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Direct payments thrown into deficit battle

DANIEL LOOKER Updated: 02/15/2013 @ 4:15pm Business Editor

Senate Agriculture Committee Chairwoman Debbie Stabenow announced on Thursday that agriculture plays a key role in a plan by Senate Democrats to prevent across-the-board spending cuts scheduled to start March 1.

Instead of the automatic $85 billion in spending cuts, known in Washington as sequestration, the Democrats propose a three-part way to save the same amount of money through:

  • eliminating some tax loopholes
  • reducing defense spending--but by about half as much as the automatic cuts would
  • eliminating direct payments in the commodity title of the farm law.

Direct payments were given another year of life when Congress extended the 2008 farm law over the New Year as part of the fiscal cliff deal that raised income taxes for high income earners--and put off any spending cuts until March 1.

But Stabenow, a Michigan Democrat,  pointed out when the Senate passed a farm bill last year "we agreed on a bipartisan basis that direct payments did not make any sense."

The Democrats' proposal cuts $31 billion from farm spending over the next nine years but uses $3.5 billion to pay for programs for beginning farmers, energy and other small programs that expired with the end of the 2008 law, as well as drought and disaster assistance for livestock and specialty crop growers. It would save $27.5 billion in federal spending.

That, Stabenow said, would help restore all domestic spending for the rest of this year, not just the USDA budget. The White House has said that across-the-board cuts would force weaker border patrols, less of a defense presence in the Persian Gulf, and furloughs of meat and poultry inspectors, which would cause packing plants to close temporarily, at a cost of $10 billion to the economy.

With the help of cutting direct payments, "there would be no other domestic spending cuts," Stabenow said.

Responding to a question from Agriculture.com, Stabenow sought to clear up any confusion about what this would mean for farmers who can start signing up for direct payments next week, on February 19. "I'm assuming that contracts are honored" by USDA, she said.

Later she said the plan to eliminate direct payments would start “probably more likely in 2014” than this year. That’s how the Congressional Budget Office counts it, too, according to one knowledgeable source who explained that "CBO does not assume any savings from the 2013 Direct Payment, which is paid in the 2014 fiscal year."

Stabenow said she had informed the leaders of the House Agriculture Committee about the plan. But the bipartisan consensus in drafting a farm bill last year seemed to be missing Thursday.

House Agriculture Committee Chairman Frank Lucas (R-OK), called the plan "the Senate Democrats' attack on rural America."

The proposed cuts to the traditional farm safety net are $31 billion, which is a 53 percent reduction, his office said.

"Farmers and ranchers want to be a part of the solution to the fiscal crisis we face in this country," Lucas said in a statement. "And, the House Agriculture Committee demonstrated that commitment to being a part of the solution when we passed a comprehensive, balanced farm bill that cut more than $35 billion from all of agricultural spending, including the farm safety net, conservation programs, and reforming the SNAP [formerly called food stamps] program."

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