WASHINGTON — Farm subsidies, which have proved to be the real third rail of American politics for rural lawmakers over the years, appear destined for the congressional chopping block as the federal government searches for ways to save money.

The House is beginning work on a new five-year Farm Bill before the most recent package, adopted in 2008, expires in September. Lawmakers on both sides of the political fence concede cuts will be made. The question is where and how deep.

The most likely target is the direct payment system, which pays farmers $5 billion a year. Direct payments are made to farmers regardless of crop yields or market prices, which are reaching all-time highs. The 2002 Farm Bill fixed the current direct payment rate, which varies from crop to crop.

According to the Obama administration’s budget document released in February: “The direct-payment program provides producers fixed annual income support payments for having historically planted crops that were supported by Government programs, regardless of whether the farmer is producing those crops -- or producing any crop, for that matter.”

“The era of direct payments is over,” said Sen. Debbie Stabenow, D-Mich., chairman of the Senate Agriculture, Nutrition & Forestry Committee.

Other subsidy programs, particularly crop insurance, are expected to face less severe cuts. The federal government offers 50 percent catastrophic insurance coverage at no cost to farmers if they have an eligible crop in a particular area. Farmers can purchase additional coverage through crop insurance companies.

“I have heard again and again from farmers and ranchers across the country that crop insurance is the most important risk management tool,” Stabenow said. “It is absolutely imperative that we get these policies right. Sixteen million people in this country have a job because of agriculture. “The Farm Bill is a jobs bill, and no farmer in America should lose their job, lose their farm, because of bad weather or market conditions beyond their control.”

According to the Environmental Working Group, a nonprofit group critical of subsidies which maintains a database on them, the Treasury doled out $261.9 billion in subsidies from 1995 through 2010. Most of that came in the form of direct payments -- $41.5 billion. Another large outlay was for crop insurance -- $39.2 billion.

Numbers show the agricultural community is performing well financially, raising questions about the need for subsidies. The U.S. Department of Agriculture anticipates a 22 percent increase in farm income this year. Over the past 10 years, farms have broken annual income records five times. Net farm income was $110.9 billion in 2011, a 28 percent jump over 2010.

Household income on farms, according to the Environmental Working Group, has exceeded the average household income for all Americans every year since 1996.

The Farm Bill is a legacy of the Great Depression and the Dust Bowl that devastated agricultural land in the Southwest and parts of the Midwest in the 1930s. It was created as part of the New Deal, intended to protect farmers from floods and droughts while also offering safeguards from price swings in the commodities market. Beginning in 1973 the Farm Bill was expanded to include the School Lunch Program, land conservation and food stamps.

The most recent package, the Food, Conservation, and Energy Act of 2008, carried a price tag of $288 billion.

President Barack Obama gave notice that changes were afoot when he introduced his proposed 2013 budget in February. At that time he offered to cut USDA appropriations by 3 percent, to $23 billion, and moved to eliminate the direct payment program and cut the crop insurance subsidy.

The House budget, championed by Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, was even tougher.

Meanwhile, the Senate is moving ahead with its version of the Farm Bill, which is expected to contain about $23 billion in deficit reduction -- substantially below the House plan.

The Senate proposal has drawn early support from several agriculture groups, ranging from the American Farm Bureau Federation to the USA Dry Pea & Lentil Council. Many groups also appreciate Senate plans to protect the crop insurance program from cuts.

 

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