President Bush signed a one-week extension of the 2002 farm bill today as Senate negotiators formally offered several concessions to their House counterparts as talks on a new bill inched forward. The White House had previously said Bush would sign an extension only if conferees made significant progress on the main sticking points, including offsets and reforms to reduce the amounts of money that big farmers get. The Senate offered to add $500 million for nutrition, a top House priority, bringing the total nutrition package to $10 billion. The Senate would pay for that by cutting $250 million from the proposed $4 billion disaster program and another $250 million from direct payments to farmers. The Senate also offered to pay for its package of agricultural tax breaks so the overall package would meet pay/go rules. In addition, the Senate offer would lower the ethanol tax credit by $1.23 billion; reduce losses that farmers could take on their Schedule F forms, which would raise $456 million; and allow low-income farmers to make Social Security payments, which would raise $124 million. The offer also would other farm related tax changes, raising $600 million. In total, these fixes would reduce the Senate’s tax-break package from $2.5 billion to $2.41 billion.
House Agriculture Chairman Collin Peterson said his first inclination was to fashion a House “pay-for” offer to match the $10 billion increase in spending, which conferees have agreed to if offsets can be found. But Peterson said House Agriculture ranking member Bob Goodlatte wanted to “build” an offer on the original House bid to increase spending only by $6 billion. The House then offered to increase total additional spending by $9.5 billion, using a Senate provision on ethanol fuels reform that raises $1.23 billion and adding $500 million in savings from programs under the control of the House Ways and Means Committee. It also included $800 million through increased tax compliance through Ways and Means as well as a $1 billion cut in commodity programs, most likely from the direct payment programs. The additional funds would be used for the $500 million increase in nutrition programs, the creation of a $2 billion disaster program that was in the original House proposal, and $1 billion in tax breaks.
A Senate aide said the only good thing that came out of the House offer was House Speaker Pelosi’s signal that she would accept $1 billion in tax breaks. A key lobbyist said that if the House offer were accepted, cuts in the direct payments program could total more than $2 billion over 10 years because the House-Senate framework assumes cuts in commodity programs that have not been specified. Under current law, farmers get $5.2 billion in direct payments whether prices go up or down. Farm bill critics who want money for nutrition, conservation and other non-commodity programs have urged that program be cut to free up money for their priorities, but free trade advocates, including the Bush administration, favor retaining the direct payments program because the WTO allows the United States to report them as non-trade distorting subsidies.
This article appears in the April 19, 2008 edition of National Journal Daily PM Update.