, including Sen. Jesse Helms (R-N.C.), chairman of the Agriculture Committee, warned that inclusion of tobacco could doom the farm bill proposals.
Block indicated yesterday that the administration would send separate tobacco legislation to Congress. And he noted that Helms has agreed to introduce the general farm proposal in the Senate.
Last month, as details of the administration proposals were leaking out, nine major farmer and commodity groups wrote to Reagan that they were "unalterably opposed" to plans to limit the support loans and cash subsidies many farmers get.
But Block said yesterday that the bulk of federal payments go to a relative handful of the nation's 2.4 million farmers. He said that current law creates inequities that are not acceptable, noting that 13 percent of the farmers receive 45 percent of the payments.
The administration bill, unusual in that it would have a proposed span of 15 years instead of the customary four, envisions slashing these support programs in a way that would cut federal spending on farmers to between $5 billion and $7 billion by fiscal year 1991.
In contrast, the administration estimates that it will have spent $63.3 billion on these same programs between 1982 and 1986, after $27 billion of spending between 1978 and 1982.
Block said the proposals were based on five principles that were essential "to return agriculture towards a more market-oriented system," allowing farmers to rely more on the market than on government for their income.
One of the biggest changes proposed would affect the dairy support program, which cost the U.S. Treasury more than $6 billion on surplus milk, butter and cheese purchases during the last three years. The Reagan plan would scrap mandatory purchase and, according to budget estimates, reduce federal spending to zero in fiscal 1989.
The dairy change envisions ending support payment by 1988 and setting up a direct-payment plan.
Payments would be made to farmers when and if the market price of milk fell below the target level -- no less than 75 percent of the average market prices for milk during the preceding three years. Administration planners figure that with lower support prices, production would moderate and little or no dairy surplus would be left to be sold to the government.
The administration plan also would apply its three-year market average price formula to support loan rates for other major commodities: wheat, corn and feed grains, cotton, rice, soybeans, peanuts, sugar, and wool and mohair. The current honey support program, which has brought thousands of tons of surplus honey into government storage, would be eliminated.
This approach would reduce gradually but substantially the "floors" put under commodity prices by the federal support program. If the price of corn, for example, averaged $3 per bushel for three years, the new support level in 1991 would be $2.25 per bushel.
In that situation, if the market price dipped below $2.25, a farmer using his crop as collateral could get a loan from the government. He would be required to pay interest on any loan amount over $200,000. Current law does not pose these limits.
Under current law, the same farmer could qualify for up to $50,000 in cash "deficiency payments" -- income supports intended to make up the difference between market price of the corn and production costs. The administration plan would scale down these payments to a final limit of $10,000 per farmer.
Michael Hall, a vice president of the National Corn Growers Association, said his organization had "serious reservations" about the lower loan and target price levels. He said his group's support of these changes would be tied to export proposals.
But, he added yesterday, "we see no new creative export proposals in the administration bill that will make us more price competitive on world markets. There is a lot of rhetoric there, but it is based on negotiations to open up markets. And that could take forever."
Another portion of the Reagan plan likely to stir controversy is its approach to farm credit, which is provided through the Farmers Home Administration (FmHA) to approximately 10 percent of the nation's farmers who cannot get commercial credit. Beginning in fiscal 1986, all FmHA loans would be offered to borrowers on a guaranteed basis through commercial lenders.
The administration also would phase out existing direct loans over the next five years by transferring them to commercial lenders who would be protected by federal guarantees.
While the administration rejected the idea of a "conservation reserve," which would pay farmers to take marginal and erodible lands out of production, it proposed a ban on any federal farm program benefits to farmers who plow fragile lands for conversion to crop production.