(Adds Vilsack comments in seventh paragraph.)
Former Iowa Governor Tom Vilsack knows that Farm Belt protocol requires paying respect to the Butter Cow. During a visit to the Iowa State Fair on Aug. 17, he made the pilgrimage to the 600-pound bovine sculpture carved from pure creamery butter. Now that he is Agriculture Secretary, however, Vilsack wants to take a chunk out of another far more sacred cow: the $15.4 billion in federal farm subsidies.
Record federal deficits and changing priorities are spurring the Obama Administration to redefine who receives rural aid. The government is shifting payments to broadband providers, land conservation efforts, and nutrition programs. To many farmers, the changes seem designed to satisfy organic food devotees, First Lady Michelle Obama's anti-obesity cause, weekend duck hunters, and small-town Internet users—everyone, that is, except traditional farmers. Kris Luoma, 55, a cattle rancher and crop insurance salesman visiting the Iowa fair from Arcadia, Neb., blames the ignorance of Washington policymakers. "A lot of them," he says, "don't know where their food comes from."
Vilsack's Agriculture Dept. in July trimmed $6 billion in payments to crop insurers during the next decade. Now he's looking at cuts of as much as $5 billion a year from an automatic payments program that rewards farmers even if they grow nothing. Vilsack is the chief messenger of this change, a turnabout for farmers who have known him as one of their most prominent advocates.
The timing makes growers especially uneasy. Agriculture, like the rest of the economy, is experiencing a fragile recovery. Corn, soybean, and wheat prices are at least 39 percent below records set in 2008. Farm profits fell 35 percent last year to their lowest level since 2002, says the USDA.
Agriculture payments have withstood challenges before. The last significant attempt to cut subsidies, in 1996, led to a backlash—and bailout checks for farmers after export declines and heat waves persuaded lawmakers to abandon cost-cutting. This time the $1.3 trillion annual federal deficit will make changes stick, says House Agriculture Committee Chairman Collin Peterson, the Minnesota Democrat whose district's $243 million in 2009 subsidy payments ranked it No. 6 out of 435.
Vilsack calls the deficit an incentive to revamp farm support and redirect funds to alternative energy and broadband projects. With more farmers relying on small-town jobs to make ends meet, and even then with incomes trailing those in urban areas by 29 percent, rural economies need to diversify, Vilsack says. Done right, government programs will benefit everyone, he adds, including crop growers and ranchers who need thriving communities nearby. "If you prime the pump properly, you get a better return on investment."
While as much as $5 billion in automatic payments to farmers would go to the administration's new rural initiatives instead, Vilsack said he's hopeful that deficit-cutting demands will be satisfied by the reductions in crop insurance and that the "safety net" farmers use to manage risk will be maintained. "I think you still need to recognize the inherent risk associated with farming," he said. "This is not about trying to figure out ways in which we provide less of a safety net or reduce risk-management tools."
Still, some growers worry that the White House will force further cuts in automatic payments, which farmers use to repay bank loans or finance new ones. And they fear unintended consequences from dramatic shifts in land use. "I'm trying to raise cows, and the government spends money to take land out of production for pheasant hunters," says Glenn Johnson, 37, a rancher from Pipestone, Minn. "You close up the programs, and it'll be the 1980s all over again," when record foreclosures cut the number of U.S. farms by 11 percent, to 2.17 million.
Representative Frank Lucas (R-Okla.), the ranking Republican on the House Agriculture Committee, calls Vilsack a "nice guy" drowning in bad ideas. He listens too much to environmentalists and "foodies" who care more about how crops are produced than whether farmers can make a living, Lucas says. Vilsack disagrees. "I might have a slightly different emphasis, but you can't say I'm not trying," he said.
The bottom line: Making good on Obama's campaign promise to cut farm subsidies, Agriculture Secretary Vilsack is disappointing some farm-state friends.