Statement of Administration Policy: S. 1541 - Agricultural Market Transition Act of 1996

(Senate)
(Lugar (R) Indiana and seven others)

New farm program legislation should be enacted immediately to avoid costly disruptions in the 1996 planting season; without a farm program in place, farmers will lack essential information on price supports and acreage eligibility. However, as clearly stated on several occasions, the Administration has serious concerns about several key provisions in S. 1541. Because of these concerns, if the bill were presented to the President in its current form, the Secretary of Agriculture would recommend that he veto it. In particular:

• S. 1541 would damage the safety net that farm programs now provide in stabilizing farm income. Rather than allow federal income support payments to adjust to changes in market conditions, as they do now, S. 1541 would set fixed annual payments that producers would receive, regardless of market conditions. This would have two negative results. First, farmers would receive payments even if market prices are high. Second, if market prices fall, federal payments would not rise, as they do under current law. Family farmers would have to absorb the lost income, thereby creating a "ripple effect" of lost income for rural communities. The bill would also arbitrarily limit benefits to current participants.
• S. 1541 would no longer require participants to have crop insurance --a major, recently enacted reform. Combined with cuts in the farm safety net, this proposal likely would raise pressure to return to budget-busting, ad hoc disaster payments.
• S. 1541 would limit the Conservation Reserve Program (CRP) -- the largest voluntary conservation assistance program available to farm producers -- to existing contract holders. Even when current CRP participants opt out, USDA could not replace the lost conservation acres with more environmentally significant ones, as the Administration proposes. In addition, the bill would prevent permanent easements under the Wetlands Reserve Program (WRP) by mandating the exclusive use of fifteen year easements. These fifteen year contracts substantially increase the cost of permanent protection as taxpayers would have to make repeated payments to maintain current levels of wetland protection.
• The bill would significantly reduce spending for agricultural export assistance.
• The bill has a variety of other shortcomings, including its failure to provide permanent farm program authority for the years following 2002; and its termination of the Farmer-owned Reserve.

Finally, targeting the bill's mandatory conservation program toward livestock producers is a good first step. However, eligibility should be expanded to include conservation funding for all producers.

Basic Requirements for a Farm Bill

The Administration will continue its efforts to obtain the enactment of sound farm program legislation as soon as possible. Such legislation should address the following basic requirements:

• The farm "safety net" must be preserved to ensure sufficient farm income in lean years when prices or yields, are low.
• Environmental protection and conservation programs must be maintained and, if possible, enhanced.
• A vibrant rural economy must be supported, such as through the inclusion of the Secretary of Agriculture's proposal for a "Fund for Rural America" that would finance rural development, agricultural research, and conservation programs.
• Agricultural exports and promotion should be strengthened.
• An extension of the current law authorization for the national nutrition safety net programs included in the 1990 Farm Bill.

Scoring for Purposes of Pay-As-You-Go

S.1541 would reduce direct spending; therefore it is subject to the pay-as-you-go provisions of the Omnibus Budget Reconciliation Act (OBRA) of 1990. OMB's preliminary scoring estimates are that the bill would reduce the deficit by $1.16 billion for FYs 1996-2002.