Domestic-aid cuts to outweigh export subsidies Bush promised wheat farmers Plan is no bonanza, aides acknowledge

September 06, 1992|By New York Times News Service

WASHINGTON -- Wheat farmers who were promised $1 billion in export subsidies by President Bush on Wednesday will find that sum more than offset by reductions in domestic programs that help them, Bush administration officials now acknowledge.

The administration is counting on the increase in exports to result in slightly higher domestic wheat prices. The higher prices would in turn reduce government payments to farmers under domestic programs.

The farmers will still come out slightly ahead because of the higher prices. A third of their crop is not covered by federal price guarantees, and farmers actually receive the market price. But the largess will be far less than the impression created by the president.

Public statements from the Agriculture Department and the White House on Wednesday did not spell out how the federal government would pay for the subsidies, and administration officials did little to counteract the impression last week that the subsidies represented a new bonanza for wheat farmers.

Robert E. Grady, the executive associate director of the Office of Management and Budget and the White House's top expert on export finance, said that the administration had not tried to mislead anyone.

But he said the explanations of the program might have been inadequate. "That may be part of our broader communications failure," Mr. Grady said.

Some of the export subsidies announced by Mr. Bush represent dozens of export subsidies that have been announced separately each year by the Agriculture Department to foreign countries since the export program began seven years ago, said Stephen L. Censky, acting administrator of the Agriculture Department's Foreign Agricultural Service.

The domestic budget issues aside, the president's announcement created a storm of protest abroad.

Foreign grain-producing countries are predictably furious. The most angry are countries such as Australia, which has few subsidy programs and whose farmers will directly feel the brunt of Mr. Bush's decision.

As more U.S. wheat is sold abroad, overseas prices fall. So Mr. Bush's program will take away other countries' share of the market.

While the wheat export subsidy program announced by Mr. Bush will cost close to $1 billion, it will save the federal government as much as $1.69 billion in domestic spending on wheat farmer assistance, said Mr. Censky of the Agriculture Department.

Under a program that currently covers two-thirds of the nation's 2-billion-bushel wheat crop, the federal government guarantees farmers a price of at least $4 a bushel for their wheat. Wheat has been selling in the last week for $3.20 to $3.34 a bushel, making farmers eligible for government payments of 66 cents to 80 cents a bushel.

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