Money issues took center stage in the corridors of power this week ... and most of the discussion focused on debt.
For starters, *the Commerce Department says the U.S. trade deficit soared to a record $617 billion last year. *The U.S. even finished in the red in farm trade as imports of wine, cheese and other food products hit a record. *More disturbing is that the weaker value of the dollar, a trend that normally is favorable to U.S. exports, failed to stem the tide.
Each of those troublesome signs is directly traceable to the worsening U.S. budget deficit. The White House took aim at that problem this week with the release of the president's fiscal 2006 budget ... a $2.5 trillion package that within hours caused divisions on political, social and regional levels.
At its core, the proposed budget calls for cutting 150 federal programs. That includes a plan to slash farm subsidies by some $5.7 billion, with lower payment caps for the biggest farms.
So, how will the budget request affect American farmers? For one, it would cap the amount of federal subsidies collected by a farmer at $250,000 a year, down approximately 30 percent from the current limit of $360,000. The White House is calling for a five percent cut in fixed payments to all farmers. In addition, the administration hopes to close loopholes that have allowed some to collect millions of dollars in payments every year. The budget would impose a requirement that recipients be actively engaged in farm operations to receive subsidies. USDA officials say they would attempt to redefine the term "actively engaged". And, the budget would require producers to buy crop insurance at a higher minimum level of coverage.
Some say the current subsidies increase U.S. production, which is unfair to farmers in developing countries. But, the chief economist for USDA claims the department has not finished calculating the impact proposed cuts would have on U.S. production. According to DTN, Agriculture Secretary Mike Johanns said he would be OK if the subsidies result in a production decline. In a press conference, he defended the agriculture budget, insisting it will maintain the farm safety net while making much needed cuts in domestic spending.
Mike Johanns, Agriculture Secretary: "Farmers and ranchers know the importance of a healthy economy. It raises income and increases demand for the products they produce. Like every agency, USDA will share the government-wide burden of controlling federal spending."
Others aren't so sure. The American Farm Bureau Federation is vowing to fight Bush's budget. It states the current subsidies help ease the sharp fluctuations in farm prices, and make American growers more competitive with producers overseas. Indeed, many farm groups are against revising the farm bill before its expiration in 2007. They say many farmers believe they have a contract with the government and have made plans accordingly.
Some southern lawmakers especially are opposed to Bush's budget. Senate Agriculture Committee Chairman Saxby Chambliss says it's unfair to slash crop subsidies without reducing payments that other farmers get through conservation programs. Cotton and rice producers in the South and in California have collected some of the biggest subsidy checks. State and national organizations for both commodities are gearing up Washington lobbying campaigns to fight the proposed cuts.