Iowa Public Television


Ag Chief Defends Phasing Out Farm Payments

posted on March 13, 2009

Agriculture Secretary Tom Vilsack defended the Obama administration's plan to phase out federal direct payments to farmers whose yearly sales exceed $500,000 despite criticism it could help drive many of them out of business.

Vilsack told reporters Monday that while it's crucial a "safety net" remains, the federal government's skyrocketing budget deficit has forced a re-evaluation of what Washington can afford to do for America's farmers.

"The president's been very straight with people about this. And we need to be straight that everyone's going to have to look at how we've done business in the past," the former Iowa governor said. "There are ways in which we can reduce that deficit without compromising significantly the safety net that exists."

He also said the president's push for alternative energy provides farmers "tremendous economic opportunity" to use farmland in ways that would help make up for loss in direct federal aid while reducing America's dependence on foreign oil.

Nearly 172,000 of the nation's 2.2 million farms - almost 8 percent - registered at least $500,000 in sales, according to the U.S. Department of Agriculture's 2007 census. Farms sold an average of $134,807 worth of goods that year.

Critics say basing aid on sales misses the mark.

"The president's proposal ... does not successfully distinguish between struggling farmers and wealthy landowners," Senate Finance Chairman Max Baucus, D-Mont., wrote in a letter last week to Vilsack. "For example, this proposal would eliminate payments to a farmer who loses money if the farmer sells his wheat for $500,000 but has already spent $600,000 on expenses such as seed, fertilizer and fuel."

Other skeptics say the plan, which would phase out payments over three years, would be especially hard on cattle farms because of the high cost of feed.

The plan would save the government about $1.2 billion of about $5.2 billion the government pays farmers each year, according to Thomas Dobbs, professor emeritus of economics at South Dakota State University.

While he agrees basing the cutback on profits instead of sales might make more sense, Dobbs is no great fan of the payments. They were put into the 1996 farm bill to cushion land values while the country moved to a more market-driven system. But the country never developed that system, and the payments mainly exist to prop up land values, he said.

"From a taxpayers' standpoint, they're pretty hard to defend, " he said.

Tags: agriculture Barack Obama government money news Tom Vilsack USDA