Bush allows Congress one more week on farm law

By Charles Abbott
WASHINGTON (Reuters) - President George W. Bush reluctantly gave Congress one more week to wrap up the new U.S. farm law, already six months overdue, and the White House called for stricter crop subsidy rules.
House and Senate negotiators are deadlocked over how to pay for a $10-billion spending increase for the farm law and whether to include a $2.4-billion Senate tax package. They blamed each other on Friday for the lack of progress.

If there is no breakthrough, said Senate Agriculture Committee chairman Tom Harkin, he will order votes on Tuesday to settle the matter. Harkin is in charge of the talks.

"We'll see if people really want to bring the farm bill down to have a tax package," said Harkin, Iowa Democrat. "At some point, it has to end."

By the end of next week, Harkin told reporters, the farm bill will be wrapped up or there will be a decision to either extend the 2002 farm law or to let the farm program revert to 1949 law, with land controls and high grain subsidy rates.

Congress began drafting the bill 13 months ago. Estimated to cost $600 billion over 10 years, it would boost spending on public nutrition, land stewardship, biofuels and specialty crops while reducing outlays for farm supports and agricultural research. Nutrition would get two-thirds of all spending.

All sides say the $10-billion spending increase is vital to assuring passage of the farm bill because it would put money into popular programs. But the House and Senate disagree over how to pay for it and on the tax package, which some senators say is essential to success.

As a stopgap, Bush signed a bill that keeps agricultural programs running until April 25. A one-month extension expired on Friday.

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

One White House proposal is to deny crop subsidies to anyone with an adjusted gross income above $500,000 a year, compared to the current limit of $2.5 million AGI. The White House says the new law should not raise taxes or use budget gimmicks to hide overspending.

When negotiators met on Friday, the Senate presented a revised package of 15 tax cuts worth $2.4 billion. They range from faster tax write-offs of race horses to incentives to developing cellulose as a feedstock for fuel ethanol.

Offsetting the tax breaks would be a reduction in the ethanol blender tax credit, limits on using farm losses to reduce income taxes, unspecified farm-related tax reforms and an optional self-employment tax.

House Speaker Nancy Pelosi offered $1 billion in tax breaks and House negotiators suggested offsets that included a $1 billion cut in commodity programs, possibly "direct" payments, and $2 billion for an agricultural disaster fund, half the amount targeted in a House-Senate "framework" for the bill.

"The problem is we still don't have offsets that are agreed to by everybody," said House Agriculture Committee chairman Collin Peterson, Minnesota Democrat.

Sen. Kent Conrad, North Dakota Democrat, said the House was not living up to the agreement for a $10 billion increase and exaggerated the cost of the tax package to try to kill it.

(Reporting by Matt Spetalnick and Charles Abbott, editing by Marguerita Choy)