Johanns answers farm bill critics

By Larry Dreiling

Letters.

When it came to farm bill proposals U.S. Secretary of Agriculture Mike Johanns got letters.

He got stacks and stacks of letters--and plenty of phone calls and e-mails, too.

Because of the huge number of questions and negative responses to the U.S. Department of Agriculture's proposals for the 2007 farm bill, Johanns used a lunchtime get-together with the North American Agricultural Journalists at their recent Washington annual meeting to answer those questions and respond to the criticism.

Johanns said the proposed $200,000 cap on adjusted gross income has created the most confusion, primarily over the difference between gross income and adjusted gross income.

"To calculate adjusted gross income, 25 different categories of farm-related expenses are deducted from gross income," Johanns said. "Only 2.3 percent of all American tax filers have an AGI of $200,000 or more.

"In 2004 only 38,000 tax filers with an AGI of that much or more collected farm program payments. Yet we estimate that the new limit would save $1.5 billion between 2008 and 2017, and I might add we believe that's a conservative estimate."

Income averaging

One banner year should not exclude producers from receiving farm payments. Johanns said the payment limit is based average income for three tax years, which would take into account atypical fluctuations in income.

Another criticism the farm bill has taken is from the National Association of wheat Growers, which believes proposed direct payments in the farm bill are too low, particularly in years when producers have no crop. Johanns defended the size of the direct payment proposal, since he thinks grain prices are high and are likely to remain so.

Also, an enhanced countercyclical payment and improved crop insurance program will offer a good safety net to producers.

"As you look out over the next five years, there likely won't be a countercyclical payment or loan deficiency payment in corn, wheat and soybeans. We decided it made sense from a number of standpoints to try and see if we could improve that direct payment," Johanns said. "Outside of the baseline, we found over $1 billion in years three, four and five to increase the direct payment by 7 percent for rice, corn, wheat and soybeans. Our proposal pays more than a simple extension.

"The idea is that this is to be a market-based bill not an incentive to plant. Probably the greatest problem wheat has had is the drought. We did an analysis of how this program would have treated wheat farmers and they would have done $800 million better all in the first year under the new farm bill. When wheat growers take a look at what we are doing, they will realize it makes a lot more sense."

Direct payment praise

Direct payments, Johanns said, offers a more efficient, predictable safety net.

"The certainty of direct payments makes it easier for farm management, planning, lending decisions. It's a predictable form of aid in a rather unpredictable profession," Johanns said. "Because direct payments are decoupled from price and production, they provide no incentive to increase production of any special crop. This helps producers to be more competitive by allowing them to choose to respond to market signals."

"I've heard concerns about how our proposed safety net would support producers during times of regional disaster like flooding or drought," Johanns said. "These proposals were designed to move agriculture aid away from emergency supplemental aid by providing more predictable forms of support to handle these situations.

"We believe the improvements we have proposed to the Countercyclical Revenue Program and Crop Insurance Program will offer a relatively complete package to guard against these events.

Johanns kept stressing the farm bill proposals need to be taken as a whole package, rather than a sum of its parts, particularly in light of an almost constant need for disaster assistance.

"What we've put forth is not a hodgepodge of unrelated proposals but a cohesive plan for farm policy. We believe it makes sense as a unit. Taken as a whole these proposals provide a strong safety net yet encourages agriculture to modernize and to enhance competitiveness," Johanns said.

Better than 2002

Taken as that whole, Johanns said the new farm bill would deliver about $5 billion more in support to producers than they would have received if the 2002 Farm Bill were reauthorized.

"Yet because of deficiencies realized elsewhere, simply by running a better farm program, we still save about $10 billion over the next five years compared with our actual outlays in the '02 farm bill versus what we'd just be spending under our proposals," Johanns said. "It fits most importantly with the President's plan to balance the budget and to eliminate the budget deficit by 2012. That is going to sound very appealing to some farm state legislators. The question though fundamentally is this: Is the money there? Is the money going to be there in the final analysis?"

The budgetary discipline that the new Congress has adopted, Johanns said, calls for offsetting any use in any of these reserve concepts with revenue increases or program cuts, all with the ultimate goal of achieving a balanced budget in the next five years.

"I think everyone, no matter what their political persuasion, wants to see Congress succeed in that goal. I don't care which political stripe you carry, balancing the budget is a very laudable goal," Johanns said. "And on both sides of the aisle have embraced it. At the moment it is hard to see how increases in spending on agriculture can be offset somewhere in the budget or supported by revenue increases.

"As I said many times in a previous life, as governor of Nebraska balancing the budget is not a matter of magic, it's a matter of math. The case for a larger federal investment in agriculture must stand up against competing claims from some very, very needy parts of the federal budget. With so many reserve funds competing against each other, I think it's fair to ask will the money be there?"

Friends on the Hill

And Johanns has indeed asked. Unlike his predecessor, Anne Veneman, who made few trips to Capitol Hill, Johanns said he has testified three times before congressional committees while Deputy Secretary Chuck Conner and other senior USDA officials have testified six more times since the rollout of the farm bill proposals.

"That's been 22 of those meetings and we are pleased by the response," Johanns said. "I've been enormously encouraged by what we've seen on Capitol Hill. That number 22 doesn't count all the informal meetings we've had where we're simply just invited up to the Hill to brief groups or to sit down with individual House or Senate members.

"We have a tradition of coming to a national consensus on farm policy, and I really believe and trust that this year will be no different. I'm confident we can develop forward-thinking policy that transcends mutual and individual interests and work toward the greater good of all American agriculture."

Larry Dreiling can be reached by phone at 785-628-1117 or by e-mail at ldreiling@aol.com.

Date: 5/3/07

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