The New Republic Inc. 1993

March 15, 1993

SECTION: Vol. 208 ; No. 11 ; Pg. 18

LENGTH: 1024 words

HEADLINE: Wheat and chaff; Agricultural subsidy programs not cut by President Clinton

BYLINE: Bovard, James

BODY: When President Clinton announced a sweeping agenda to reduce the deficit by almost $ 500 billion, the slashing of farm subsidies one of the most blatant ways the government wastes money was touted as an integral part of the effort. But once again the farm lobby has prevailed. For all of Clinton's tough talk, existing farm program subsidies will almost double this year, from $ 9 billion to $ 17 billion, primarily in response to falling market prices for crops. Other farm programs such as the Farmers Home Administration, which provides cheap loans to uncredit worthy farmers will cost taxpayers another $ 10 billion to $ 15 billion. Clinton's paltry cuts do not begin to make serious inroads in what is universally regarded as an entitlements swamp.

At the top of the administration's list of agricultural spending cuts is a proposal to end direct farm subsidies to individuals who earn more than $ 100,000 per year off the farm. Sounds dandy, and it may have some slight impact on absentee farm owners and hobby farmers. But the new subsidy cap will be largely a mirage. Under current law, farmers are eligible to receive up to $ 50,000 in direct subsidies from the government, regardless of how profitable their farms are or how much money they make off the farm. And because of a series of complex loopholes, many farmers are able to rake in thousands more in additional subsidies above the limit. The same practices are likely to foil the current changes, as they have done to similar changes in farm payments since the early 1970s. The General Accounting Office perennially reports a flock of abuses of the payment limitations law, yet Congress has refused to rewrite the law to achieve its purported goal. Unfortunately, Clinton hasn't shown any inclination to do so either. As a result, his proposed major change is likely to save taxpayers at most $ 75 million in 1994 less than one half of 1 percent of federal farm subsidies.

In a New York speech two days after the economic address, Clinton declared he would also cut back on subsidies to wool and mohair growers, who are currently entitled to a maximum of $ 150,000 a year in federal handouts, at a cost of $ 183 million this year. "We had sheep on the farm when I was a boy, so I'm more sensitive to this than some are. But when I got to studying this, we started a subsidy to sheep growers in World War I because we needed plenty of wool for uniforms . . . So I recommended cutting it back." And what is Clinton's radical wool proposal? To trim the maximum handout for wool and mohair growers to $ 50,000. Again, it sounds like a major cut, but in reality, the vast majority of wool and mohair farmers already receive less than $ 50,000; so in 1994 the actual net saving to the taxpayer will be a mere $ 12 million out of $ 191


The New Republic, March 15, 1993

million. The gao has repeatedly recommended that the wool program be abolished, but New Democrat Clinton cannot bring himself to do that much. By his own estimation, he will save only $ 682 million (out of more than $ 40 billion) from payment limitations to farmers over the next four years.

Elsewhere, Clinton plays smoke and mirrors with the numbers. For example, he is claiming as a $ 208 million cut a proposal not to increase the current budget for the Market Promotion Program, a slush fund that pays for foreign advertising for favored private companies. This year mpp will lavish $ 3.47 million on whiskey producers, $ 260,000 on the Vodka Producers Association, $ 11.6 million on the Wine Institute and $ 1.1 million on the Mink Export Development Council. Congress slashed the mpp budget in 1992, and there is bipartisan support to abolish it. Yet Clinton demurs from further cuts.

Other sections of Clinton's program are equally disingenuous. For example, the majority of what Clinton calls "cuts" take effect in 1996 and 1997. By then, a new five year program of farm subsidies, due to begin in late 1995, will be in force. In all likelihood, the new payments will be considerably lower than they are now. So Clinton's tough figures might even be increases in subsidies on the likely 1996 and 1997 figures. Far from wresting agricultural spending cuts from a reluctant Congress, Congress may actually be wresting spending cuts from an overly pandering president.

Clinton's proposals for increased Agriculture Department spending are even more disappointing than his phantom budget cuts. The administration will actually increase the usda food stamp program by $ 9 billion, terming it an "investment." The increase is intended partly to compensate low income Americans for higher energy taxes. Clinton also plans to "stimulate" rural America by increasing a favorite farm state congressional pork program Farmers Home Administration and Rural Development Administration loans for businesses, housing and local governments by almost $ 10 billion over four years. But the default rate on this easy money is notoriously high: the gao estimates that as much as 70 percent of the fmha's current farm loan portfolio could eventually default, costing taxpayers up to $ 14 billion. Rather than digging the federal government out of debt, Clinton may actually be digging it further in.

Clinton does propose some respectable budget reforms, such as ending the interest rate subsidy on Rural Electrification Administration loans, reducing low priority agricultural research, reforming the subsidized federal crop insurance program and consolidating many of the 12,000 local office buildings that usda agencies have scattered across the country. But most of these reforms are mild mannered, "good government" type changes that should have been made long ago. The only commodity program Clinton proposes to abolish, in fact, is the honey program one of the smallest of all subsidies, which will cost only $ 17 million this year. Not exactly "reinventing government." More like nipping at the edges of a scandal. James Bovard James Bovard is the author of The Fair Trade Fraud (St. Martin's Press) and The Farm Fiasco (ics Press).