U.S.: Lawmakers Question Tobacco-Farm Buyout

Source from:  AP Sun Jul 25,2004 07/26/2004

Tobacco farmers are closer than ever to securing billions of dollars for giving up a federal farm program, but some influential voices in the nation's capital are questioning why they should get anything at all. "I think they've had a nice privilege for decades," said Senate Budget Committee Chairman Don Nickles, R-Okla. "I don't know that we have to pay them to stop receiving the benefit." Nickles is among a handful of senators who oppose the buyout and who sit on the negotiating committee tasked with producing a compromise tax bill with the House that may include a buyout. Separate tax bills recently passed in the House and Senate would pay farmers billions of dollars to give up allotments dictating how much tobacco they can sell under the federal program begun during the Depression. In recent years, the government has been reducing farmers' tobacco quotas to reflect rising imports of cheaper foreign leaf and a steady decline in smoking. Many say the quotas now are too small to make much of a profit. The farmers would just as soon take their chances on a free market with no production limits, but they also want to be compensated for giving up their allotments, describing them as assets that can and have been bought, sold and leased. "You've got farmers and quota holders who have been going along with this program for 60 years," said Keith Parrish, a North Carolina farmer and executive director of the National Tobacco Growers Association. "It's just not right to take away the quota value and leave these people stranded." Parrish has been among the tobacco farmers who have visited Washington each week for more than a year to spread that message. In making his case, he often points out that there are precedents for a buyout. Lawmakers approved a similar buyout two years ago for peanut farmers, and one for dairy farmers in the 1980s. Peanut farmers were allowed to keep farming. The farmers who took the dairy buyout had to sell their cattle. Tobacco farmers who want to stay in the leaf-growing business would be able to do so under both the House and Senate proposals. An estimated 400,000 people own quotas giving them the right to grow the crop, but only about 100,000 are active growers. Instead of the government paying for the buyout, the Senate would have tobacco companies do it, presumably through higher prices for cigarettes. Tobacco farmers would be paid a total of $12 billion over 10 years under the Senate plan but would still enjoy government limits on how much acreage could be devoted to the crop. The House bill would use taxpayer dollars to pay tobacco growers and quota owners $9.6 billion over five years, while placing no ceiling on total acreage. Except for Philip Morris USA, all the major tobacco companies prefer the House's plan to the Senate's. Nickles says he will try to get the tax bill passed without a buyout. At the least, he says the plan should be scaled back and caps imposed to limit how much individuals could receive. Among the other lawmakers who voted against the Senate buyout and are on the committee negotiating a final bill are former Senate Majority Leader Trent Lott, R-Miss.; Health, Education and Labor Committee Chairman Judd Gregg, R-N.H., and Pennsylvania Sen. Rick Santorum (news, bio, voting record), the Senate's third highest-ranking Republican. Unlike the House version, the Senate legislation would not create a free-market approach. Acreage and geographic limits would still be imposed on tobacco growing. Tobacco-state lawmakers concede they may have to give up the production controls, but they insist they will fight to retain the overall buyout. "Today's tobacco farmers did not create nor do they control the quota system," said Senate Majority Leader Bill Frist, R-Tenn. "Yet, they have been forced to farm under its outdated rules for far too long." The Bush administration has been reluctant to overhaul the tobacco quota system, and this spring President Bush (news - web sites) said no change was needed. That sparked a furor among tobacco farmers. Ultimately the White House came around to supporting a buyout resembling the House approach. Daniel Sumner, an agriculture economist at the University of California, Davis, said the debate is not unique. "Worldwide, there's debate about what's the strategy for ending government programs that seem to have either ended their popularity or their usefulness," Sumner said. Typically, there's no legal requirement for government compensation but lawmakers often think it is the right thing to do politically, he said. Frequently a determining factor is whether there was an implication that the government program would be permanent. Parrish, who grew up around tobacco farms, says he always thought the program would be there to benefit farmers. "Anything that lasts 60 years gives you the impression that it's permanent," he said. "Up until the last recent years, we were in pretty good shape." ___ On the Net: Tracking legislation: http://thomas.loc.gov/