March 8, 2010
Less than two years ago, Congress seemingly ended a decades-old practice of rushing to the rescue of farmers any time they suffered weather damage to their crops. The costly old system of “emergency aid” was a regular drain on the budget, and there were so many loopholes that some farmers with no appreciable losses were able to cash in.
But some habits are hard to break. The Senate this week is on the verge of bypassing new procedures set up by the 2008 U.S. Farm Bill in order to bestow $1.1 billion of emergency aid on farmers as part of a huge package of renewed tax provisions and a one-year extension of unemployment insurance. Also tucked into the legislation is nearly $350 million to help ranchers, fruit and vegetable producers, catfish farmers hit with high feed costs, and poultry raisers left high and dry by the closing of southern chicken processing plants.
For the legislation’s main champion, Senate Agriculture Committee Chairman Blanche Lincoln, D-Ark., obtaining the farm aid for Mississippi Delta cotton and soybean growers hurt by last fall’s heavy rains is a crucial step in an uphill battle to retain her seat in November.
Lincoln has been sharply criticized by conservatives for allowing health care legislation to proceed in the Senate, and has been hurt by a groundswell of anti-government feelings throughout her state. Polls show her trailing several Republicans, and she is now also being challenged in the May 18 Democratic primary by Lt. Gov. Bill Halter, who is being backed by liberal groups who are displeased with her close ties to corporate agriculture and her stands on health care, union rules and global warming.
Lincoln ascended to chairmanship of the Agriculture Committee late last September, and since then has been pressing Senate Majority Leader Harry Reid, D-Nev., and other Democratic leaders to help her pass emergency assistance for farmers in her region. An aide to Reid confirmed Monday that emergency agriculture assistance was included in the $138 billion package of tax extenders and unemployment insurance provisions awaiting action in the Senate.
But how Congress handles the farm aid issue will be a test of both parties’ commitment to control spending.
That’s because the 2008 farm bill was supposed to end such ad hoc payouts and replace them with a permanent — and less politically driven — system.
The farm bill set up a $3.8 billion trust fund, financed out of customs duties rather than appropriated funds. Last December, the Department of Agriculture followed up by announcing stringent eligibility standards that required farms to demonstrate substantial losses not just on one crop but across their entire farming operation. The new Supplemental Revenue Assistance Payment Program (SURE) closed significant loopholes that had been part of emergency farm aid spending measures enacted by Congress. And it requires farmers to have purchased their own private crop insurance — providing incentives to growers not to rely on government alone to manage risks
Senate Budget Committee Chairman Kent Conrad, D-N.D., a principal architect of the program, hailed SURE as a better solution to the more expensive disaster bills common in Congress.
But the current push for special one-time aid — coming before a single dollar has been paid out by SURE — is being driven by strong political pressures and, less obviously, by striking differences in the ways farmers in different regions of the country cope with risk.
“Arkansas’ farmers are the backbone of our state’s economy,” Lincoln said last week of the emergency assistance. “This will provide the helping hand they need to get back on their feet and save jobs.”
Theo Eldridge, director of the Farm Service Agency in Phillips County, Ark., in the Mississippi Delta, estimates 30 percent of the local soybean and cotton crop was lost due to record rainfall at harvest time. But that tells only part of the story because rice — a major local crop and the second largest after soybeans in the state — did not have significant losses, Eldridge said.
Although Republicans and Tea Party activists are targeting Democrats for their free spending ways, Lincoln has political cover on farm aid because her legislation is co-sponsored by Sen. Thad Cochran , R-Miss., the top Republican on the Appropriations Committee.
Even so, after a year of record outlays, Democratic leaders are under enormous pressure to show fiscal restraint. That could involve standing up to the powerful farm bloc, something few in either party have been willing to do.
Last week the House Agriculture Committee formally rejected President Obama’s proposal to reduce crop subsidies to higher-income farmers in the 2011 budget.
Lincoln’s farm aid proposal would channel disaster payments to farmers with losses amounting to no more than 5 percent of a single crop, too generous even for some key farm state lawmakers.
“That doesn’t fly,” House Agriculture Committee Chairman Collin Peterson , D-Minn., said of the Lincoln proposal at a rice industry conference last week. “That’s asking for trouble.”
“The farm safety net has been improved over the last several years so the proposal for ad hoc assistance seems to me to be a difficult proposition,” said Keith Collins, a former chief USDA economist who now consults for the crop insurance industry.
Lincoln has said the payments will “bridge the gap” until USDA begins distributing SURE money later this year. But underlying her effort is the fact that most southern farmers won’t be eligible for much help under the new program.
“SURE is unpopular here,” said Arkansas’ Agriculture Secretary Richard Bell.
That is because southern farmers have tended to rely on government programs and emergency aid passed by Congress, rather than the private crop insurance to which SURE benefits are pegged. SURE adds 15 percent to all the crop insurance guarantees a farmer purchases. For farmers with little coverage, SURE falls far short of the direct aid that Lincoln has proposed.
Some farmers in the Midwest, Northern Plains and California buy enough to cover most of their operating costs if they lose a crop. But in the South, most farmers take out only the minimum coverage that protects 27.5 percent of their potential losses on a crop.
A major reason, according to USDA and academic studies, is that the private crop insurance companies set southern premiums relatively high due to concerns about fraud and losses from such southern hazards as the boll weevil. The largest and most successful farmers tend to insure themselves or rely on ad hoc aid and traditional farm programs. At the same time, the insurance industry has had difficulty designing policies for southern crops such as rice, which is less subject to weather losses since it grows in flooded fields and is protected against drought by irrigation.
“It’s an historical and cultural thing,” said Michael R. McLeod, executive director of the American Association of Crop Insurers.