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Bush's Budget: Robbing Farmers & the Poor to Pay the Pentagon

THE
AGRIBUSINESS
EXAMINER
February 8, 2005, Issue #393
Monitoring Corporate Agribusiness

>From a Public Interest Perspective

EDITOR\PUBLISHER; A.V. Krebs
E-MAIL: avkrebs@earthlink.net
WEB SITE: http://www.ea1.com/CARP/
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THROUGHOUT the seven years of its existence THE AGRIBUSINESS EXAMINER a very generous --- albeit quite small --- cadre of readers have been providing it
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1. GEORGE W. BUSH: ROBBING THE FARMER TO PAY THE PENTAGON
2. BUSH ADMINISTRATION WILL SEEKS TO CUT $5.74 BILLION IN FARM SUBSIDIES
3. NFU URGES CONGRESS TO REJECT BUSH AG BUDGET
4. POPULIST AG ECONOMISTS URGES GLOBAL FOOD POLICY BASED ON SUPPLY MANAGEMENT

***********************

1. GEORGE W. BUSH: ROBBING THE FARMER TO PAY THE PENTAGON

LIBBY QUAID, ASSOCIATED PRESS [ February 5, 2005 ]: President Bush will
propose a nearly five percent increase for next year's defense spending
while calling for cuts in payments to farmers and work on a nuclear waste
storage site in Nevada, according to documents and federal officials.

Bush also will propose boosting the size of Pell grants for low-income
college students as he seeks to abolish a widely used college loan program
and to shrink federal subsidies for banks that lend money to students.

Those details and others emerged Friday about the roughly $2.5 trillion
budget for 2006 the president will ship Congress on Monday. Including a
smaller defense boost than was planned a year ago, the proposals underscore
how Bush is responding to a string of record federal deficits by paring expenditures
across the breadth of government.

``The people in Congress on both sides of the aisle have said, 'Let's worry
about the deficit,''' Bush said Friday in Omaha, Nebraska, as he barnstormed
the country for his Social Security plan. ``I said, 'OK, we'll worry about
it again.' My last budget worried about it, this budget will really worry about it.''

Bush administration officials also revealed new details of some health proposals the president will unveil.

Among them, Bush will propose $3,000 tax credits to encourage people who
don't have public or employer-provided health insurance to buy coverage. The
plan, which would cost $74 billion over the next decade, would be part of
$140 billion in tax breaks and expenditures aimed at improving health care
over the coming ten years.

Administration officials had already said Bush will seek $60 billion in
Medicaid savings over the coming decade. These will come largely from
smaller reimbursements to pharmacies, reducing payments to other health
providers, and making it harder for parents to qualify for coverage if their
assets have been shifted to their children.

According to documents obtained by The Associated Press, Bush will propose
$419.3 billion for the Pentagon for next year, a 4.8 percent boost over this
year. That total, however, is $3.4 billion less than he planned a year ago
for fiscal 2006, which begins October 1.

Taking a major hit are his proposals for procuring weapons and other items.
Such spending with total $78 billion --- $2.4 billion less than he projected
spending in 2006 a year ago.

Despite budget pressures, it is unclear how Bush's defense plan will play in
Congress. The top Democrat on the House Armed Services Committee, Rep. Ike
Skelton of Missouri, has expressed concern that Bush won't seek enough for
U.S. troops and their families.

None of the figures include expenditures for the wars in Iraq and
Afghanistan. Bush plans in a few days to ask for another $80 billion --- in
a separate spending bill --- for those conflicts. Congress last summer
provided $25 billion for the wars in 2005.

In the longer run, Bush envisions defense spending grow steadily after next
year, hitting $502.3 billion by 2011.

The documents said Bush's defense budget is designed ``to implement lessons
learned from ongoing operations in the war'' --- including more flexible
military forces and beefed up special operations forces, intelligence and
communications.

Weapons systems that would get less next year than in 2005 include the Aegis
destroyer, the F22 Raptor fighter and the C17 cargo aircraft. The Apache
helicopter and the Army's future combat system would see increases.

In other areas:

* Bush will seek about $650 million for the Yucca Mountain nuclear waste
project north of Las Vegas, said officials speaking on condition of
anonymity. That is about half what once was envisioned for 2006. Though Bush
and Congress approved
the project in 2002, opposition has continued and a federal court has
rejected proposed radiation safety standards. New standards are being
developed.

* Bush will propose paring farmers' federal payments and other agriculture
supports by $587 million in 2006 and $5.7 billion over the next decade.
Payments to producers would drop by five percent, and the current $360,000
annual ceiling on those payments would drop to $250,000, said a senior
administration official speaking on condition of anonymity.

Two-thirds of the savings would come from cutting direct payments to crop
and dairy farmers. Even without the cuts, aid to farmers was already
projected to drop from $24.06 billion this year to $19.64 billion in 2006
because stronger prices have pushed down government payments. Bush's proposal would push overall spending down further to $19.05 billion, and a battle with farm-state lawmakers is possible.

* Bush would raise the maximum Pell Grant for students from $4,050 to $4,550
over five years, or $100 a year. Along with other changes, Bush's financial
aid plan would cost about $28 billion over 10 years.

To help pay for it, Bush would shrink subsidies the government pays banks to
encourage them to make low-interest loans, and to the agencies that insure
the loans for the lenders, education department officials said.

Bush would also phase out Perkins loans, 673,000 of which were made to
graduate and undergraduate students last year. Officials said the plan would
save $6 billion over ten years.

Associated Press writer Alan Fram contributed to this report.

>>>>>>>>>>>>>>>>>

2. BUSH ADMINISTRATION WILL SEEKS TO CUT $5.74 BILLION IN FARM SUBSIDIES

SCOTT KILMAN, WALL STREET JOURNAL: The Bush administration wants to cut federal payments to the nation's biggest farms to help trim agriculture
subsidies by $5.74 billion over the next ten years.

Senior administration officials said the fiscal 2006 budget request to be
sent to Congress today would cap the amount of federal subsidies collected
by a farmer at $250,000 a year, down roughly 30% from the current cap of
$360,000. The administration also is seeking to close loopholes that have
allowed some large farming businesses to collect millions of dollars in
subsidies a year.

American farmers, who reaped record profits last year thanks to high
livestock and grain prices, have been resigned to some cuts in federal aid.
The White House is trying to pare the budget deficit and has signaled that
it is willing to rein in farm-subsidy programs if necessary to win a global
accord through the World Trade Organization that would bring down barriers
to trade in manufacturing and services.

But the White House proposal is likely to trigger a fight in Congress by
pitting some farm groups against others in the scramble for a shrinking pie
of money.

Lowering subsidy payments to big farmers has long been a divisive issue in
agriculture. Populist farm groups complain that too much of the subsidy
budget goes to the biggest and wealthiest farmers, because growers collect a
subsidy for each bushel or bale they produce.

A 2003 Agriculture Department study found that the largest 6% of growers
received 30% of federal payments in 2001. The Environmental Working Group, a
Washington group long critical of farm-subsidy programs, calculates that ten
percent of recipients received 72% of total federal payments from 1995
through 2003, an amount that includes disaster aid and conservation
payments.

Lowering the payment cap by 30% would be felt most sharply in the South and
in California, where cotton and rice producers have long collected some of
the biggest subsidy checks. The Midwest would feel less of an effect because
a smaller percentage of grain farmers bump up against payment limits, which
helps explain why some Midwest lawmakers, particularly Sen. Charles Grassley
(Rep.-Iowa), have championed the lowering of payment limits as a way to
stretch the subsidy budget.

The Senate tried to impose a per-farmer payment limit of $275,000 during
debate on the 2002 Farm Bill, but the effort was turned back by Southern
lawmakers in the House.

A senior administration official said the Agriculture Department has yet to
calculate how many farmers would be hit by the proposed payment cap, which
is the most drastic of the cuts being sought by the White House in the
farm-subsidy budget. The White House also wants to impose a five percent cut
in fixed payments to all farmers and to trim its spending on subsidized crop
insurance.

The Bush administration's 2006 budget request would cut spending on
farm-subsidy programs by $587 million, or three percent, to $19.053 billion
from the original projection of $19.64 billion. If the changes proposed for
fiscal 2006 are kept in place over the next ten years, spending on farm
subsidies would drop by $5.74 billion, a senior administration official
said [ February 7, 2005 ]

Bill Tomson of Dow Jones Newswires contributed to this article

>>>>>>>>>>>>>>>>>>>>>

3. NFU URGES CONGRESS TO REJECT BUSH AG BUDGET

NATIONAL FARMERS UNION: National Farmers Union is urging Congress to
reject President Bush's cuts in agricultural spending.

"I think it is wrong for President Bush to try to balance the budget on the
backs of rural Americans," said NFU President Dave Frederickson.
"Agricultural programs are not the cause of the record federal deficit and,
therefore, should not be the solution."

Frederickson said U.S. farm programs were written by Congress and signed
into law by President Bush in 2002 with the intentions that farmers and
ranchers would have an adequate safety net through 2007. During the first
three years of the new farm bill, farm program spending has totaled $15
billion less than originally projected.

"If all federal program spending would have been as fiscally responsible as
agricultural spending we would not be facing the highest federal budget
deficit in our nation's history," Frederickson said.

"The administration's budget proposal risks the safety net for farmers and
ranchers that he signed into law in 2002," said Frederickson. "To propose
cuts in the safety net prior to the WTO trade negotiations will put U.S.
farmers at a disadvantage in the international marketplace, further
compounding our ability to compete.

The Farmers Union leader said the best way to reduce federal farm program
spending would be to fix the problems in the marketplace first. "If we could
get a fair price in the marketplace, farm program spending will be minimal,"
he said.

"Commodity prices have plummeted while input costs have escalated, and for
the first time in half a century, the United States is becoming a net
importer of food," Frederickson continued. "This is simply the wrong move,
at the wrong time, and for the wrong reason."

National Farmers Union and a coalition of 117 other groups sent a letter to
Agriculture Secretary Mike Johanns last week opposing cuts that would
undermine nutrition, conservation, crop insurance and farm programs. [
February 7, 2005 ]

>>>>>>>>>>>>>>>>>>>

4. POPULIST AG ECONOMISTS URGES GLOBAL FOOD POLICY BASED ON SUPPLY MANAGEMENT

PHILIP BRASHER, DES MOINES REGISTER: Could the future of government farm programs be in the past?

A group of populist economists thinks so.

The group, which includes Iowa State University's Mike Duffy and Neil Harl,
as well as Darryl Ray of the University of Tennessee, believes the last two
farm bills have been expensive failures.

They say it is time to consider returning to the days of supply management
when the U.S. secretary of agriculture could order farmers to cut back on
production.

This time, however, these economists think it is time to come up with a way
to control farm production around the globe.

They don't say how you could do that --- or who would be this world ag czar.
Those are no small omissions.

"Today, U.S. agriculture and the agricultural sector around the world stand
at a different crossroads," the economists say in a 39-page report released
by Iowa State's Leopold Center for Sustainable Agriculture. "The pressing
question now is whether there is a place for a global food and agriculture
policy."

The report's co-authors are Traci Bruckner of the Center for Rural Affairs,
a Nebraska advocacy group, and Mark Ritchie of the Institute for Agriculture
and Trade Policy in Minneapolis.

Duffy, the Leopold Center's associate director, said his group is just
trying to "get people to think about things."

There is no question that U.S. farm programs are in trouble. The World Trade
Organization has said that subsidies for cotton growers unfairly encourage
overproduction that depresses world prices.

The U.S. surplus in agricultural and food trade has evaporated. And farm
spending this year is expected to more than double to $22 billion because of
falling commodity prices brought on by last year's record crops of corn,
soybeans and cotton.

However, Duffy and his group are going to have a tough time finding people
inside Republican-dominated Washington --- or even outside Washington, for
that matter --- willing to consider a return to supply management in
agriculture.

"This is dinosaur-Democrat-type stuff," said Ford Runge, an agricultural
economist at the University of Minnesota who has advised Democrats on farm
policy.

Ouch. That's exactly how it will be seen in Washington, however.

The United States' production controls are widely viewed as having
undermined U.S. exports in the 1980s. U.S. competitors, such as Brazil,
Australia, Canada and the European Union, would love to see us do it again,
Runge said.

If anything, there is pressure to go the other way and increase production.
Feed and grain companies are pressing President Bush's administration to
shrink the government's Conservation Reserve Program to put more land into
cultivation.

Nevertheless, the Leopold Center report hits on some fundamental issues that
will face policymakers as they start working on new government farm
legislation: the high cost of the existing subsidy programs and the concerns
of Third World countries whose farmers have trouble competing with heavily
subsidized growers in the United States and Europe.

Those Third World issues were totally ignored in 2002 when the last farm
bill was written. They won't be ignored the next time. The WTO ruling
against U.S. cotton subsidies almost guarantees that.

The working assumption in Washington is that crop subsidies will have to be
cut --- to stop stimulating U.S. production --- and that the money will be
shifted into conservation programs.

Many farmers, though not all, realize that their government programs must
change, Duffy said.

Farmers "are not ideologues, they are more practical people," he said.

Duffy is practical, too, about what may happen with his group's idea.

"It may be that we sit around and think about this and the fact of the
matter is that supply control of any sort is so non-politically acceptable
that there is no point in thinking about it then," he said. [ February 6,
2005 ]