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Bush signs farm bill extension

WASHINGTON -- President Bush signed a one-week extension of the 2002 farm bill April 18 as House and Senate negotiators continued to haggle over whether to cut direct payments and the disaster package to pay for an increase in spending in the bil...

WASHINGTON -- President Bush signed a one-week extension of the 2002 farm bill April 18 as House and Senate negotiators continued to haggle over whether to cut direct payments and the disaster package to pay for an increase in spending in the bill and over whether a package of tax breaks for agriculture should be included.

Without the president's signature, the 2002 farm bill would have elapsed and antiquated permanent laws from the 1930s and 1940s would have gone into effect. Bush's decision to sign the extension was a signal that the White House is unwilling to risk the anger of farmers even though he had said he would not sign it unless he saw significant progress.

"The president will sign the extension," White House spokesman Scott Stanzel said. "We remain disappointed the Congress hasn't been able to achieve an agreement on a reform-minded farm bill."

The extension expires April 25, but House Agriculture Committee Chairman Collin Peterson, D-Minn., has said he expects to ask for another two-week extension. That would make May 9 the deadline for completion of the bill.

Sticking points

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At the end of a week's negotiations, Peterson, Senate Budget Committee Chairman Kent Conrad, D-N.D., and Senate Finance Committee Chairman Max Baucus, D-Mont., all said they were frustrated by the slowness of the negotiations, but that they believed progress had been made.

"We've in worse trouble that this before," Peterson said, alluding to fears last year that the House would not be able to pass a bill.

The big issues that delay completion have nothing to do with the core programs in the farm bill. In fact, Peterson and Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, both said on April 14 that they have settled all the major issues in the new farm bill.

But the House and Senate spent the week sending offers back and forth on offsets to pay for spending above the 10-year baseline of $597 billion and on the tax package. These issues are important because House rules require that spending not be increased unless spending is cut or government revenue is increased.

The new budget proposals involve cuts in the weather-related disaster program that Conrad and Baucus have proposed and in the direct payments that farmers get whether prices are high or low. Farm bill critics who want money for nutrition, conservation and other noncommodity programs have urged that program be cut to free up money for their priorities, but free trade advocates, including the Bush administration, favor retaining the direct payments program because the World Trade Organization allows the United States to report them as nontrade-distorting subsidies.

The cuts in disaster aid and direct payments would make it easier to get the farm bill through the House of Representatives where the percentage of members from farm districts is very small. House Speaker Nancy Pelosi, D-Calif., who represents San Francisco, and House Ways and Means Committee Chairman Charles Rangel, D-N.Y., who represents Harlem, have made an increase in food stamps and other nutrition programs a top priority. The issue has become more important recently because food prices have been rising, make it harder for the poor to afford food.

The House and Senate conferees already had agreed to increase nutrition spending by $9.5 billion, but on April 18, the Senate offered to add $500 million for nutrition, bringing the total nutrition increase to $10 billion. The Senate would pay for that by reducing the budget for the disaster program from $4 billion to $3.8 billion and taking a small amount of money, $250 million over 10 years, from direct payments to farmers. Farmers get $5.2 billion in direct payments per year.

Tax breaks

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The Senate also included a package of tax breaks for agriculture in the bill it passed last year and wants to keep those in the final bill. The tax breaks range from one that would classify income from government payments for Conservation Reserve Program lands so that people receiving Social Security retirement or disability payments would not have to pay self-employment taxes on that income or have their Social Security or disabled payments cut to one that would speed up depreciation of race horses. Another provision would establish a tax credit for landowners who grant an easement for protection of endangered species and restore or create habitat for the protected species.

House members objected to finding more money to pay for the tax breaks so the Senate has offered to pay for the tax breaks by making changes in other agricultural tax laws. The Senate would lower the ethanol blender tax credit from 51 cents to 47 cents, which would raise $1.23 billion; reduce losses that farmers could take against nonfarm income on their Schedule F forms, which would raise $456 million; and allow low-income farmers to make Social Security payments in quarters in which they do not have income, which would raise $124 million. The offer also would include other reforms in farm-related taxes, which would raise $600 million.

At the same time, the Senate would give up some of the tax breaks so the total value of it would go from the $2.5 billion in the Senate bill to $2.41 billion. In total, these fixes would reduce the Senate's tax-break package from $2.5 billion to $2.41 billion.

Meanwhile, the House made a different offer to the Senate that would allow $1 billion in tax breaks and also increase nutrition by $500 million, but reduce the size of the disaster aid budget from $4 billion to $2 billion and cut commodity programs, mostly likely direct payments, by $1 billion. In a plan to get Republican cooperation, Peterson allowed House Agriculture Committee ranking member Bob Goodlatte, R-Va., to develop the plan. Goodlatte started with the House's original plan to increase spending by only $6 billion. Goodlatte's plan would increase total additional spending by $9.5 billion, using the Senate provision on ethanol fuels reform that raises $1.23 billion and adding $500 million in savings from programs under the control of the House Ways and Means Committee. It also included $800 million through increased tax compliance through Ways and Means as well as a $1 billion cut in commodity programs, most likely from the direct payment programs.

A Senate aide said the only good thing that came out of the House offer was Pelosi's signal that she would accept $1 billion in tax breaks. A key lobbyist said that if the House offer were accepted, cuts in the direct payments program could total more than $2 billion over 10 years because the House-Senate framework assumes cuts in commodity programs that have not been specified.

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