Farm Lobby Beats Back Assault On Subsidies

By LAUREN ETTER and GREG HITT / Wall Street Journal

With grain prices soaring, farm income at record highs and the federal budget deficit widening, the subsidies and handouts given to American farmers would seem vulnerable to a serious pruning.

But it appears that farmers, at least so far, have succeeded in stopping the strongest effort in years to shrink the government safety net that doles out billions of dollars to them each year.

"At some point, you have to step back and ask, 'Does this make sense for the American taxpayer?'" says Rep. Ron Kind. The Democrat from Wisconsin sponsored a measure that would have slashed about $10 billion over five years in subsidies -- and saw it get crushed on the House floor.

Grain prices are on a tear this year. On Wednesday, corn prices closed at $5.52 a bushel, up from about $2.20 in 2006, and near the all-time high of $5.70 set earlier this month. U.S. farm income, buoyed by demand for grain from rising middle classes around the globe and the biofuels industry, is projected to reach a record $92.3 billion this year. Still, farmers are expected to collect $13 billion in federal subsidies this year, according to the U.S. Agriculture Department, including payments for commodities, land conservation and emergency assistance.

A little more than a year ago, the stars appeared to be aligned for significant changes to the complex piece of legislation known as the farm bill, which allots billions of dollars to farmers and landowners to help stabilize grain prices, make products more competitive abroad and provide a plentiful food supply.

President Bush wanted to cut subsidies. California Rep. Nancy Pelosi, who had backed a high-profile effort to reshape the system in 2002, had become House Speaker. And a broad coalition of advocacy groups was assembling to press lawmakers.

But now serious reform is likely to be left behind like corn husks flung from a combine. As Congress tries to finish writing the new farm bill, the final tab is likely to be larger than the 2002 bill, which totaled more than $260 billion.

How did it happen?

Influential interest groups -- which had toyed with supporting changes -- cut deals to get their own piece of the action. Lawmakers who supported an overhaul peeled off as the debate moved into the election year. Historical alliances between rural and urban lawmakers proved difficult to untie.

The agribusiness industry plowed more than $80 million into lobbying last year, according to the nonprofit Center for Responsive Politics, which tracks spending on lobbying. Much of that was focused on the farm bill.

"We got rolled," says Rep. Paul Ryan, a Wisconsin Republican who worked closely with Rep. Kind. "The agriculture community circled the wagons."

Farmers and their allies in Congress say a victory is all to the good because the bill, which is typically renewed every five years, is designed to provide farmers with a safety net through cycles of boom and bust. The heady times of the 1970s, when crop prices soared as the Soviet Union gobbled up American grain, devolved into the farm crisis of the 1980s, leaving farmers buried in debt.

"We all know with the good times will come times that are less fortunate than now," says Dale Hadden, a grain farmer in Jacksonville, Ill., who recently traveled to Washington to talk with lawmakers about farm policy.

The farm bill has its roots in the Great Depression, when about a quarter of the U.S. population lived on farms and endured extraordinary economic hardship. As first conceived in the 1930s, the bill was designed to be a temporary boost to farm income.

It has since evolved into a thicket of hard-to-cut programs, providing payments and special loans to farmers to counteract swings in commodity prices and ensure market stability, as well as income. Subsidies flow to growers of corn, wheat and cotton, among other commodities. The legislation has also become a vehicle for funding food stamps, land conservation and school lunches, to name a few things, attracting supporters whose constituents have little or nothing to do with farms.

That has helped create a powerful alliance that makes the farm bill difficult to challenge. The bloc helps ensure all programs in the legislation live on, when they might be vulnerable if considered separately. The 2002 farm bill tab was one of the most expensive ever, with a yearly payout that roughly totaled what the federal government appropriates annually for the Education Department.

Today, farmers make up less than 1% of the U.S. population, and agriculture production is dominated by large, industrial farms that have annual sales of $1 million or more. In 2006, average farm household income was $77,654, or about 17% more than average U.S. household income, according to the Department of Agriculture. Average farm household income is expected to be about $90,000 this year. Current law allows subsidies to farmers with annual adjusted gross income of as much as $2.5 million.

"If you're providing benefits to the wealthiest Americans, that's not a safety net," said Chuck Connor, deputy agriculture secretary and the Bush administration's lead farm-bill negotiator. "We felt that was fundamentally wrong."

Farmers argue that it's worth supporting a vital part of the U.S. economy. "What's important for the overall economy, and our piece of it in America, is maintaining strong production agriculture," says Bob Stallman, president of the American Farm Bureau Federation.

Costly Combines

Agriculture and related industries, including processed food and beverages, contribute about 5% of America's annual gross domestic product, according to the Agriculture Department. Farmers say critics who focus on millionaire growers don't account for how difficult farming can be, with unpredictable weather, foreign competitors who get government support and the large amount of money it takes to farm.

The price of a new combine, for example, can exceed $300,000. Costs for seed, land rent and fertilizer have been rising swiftly along with prices of wheat, corn and soybeans.

"There's a lot of goodwill in the American public for the American farmer," says Ralph Grossi, president of the American Farmland Trust, a land conservation organization that has worked with the farm lobby on the farm bill. Farmers are seen as a "hard-working, salt-of-the-earth, core part of our culture."

An effort was made to overhaul farm programs in 1996, when grain prices were high. That year, Congress enacted the Freedom to Farm Act, which was supposed to give farmers more control over production and planting decisions, while moving away from federal support.

Those efforts were largely abandoned soon after the bill became law, when a downturn in the farm economy prompted lawmakers to pass emergency-relief bills. By 2002, when the next farm bill was being written, big changes were off the agenda.

At the time, President Bush, in the wake of the Sept. 11 terror attack, applauded the "generous" bill. He said "the success of America's farmers and ranchers is essential to the success of the American economy."

Mr. Bush would later rue signing the 2002 bill, which hampered efforts to reach a deal in long-running global trade talks launched in Doha, Qatar, in the wake of the 9/11 attacks. In those still ongoing negotiations, poor countries -- whose economies are often dominated by agriculture -- are complaining U.S. subsidies give American farmers unfair advantages in the global marketplace.

In January 2007, as Democrats took power on Capitol Hill, the administration proposed a sharp break with past farm bills. The plan emphasized the need for spending on ethanol and other biofuels, conservation and rural development. Most important, it proposed big cutbacks in farm subsidies.

The goal was to target more benefits at farmers who work the land and need financial assistance, while weaning benefits away from the well-to-do. Recent recipients include 92-year-old David Rockefeller Sr., heir to oil-baron John D. Rockefeller. He received $554,000 in subsidies from 1995 to 2005 for farm operations and land conservation in New York, according to a spokesman for Mr. Rockefeller and government data compiled by the Environmental Working Group, which is lobbying for an overhaul of farm programs. The spokesman says Mr. Rockefeller has reinvested about $600,000 into the community where his farm is located, and that his late wife, Peggy, loved to farm and raised cattle. "She was on the tractor and everything," he says.

Among other things, Mr. Bush proposed to end payments to producers with adjusted gross incomes greater than $200,000, instead of the $2.5 million under current law.

At the same time, disparate advocacy groups came together and began pressing for change. The loose-knit alliance included the National Black Farmers Association, which felt the subsidy system had ignored black farmers; the faith-based Bread for the World; and Taxpayers for Common Sense, a group advocating fiscal responsibility. "We decided to put on a game," says Washington lobbyist Rick Swartz, who organized the alliance.

Some groups argued that farm subsidies hurt poor, unsubsidized farmers in the developing world. Others argued the programs can't be justified with the federal budget deficit as large as it is. Still others blamed the commodities subsidized in the farm bill for contributing to obesity, diabetes and heart disease.

Antipoverty group Oxfam America tapped into a grass-roots network around the country to raise awareness of the issue. It paid for television ads that ran in the nation's capital and in targeted states, including Minnesota, home to Democratic Rep. Collin Peterson, chairman of the House Agriculture Committee.

The farm lobby already was fighting back. Led by the American Farm Bureau Federation, with more than six million members nationwide, the pro-subsidy force includes trade associations representing farmers of corn, wheat, cotton, soybeans, sugar, rice and peanuts. Many of these groups have their own lobbyists and entire teams devoted to farm-bill strategy.

Equally important are the thousands of smaller farmers who take time off to travel to Capitol Hill to lobby.

Through the spring of 2007, roughly 3,000 Farm Bureau members came to Washington to lobby lawmakers as part of a well-organized "fly in." The farmers found receptive ears on the House and Senate agriculture committees that write the farm bill.

Soon after the Bush proposal was unveiled, Mr. Peterson, chairman of the House Agriculture Committee, vowed "to make sure that we protect the safety net." His committee proposed to lower the income limit on payments to $1 million from $2.5 million, and to $500,000 for beneficiaries who don't earn at least two-thirds of their income from farming. He agreed to additional changes, including one that would bar farmers from collecting multiple payments by setting up affiliate corporate entities.

The safety net was essentially left intact. Basic support for commodity programs remained.

'Good First Step'

As the measure headed to the House floor in July, advocates of reform made a last-ditch bid for support, appealing to Speaker Pelosi. But the California Democrat sided with Mr. Peterson of the House Agriculture Committee. The year before, he'd ushered Mrs. Pelosi around a popular farm festival in Minnesota, where she mingled with farmers and ate pork chops on a stick.

To shore up support for the bill, especially among urban lawmakers, Chairman Peterson -- with the speaker's blessing -- made sure more money was added for nutrition and conservation, among other things. A Pelosi spokesman described the House bill as a "good first step toward reforming the farm bill."

As it became clearer the farm lobby wasn't going to be stopped, groups that had considered pushing for change focused on getting a piece of the pie. One such group is the United Fresh Produce Association, which, along with other fruit and vegetable groups, is likely to win specialty-crop producers up to $2.2 billion in aid for the first time.

"We were pulled in a lot of directions," says Robert Guenther, senior vice president for public policy at the United Fresh Produce Association. But at the end of the day, "we were most concerned about getting a foothold in the farm bill."

The National Black Farmers Association agreed to support the overall bill in return for language that would help members receive settlement money from the Agriculture Department in a discrimination lawsuit.

"We are upbeat about that," says the association's president, John Boyd, who once traveled about 200 miles in a wagon pulled by two mules from Baskerville, Va., to Washington to raise awareness about farm policy. "But we lost the bigger fight, which is the subsidy fight."

The House bill passed by a vote of 231-191 in July. The Senate bill, passed in December, would eventually ratchet down the income cap to $750,000. Like the House bill, it proposes to bar farmers from collecting multiple payments, among other changes. Key members of the House and Senate are hoping to negotiate a compromise package by mid-April.

Mr. Bush has vowed to veto both bills, a threat that gives him leverage in negotiations to wring concessions on reform. At the same time, Mr. Bush is dangling the prospect of $10 billion in new spending, in return for congressional support for more aggressive changes. As an inducement, the White House has suggested it could raise its proposed income cap to $500,000 from $200,000.

But farmers are standing fast. A group of Farm Bureau members from Iowa traveled to Washington earlier this month to give lawmakers "a dose of in-your-face reality," says a spokeswoman.