President Obama's 2012 budget plan calls for the elimination of more than $5 billion in public support for agricultural programs, including subsidies to the wealthiest U.S. farmers.
On Monday, Obama signaled that his administration wants to shift federal dollars away from farm programs, setting up a battle between the White House and legislators from agricultural states. It will also test the political will of some Republican and "tea party" lawmakers from rural districts who have vowed to trim federal spending.
It's a hot-button issue that draws uncomfortable political battle lines: Should lawmakers deeply cut farm subsidy programs that help ensure a steady domestic supply of food, but that critics say are rife with waste and largely benefit large agribusiness corporations?
Or should they cut back food assistance for the poor — cuts that could also hurt some small farmers and struggling segments of the agricultural community?
All this comes as federal deficits are ballooning and the nation's agricultural sector is booming. Net farm income for some growers increased 27% or more last year thanks to high commodity prices and healthy export markets, according to the White House budget office.
For the White House, that places farmer subsidies that date to the Great Depression on the chopping block.
Under the president's proposed budget, tighter limits would be placed on direct payments to farmers, which would be expected to save nearly $2.6 billion over the next 10 years; and payments to insurance companies that take part in the federally backed crop insurance program would be reduced by $1.8 billion. (The latter cut was already made last year by the U.S. Department of Agriculture as part of an agreement made with the insurers.)
The White House wants to cap direct payments to farmers — which flow mainly to producers of corn, soybeans, cotton and other core commodities, regardless of market prices — at $30,000 per farm. It also wants to limit who is eligible to receive those subsidies.
Currently, a farmer can earn as much as $500,000 in non-farm adjusted gross income and still qualify. The administration is proposing reducing that ceiling to $250,000, phased in over a three-year period.
According to Agriculture Secretary Tom Vilsack, the change would affect about 30,000 of the 1.2 million people who currently receive direct-payment farm subsidies.
Some of the other proposed cuts would affect conservation programs for wetlands and farmlands; rural housing loan and grant programs; and the agency's Food Safety and Inspection Service, which monitors meat, egg and dairy facilities. Such budget cuts would reflect "efficiencies that can be obtained," rather than affect food safety, Vilsack said during a news conference Monday.
In contrast, the president's budget calls for USDA spending on the Supplemental Nutrition Assistance Program, or so-called food stamps, to grow 15% from 2010 levels. In November, a record 43.6 million people — more than 1 in 8 Americans — took part in the program for food aid, according to USDA data.
Such programs can help farmers. In recent years, for example, the dairy industry, which has struggled to recover from slumping milk prices, was able to unload some of its hefty cheese surplus to federally backed food bank programs.
Vilsack pointed out Monday that his agency had already taken a hard budgetary hit. Last year, the administration pushed through a plan that cut
$6 billion over the next 10 years in funding for the federal crop insurance program, a multibillion-dollar program that helps farmers recover after natural events devastate their fields.
Vilsack cautioned that even in challenging times, lawmakers must be careful not to harm one of the nation's few economic bright spots.
Cuts to direct farm subsidies have proved tough to get through Congress. Large agribusiness companies contribute heavily to the political campaigns of lawmakers on key committees. And the American farmer has long been seen as a cultural icon to be protected.
President George W. Bush tried to scale subsidies back. So did his father. President Clinton swore during his tenure that such direct payments would be quashed. And just last year, Obama, like his predecessors, tried to tighten limits on direct payments to big farmers — with little success.
Last year, when Congress was dominated by the Democrats, bipartisan lawmakers shot down that effort. Instead, they argued, changes in farm supports should wait until a scheduled overhaul of the federal farm bill in 2012.
"The problem is, they've been saying that for decades and nothing really has changed," said Rep. Ron Kind (D-Wis.), whose district is home to numerous dairy farms. "This doesn't help family farmers. It's a huge taxpayer subsidy that's going to a few very big agribusinesses and distorts trade policy."
Indeed, domestic cotton subsidies were at the core of a World Trade Organization fight between Brazil and the U.S., a legal battle the U.S. lost. As a result, the Obama administration last year agreed to pay $147 million a year into a fund that assists cotton farmers in Brazil.
Still, some analysts say the economy and the political shift in Washington could make a difference this time around.
House Republicans, as well as members backed by the tea party, campaigned heavily on the push to rein in the budget deficit. But so far there seems to be more interest among Republicans in Congress in cutting back food programs — such as the Special Supplemental Nutrition Program for Women, Infants and Children — than in cutting payments to grain and cotton farms.