Updated: Jan 5
Closed-door debate on extra $10 billion for other interests
Carolyn Lochhead, Chronicle Washington Bureau
Feb. 28, 2008
As Sens. Barack Obama and Hillary Rodham Clinton toured the land denouncing special interests, giveaways to the rich, home foreclosures, job losses and a middle-class squeeze, back in Washington House Speaker Nancy Pelosi and other top Democrats met behind closed doors on a plan to raise taxes and cut food stamp money to protect billions of dollars for agribusiness, a sector of the economy that is booming.
The subsidies demanded by the farm lobby would help big corn, wheat and soybean growers in areas where income is shattering records, credit is flowing and real estate values soaring.
Because of government ethanol subsidies and rising demand for grain in developing nations, grain farmers are enjoying such whopping price increases that food inflation is becoming a worry. U.S. bakers are even urging a restriction on grain exports to try to dampen prices.
"The idea that we're going to raise taxes at a time of rising energy prices, rising food prices, a housing crisis, on the eve of a recession, to give unlimited subsidies to millionaires is absolutely disgusting," said Scott Faber, head of federal affairs for the Grocery Manufacturers Association. "It just defies logic. ... I can't imagine why Democrats and Republicans of conscience aren't screaming from the highest rooftops."
The Bush administration promised to veto the House and Senate farm bills passed last year if they raised taxes, used budget gimmicks and continued sending aid to wealthy farmers. Both bills needed extra money to increase spending on conservation, food stamps and fruit and vegetables while still maintaining grain subsidies.
If anything gets cut, support for the bill could collapse. To figure out how much extra money is needed, Democratic negotiators met privately in Pelosi's office Tuesday night, just before the Democratic presidential primary debate in Ohio.
Automatic payments safe
Off the table are the $5 billion in automatic payments sent to commodity farmers and landowners every year, whether the crops are grown or not. Other farmers do not get these payments. Married commodity farmers could get up to $120,000 a year in government checks if they earn less than $1.8 million a year.
Negotiators also need money for a new $5 billion "permanent disaster" fund that would benefit a handful of Plains states whose farmers plow arid land, routinely see their crops fail, and continue planting anyway, assured of federal aid.
Even budget gimmicks such as pretending the automatic payments will disappear in 2016, only to reappear in 2017, don't make the numbers work.
So the negotiators are looking to cut money that was added for food stamps and food banks. They may trim conservation funding, and ditch some research and marketing money for fruits and vegetables. They are scouring the tax code for ways to raise funds, such as squeezing more taxes from consumers' credit card and debit card transactions.
"This is crazy," said Rep. Ron Kind, a Democrat from Wisconsin farm country who is pleading with party leaders to reform the bill - and to do so in the open, where everyone can see. "It's as if the Congress is operating in a vacuum, completely ignorant of what the market is doing."
Among those meeting in Pelosi's office were House Ways and Means Committee Chairman Charles Rangel, the New York Democrat and food stamp advocate, and Senate Majority Leader Harry Reid, the Nevada Democrat who said he would "gag" if the economic stimulus package sent $600 checks to rich people.
The Bush administration amended its veto threat, agreeing to spend an extra $6 billion in the bill, but was lambasted nonetheless by farm-state Senate Republicans for not agreeing to twice that much and refusing to raise taxes to pay for it.
American Farm Bureau President Bob Stallman issued an urgent call to lobbyists: "I have talked to a lot of farmers and I can tell you, they don't really care whether something is a budget gimmick, or closing a loophole, or providing a tax credit," so long as subsidies aren't cut.
Sara Hopper, an advocate with Environmental Defense, an advocacy group, called the new permanent disaster program "one of the biggest stumbling blocks to getting a bill signed by the president with significant new funding for conservation. When the farm-state senators want $5.1 billion in new subsidies, it's pretty hard to make the math work with no new taxes."
A spokesman for Pelosi said that the speaker "strongly urged real reforms whatever's in the final package" and that her priority is "the nutrition programs and pushing for what we can get in food stamps."
Obama and Clinton aides promised to comment on what the candidates think about the new plan but had not responded by Wednesday night. Both were absent during Senate votes on a bipartisan bill sponsored by Sens. Richard Lugar, R-Ind., and Frank Lautenberg, D-N.J., that would have abolished commodity subsidies, given free insurance to all farmers and diverted billions of dollars in savings to nutrition and environmental programs. Both of the presidential candidates told Iowans in a debate that they would have voted against it.
They did, however, vote to limit payments to $250,000 per farm. Obama co-sponsored that effort.
Probable Republican nominee Sen. John McCain, R-Ariz., co-sponsored the Lugar-Lautenberg reform and the payment limit, but missed the votes. The payment limit won 56-43 in the Senate, but failed because Reid required it to get 60 votes to pass. The tactic allowed Democrats to avoid an embarrassing filibuster by their own, Democratic Arkansas Sen. Blanche Lincoln, who sought to shield the Arkansas rice industry.
"Our Democratic candidates are talking about change and standing up to special interests and you have a Democratic-controlled Congress that apparently is unwilling to tell the farm lobby 'no" on anything," said Hopper.
Farm real estate surges
The Kansas City Federal Reserve reported that Midwest farm real estate prices "surged at a record pace," in the fourth quarter, rising 21 percent above the previous quarter's record high. The government predicts that farm profits will break records again this year, with net farm income reaching $92.3 billion, 50 percent above the 10-year average.
"If there's ever a time that big farms don't need unlimited payments, this is it," said Chuck Hassebrook, director of the Center for Rural Affairs in Nebraska.
House Agriculture Committee Chair Colin Peterson, D-Minn., has threatened that if the White House refuses to budge, he might allow farm programs to revert to their 1938 and 1949 incarnations known as "permanent law," an anachronism left over from a time when a quarter of Americans lived on farms. Among other things, that would sharply raise milk prices.
"The farm bill is a prime example for any of those three presidential candidates - they're all senators," said Rick Swartz, a lobbyist with a left-right coalition of taxpayer, environmental and nutrition groups. "So why don't they get their act together and work on the farm bill right now? Either Barack or Hillary is going to be the nominee. They can start leading their party."
Carolyn Lochhead was the Washington correspondent for the San Francisco Chronicle, where she covered national politics and policy for 27 years. She grew up in Paso Robles (San Luis Obispo County) and graduated from UC Berkeley cum laude in rhetoric and economics. She has a masters of journalism degree from Columbia University. Twitter: @carolynlochhead