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   The New York Times
------------------------------------------------------------------------


         February 6, 2005


   Bush Is Said to Seek Deep Cuts in Farm and Commodity Programs

*By ROBERT PEAR *

WASHINGTON, Feb. 5 - President Bush will seek deep cuts in farm and 
commodity programs in his new budget and in a major policy shift will 
propose overall limits on subsidy payments to farmers, administration 
officials said Saturday.

Such limits would help reduce the federal budget deficit and would 
inject market forces into the farm economy, the officials said.

The proposal puts Mr. Bush at odds with some of his most ardent 
supporters in the rural South, including cotton and rice growers in 
Alabama, Arkansas, Georgia, Louisiana and Mississippi.

The new chairman of the Senate Appropriations Committee, Thad Cochran of 
Mississippi, and more than 100 farm groups are gearing up to fight the 
White House proposal. The administration's willingness to push the 
proposal, despite such protests, suggests how tight the new budget will be.

Most of the subsidies are paid to large farm operators growing cotton 
and rice and, to a lesser degree, corn, soybeans and wheat.

Mr. Bush would set a firm overall limit of $250,000 on subsidies that 
can now exceed $1 million in some cases.

The proposal comes as the administration is seeking significant changes 
in other programs long considered sacrosanct, with the proposed 
revamping of Social Security to allow personal investment accounts and a 
move to shake up the Civil Service system.

Mr. Bush's farm proposal found support from some people who frequently 
criticize his policies.

For example, Kenneth Cook, president of the Environmental Working Group, 
a research and advocacy group, said that it would reduce payments to 
large agribusiness operations and that the savings would reduce pressure 
on Congress to cut conservation programs.

"This proposal is a very big deal," Mr. Cook said. "I am stunned and 
impressed. The Bush administration is opening the door to reform on the 
most contested issue in agriculture policy today. Taxpayers will no 
longer have to subsidize every bushel of grain or bale of cotton. They 
will no longer have to subsidize the demise of the family farm."

In the past, when Congress considered limits on payments, Mr. Cook said, 
the administration took no position. The Senate approved a $275,000 
limit in 2002 but dropped it in negotiations with the House.

Agriculture Department officials said Mr. Bush's proposals would cut 
federal payments to farmers by $587 million, or about 5 percent, next 
year and would save $5.7 billion in the coming decade. The officials 
spoke on condition of anonymity because they did not want to upstage 
release of the president's budget, scheduled for Monday.

The budget includes other proposals intended to produce large savings in 
farm programs, the officials said, but they refused to give details.

In theory, the maximum payment to a farmer, through multiple entities, 
is now $360,000 a year. But Keith J. Collins, chief economist at the 
Agriculture Department, said that growers had found many legal ways to 
get around the limit and that some growers received several times that 
amount. One type of aid, which involves marketing assistance loans, is 
not subject to any limit, he said.

In setting a firm overall limit of $250,000, the president's plan would 
tighten requirements for the recipients of such payments to be "actively 
engaged" in agriculture, and it would generally prevent farmers from 
claiming additional payments through multiple entities.

Farm subsidies have been a major issue in global trade talks, as poor 
farmers in the developing world demand that the United States and other 
wealthy countries cut back subsidies for their domestic producers.

Efforts to cap farm payments have produced odd alliances. Fiscal 
conservatives like the Heritage Foundation have joined some 
environmental groups and family farmers in the Midwest in supporting 
stricter limits. Opponents include the American Farm Bureau Federation. 
the nation's largest farm organization, as well as many commodity groups 
and politicians of both parties from rice and cotton states.

Mr. Cochran, the former chairman of the Senate Agriculture Committee, 
said he would "work as hard as I can to oppose any changes" in current 
payments limits, set by Congress three years ago.

Speaking this week to the National Cotton Council, a trade group, Mr. 
Cochran said he knew that some people wanted to reduce farm program 
payments.

"We always know there is a threat to lower levels of payments to 
producers from some in the Congress," he said. But, he added, the 
payments are economically important to rural communities, and "the risk 
caused by changing payment limits far outweighs the benefits."

In a letter to Mike Johanns, the new secretary of agriculture, a 
coalition of more than 100 farm groups said they too would resist such 
cuts.

"With prices for many major commodities falling sharply from last year, 
reductions to farm programs would come at precisely the time that these 
supports are most needed in rural America," the coalition said.

The White House proposal is a vindication of sorts for Senator Charles 
E. Grassley, Republican of Iowa, who has advocated "reasonable payment 
limits" for three decades.

"When 10 percent of the nation's farmers receive 60 percent of the 
payments, it erodes public confidence in federal farm programs," said 
Mr. Grassley, who describes himself as the only family farmer in the 
Senate. "Unlimited farm payments have placed upward pressure on land 
prices and contributed to overproduction and lower commodity prices, 
driving many family farmers off the farm."

Mr. Collins, the Agriculture Department economist, said, "When the 
government subsidizes every bushel and every acre, it encourages large 
farm operations to grow larger."

Subsidy payments take several forms and are computed according to 
complex formulas that take account of "base acres," "target prices" and 
other factors. In some cases, the government makes direct payments to 
farmers. In others, it lends money to farmers and assures them, in 
effect, that they can receive more than the market price for their 
crops, if that price declines.

In a report last year, the Government Accountability Office, an 
investigative arm of Congress, said farmers used many "schemes or 
devices" to circumvent existing payment limits. Under federal law, 
payments are supposed to go only to people who are "actively engaged in 
farming," but, the report said, many people not involved in farm 
operations have received large subsidies.

Moreover, it said, individuals who on their own could receive no more 
than $180,000 for a farming operation sometimes set up a partnership 
composed of three partners, each of whom receives $180,000 in subsidies, 
thus tripling the total amount of payments to the farming operation. A 
federal advisory commission, said many of the largest farms had changed 
their business structure to "avoid payment limits."

An exhaustive study by the Agriculture Department found that "government 
payments increase with farm size and sales," so "payments tend to be 
concentrated among the larger farms." In 2001, it said, "59 percent of 
government payments went to producers on farms with a net worth of 
$600,000 or more." But, it added, about one-third of all farms receive 
commodity subsidies, and the "government payments often make a 
significant contribution to farm income, regardless of the farm's size."

Senator Blanche Lincoln, Democrat of Arkansas, said payment limits would 
be particularly unfair to rice and cotton farmers because production 
costs were higher for those crops than for others.

Mrs. Lincoln, the daughter of a rice farmer, said some farmers would 
have difficulty surviving under stringent payment limits.

But Brian M. Riedl, an economist at the conservative Heritage 
Foundation, said stricter payment limits were needed because farm 
subsidies had become "America's largest corporate welfare program."


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