    [Economic Outlook, Highlights from FY 1994 to FY 2001, FY 2002 Baseline Projections]
    [III. Major Functions of the Federal Government]
    [7.  Agriculture]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 97]]

                                 7.  AGRICULTURE

      ----------------------------------------------------------------------

                                 Table 7-1.  Federal Resources in Support of Agriculture
                                              (Dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                            Percent
                                    Function 350                                     1993        2001       Change:
                                                                                    Actual     Estimate    1993-2001
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary budget authority............................................      4,297       4,792         12%
      Mandatory outlays.........................................................     16,109      20,356         26%
    Credit Activity:
       Direct loan disbursements................................................     11,132      10,879         -2%
       Guaranteed loans.........................................................      4,564       6,492         42%
    Tax expenditures............................................................        290       1,080          NA
    ----------------------------------------------------------------------------------------------------------------
    NA = Not applicable.

      ----------------------------------------------------------------------
      The U.S. Department of Agriculture (USDA) seeks to enhance the quality
    of life for the American people by supporting agricultural production;
    ensuring a safe, affordable, nutritious, and accessible food supply;
    conserving agricultural, forest, and range lands; supporting sound
    development of rural communities; providing economic opportunities for
    farm and rural residents; expanding global markets for agricultural and
    forest products and services; and working to reduce hunger in America
    and throughout the world. (Some of these missions fall within other
    budget functions and are described in other chapters in this Section.)
      Farming and ranching are risky. Farmers and ranchers face not only the
    normal vagaries of supply and demand, but also uncontrollable risk from
    nature. Federal programs are designed to accomplish two key economic
    goals: (1) enhance the economic safety net for farmers and ranchers;
    and, (2) open, expand, and maintain global market opportunities for
    agricultural producers.
      Over the past eight years, as farm income rose to a record level and
    then receded, the Federal Government has helped to make U.S. farmers
    more productive, ensure that markets function fairly, and provide a
    safety net for farmers and ranchers. Among its other missions, USDA
    disseminates economic and agronomic information, ensures the integrity
    of crops, inspects the safety of meat and poultry, and helps farmers
    finance their operations and manage risks from both weather and variable
    export conditions. The results are found in the public welfare that
    Americans enjoy from an abundant, safe, and inexpensive food supply,
    free of severe commodity market dislocations. Agriculture, food, and its
    related activities account for 15 percent of the total U.S. personal
    consumption expenditure.

    Conditions on the Farm

      The farm economy has swung widely in the past eight years. By 1993,
    the farm sector had recovered from the economic farm crisis of the
    1980s. Net cash income reached a record $59.1 billion. Production losses
    that year, because of widespread flooding in the Midwest, were
    ameliorated by a surge of Federal Government payments. Farm equity
    increased and debt ratios fell. Although commodity prices soared to
    record highs in 1995 through 1997, farm cash income in 1993 remains the
    record level. Following the historic tight supplies of major commodities
    in the mid-1990s, repeated years of over-production caused prices to
    decline beginning in 1998. Gradually prices and market income are

    [[Page 98]]

    recovering, aided by activities and funding by the Federal Government.
      Economic conditions facing U.S. agriculture in 2000 continued to
    challenge the Federal role. While supplies of farm commodities continued
    to exceed demand, prices have started to recover from the lows of the
    past two years. Gross cash receipts rose slightly (three percent above
    the previous year) to $195 billion, well above the average level for
    1990-1995. Net cash income also rose slightly, remaining above average,
    due once again to Federal emergency payments. Farmers are expected to
    earn slightly more from 2001 crop sales due to a larger crop and
    improving prices. Livestock prices in 2000 recovered from previous lows,
    and livestock receipts exceeded the record level of $96.5 billion in
    1997. Crop and livestock prices are expected to strengthen modestly in
    2001.
      Economic conditions in 2000 prompted the Federal Government to expand
    spending on agriculture for a third year, including a total of $9.1
    billion in emergency disaster relief enacted in both the 2001
    Agriculture Appropriations Act and the Agriculture Risk Protection Act
    of 2000. Overall, Federal payments to farmers from USDA's Commodity
    Credit Corporation (CCC, the major farm-assistance program) reached a
    record $28 billion in 2000 (from $10 billion in 1998 and $12 billion in
    1993). Table 7-2 provides detail on these payments by fiscal year, while
    Chart 7-1 displays on a calendar/tax year basis the share of net farm
    income that was provided through USDA payments.
      ----------------------------------------------------------------------

        Table 7-2.  USDA/Commodity Credit Corporation Payments to Farmers
                        (Outlays, in millions of dollars)
    ------------------------------------------------------------------------
                                            Actual             Estimate
                                     ---------------------------------------
                                        1993      1999      2000      2001
    ------------------------------------------------------------------------
    Income Assistance...............     8,607     5,476     5,049     4,056
    Loan Deficiency Payments........       352     3,360     6,387     5,259
    Conservation Reserve Program and     1,579     1,754     1,770     2,058
     other Conservation Programs....
    Emergency Assistance............     1,254     5,853    14,504     3,698
                                     ---------------------------------------
      Total.........................    11,792    16,443    27,710    15,071
    ------------------------------------------------------------------------

      ----------------------------------------------------------------------

      Despite generally low commodity prices, farm assets and equity
    continue to rise. Farm sector assets increased in value in 2000, to $1.1
    trillion. Farm asset values are forecast to remain at historically high
    levels in 2001, as farm real estate values increase for the twelfth
    straight year. Farm business debt declined slightly in 2000, from its
    highest level since 1986; and the debt-to-equity and debt-to-asset
    ratios also improved slightly in 2000, and are much stronger than on the
    eve of the financial stress in the farm sector during the 1980s. Farmer
    loan delinquencies are at a low and flat level. However, continuing low
    commodity prices may cause increasing financial stress for certain
    producers, although farm income overall and in most regions is expected
    to improve in 2001.
      Exports hold the key to future U.S. farm income. The Nation exports 30
    percent of its farm production, and agriculture produces the greatest
    balance of payments surplus, for its share of national income, of any
    economic sector. Agricultural exports reached a record $60 billion in
    1996. Lower world market prices and bulk export volume reduced exports
    to $49 billion in 1999, although export volume was steady in that
    period, but in 2000 exports increased to $51 billion. In 2001, export
    growth is likely to continue to improve gradually to $53 billion, with
    the agricultural trade net surplus expected to reach $13 billion.

    [[Page 99]]

    The 1996 Farm Bill

      President Clinton emphasized, when he signed the Federal Agriculture
    Improvement and Reform Act of 1996 (the 1996 Farm Bill), that its income
    safety net was not sufficient. Events in the agricultural economy, and
    the Federal response, since then have borne out his concern. When
    commodity prices dropped in 1998, statutory Federal assistance was
    insufficient, prompting a series of emergency funding legislation that
    has nearly doubled the 1996 Farm Bill's income assistance during 1998-
    2000. In response, the Administration proposed legislation to amend the
    Farm Bill to provide counter-cyclical farm income assistance that would
    target payments to farmers in need when market income falls below the
    five-year average level. Congress did not adopt the legislation, but the
    proposal provides important recommendations for the next Farm Bill,
    which will be legislated within the next two years.
      In the absence of legislative reform, the Clinton-Gore Administration
    moved forward under existing authorities to bolster commodity prices and
    support for family farmers. These administrative actions included
    purchasing surplus commodities to expand humanitarian donations at home
    and abroad; freezing the commodity price-support loan rates instead of
    allowing them to fall; and, expanding alternative uses of commodities
    through programs such as the bioenergy initiative in which bonuses are
    paid to bioenergy producers who increase their purchases of commodities.
    These actions increased farm income by over $500 million for the 2000
    crop year.
      The 1996 Farm Bill, effective through 2002, redesigned Federal income
    support and supply management programs for producers of wheat, corn,
    grain sorghum, barley, oats, rice, and cotton. Under previous laws
    dating to the 1930s, farmers who reduced plantings could get income
    support payments when prices

    [[Page 100]]

    were low, but farmers had to plant specific crops in order to receive
    such payments. Even when market signals encouraged the planting of a
    different crop, farmers had limited flexibility to do so. By contrast,
    the 1996 Farm Bill eliminated most such restrictions and, instead,
    provided fixed, but declining payments to eligible farmers through 2002,
    regardless of market prices or production volume. This law thus
    ``decoupled'' Federal income support from planting decisions and market
    prices. The law has brought changes in the crop acreage planted in
    response to market signals. In 1997, wheat acreage fell by six percent,
    or about five million acres, from the previous year, while soybean
    acreage rose by 10 percent, or over six million acres.
      The 1996 Farm Bill's elimination of planting restrictions on farmers
    meant greater potential volatility in crop prices and farm income. Not
    only can USDA no longer require farmers to grow less when supplies are
    great, but the size of farm income-support payments no longer varies as
    crop prices fluctuate. The 1996 Farm Bill also provides ``marketing
    loan'' payments to farmers when commodity prices fall below a
    statutorily set ``loan rate''. These payments reached the historic-high
    level of nearly $7 billion in calendar year 2000. Payments to farmers
    were further supplemented by emergency aid: $6 billion was appropriated
    in 1999 for 1998 crop-year losses, and $15 billion was legislated in
    2000 to address both 1999 and 2000 crop-year losses.
      Market conditions in 1998-2000 raised the issue of whether the Federal
    farm income safety net was sufficient, and how it should be improved.
    Some crop prices significantly decreased from previous years, but the
    Farm Bill's decoupled income assistance did not sufficiently adjust
    upward to compensate. The recent crop experience also highlighted
    problems with the crop insurance program, which is intended to be the
    foundation of the farm safety net. Farmers did not have sufficient
    coverage when they experienced multi-year losses; there was no coverage
    available for many commodities including livestock; and, most
    fundamentally, coverage that provides adequate compensation was simply
    not affordable for many farmers.

    Crop Insurance

      USDA helps farmers manage their risks by providing subsidized crop
    insurance, delivered through the private sector, which shares the
    insurance risk with the Federal Government. Farmers pay no premiums for
    coverage against catastrophic production losses, and the Government
    subsidizes their premiums for higher levels of coverage. Over the past
    three years, an average 65 percent of eligible acres have been insured,
    the highest in the program's 60-year history. USDA now targets an
    average indemnity payout of $1.08 for every $1 in premium, down from the
    historical average indemnity of $1.40 for every $1 in premium. Crop
    insurance cost the Federal Government an average of $1.2 billion a year
    over the last eight years, including USDA payments to private companies
    for delivery of Federal crop insurance.
      In 1998, the Secretary of Agriculture used the authority and funds
    provided in an emergency farm assistance package to increase crop
    insurance premium subsidies, thereby providing incentives for more
    producers to enroll in the program and purchase higher coverage that
    might mitigate the need for future ad hoc crop-loss legislation. The
    Secretary's plan was highly successful, as farmers responded with
    purchases of unprecedented insurance coverage levels. Congress has since
    followed the Administration's lead and enacted further crop insurance
    discounts in subsequent years, culminating in codifying the reform
    through the Agriculture Risk Protection Act, enacted in June 2000. With
    the new legislation, the Administration will have taken the crop
    insurance program from a narrow, ineffective program in 1993 to a
    comprehensive program that is the centerpiece of a more market-oriented
    farm safety net. Over the same period, major enhancements and innovative
    risk management products have been brought to market, including the
    first Government program to subsidize the use of options contracts for
    the purpose of managing price risk on milk. The recent reforms will
    increase average premium subsidies to over 50 percent, and also pave the
    way for the program's first livestock policy.

    [[Page 101]]

    Trade

      The trade surplus for U.S. agriculture declined more than 50 percent
    from its peak of $27.4 billion in 1996 to $11.9 billion in 1999, after
    experiencing faster growth in recent decades than any other sector of
    the economy. The trade surplus level in 1993 was $18.6 billion, and
    averaged $17.9 billion per year from 1994-1999. The reduction was
    largely the result of decreased commodity prices, and significantly
    greater U.S. imports drawn by the strong dollar, rather than a loss of
    agricultural export volume. USDA's international programs helped to
    shape the growth in agricultural exports, and maintain the volume of
    foreign demand. Its Foreign Agriculture Service's efforts to negotiate,
    implement, and enforce trade agreements play a large role in creating a
    strong market for exports.
      USDA is authorized to spend over $1 billion in 2001 on agricultural
    export activities, including subsidies to U.S. firms facing unfairly
    subsidized overseas competitors, and loan guarantees to foreign buyers
    of U.S. farm products. USDA also helps firms overcome technical
    requirements, trade laws, and customs and processes that often
    discourage the smaller, less experienced firms from taking advantage of
    export opportunities. USDA outreach and exporter-assistance activities
    help U.S. companies address these problems and enter export markets for
    the first time.
      USDA programs also help U.S. firms, especially smaller-sized ones,
    export more aggressively, and high-value products now account for more
    than half of agricultural export value. By participating in USDA's
    Market Assistance Program (MAP) or USDA-organized trade shows, firms can
    more easily export different products to new locations on their own.
    Small and medium-sized firm recipients (those with annual sales of under
    $1 million) now represent nearly all of the MAP branded-promotion
    spending, up from 70 percent in 1996.
      Most significantly in recent years, the Administration has greatly
    increased overseas donations of U.S. commodities, using current
    authorities to dispose of crop surpluses. Since 1998, U.S. food aid has
    tripled to nearly 10 million metric tons annually, at a total cost of
    about $5 billion. The donation of U.S. commodity surpluses has
    capitalized on the opportunity to boost U.S. exports of surplus crops
    while feeding hungry people abroad. In 2001, USDA is also implementing a
    pilot program, the Global Food for Education Initiative, to donate $300
    million in commodities and associated transportation and distribution
    costs to create a school lunch program in lower-income foreign
    countries. Through this initiative, the Administration is expanding the
    overseas donation program to strengthen the link between good nutrition
    and education that has been demonstrated in the United States.

    Conservation

      Although the Administration had serious concerns with the 1996 Farm
    Bill's commodity provisions, it strongly supported the bill's extensive
    conservation provisions, which were developed with bipartisan
    cooperation. These provisions made the 1996 Farm Bill the most
    conservation-oriented farm bill in history, enabling USDA to help
    farmers and ranchers protect the natural resource base of U.S.
    agriculture while augmenting farm income. USDA's Environmental Quality
    Incentives Program (EQIP) provides cost-share and incentive payments to
    farmers and ranchers that implement conservation practices such as
    integrated pest management or animal waste management systems. EQIP is
    also designed to help farmers comply with Federal, State, and local
    environmental regulations, and, by law, at least half of its funds must
    be used to address conservation concerns associated with livestock
    production. USDA's Conservation and Wetlands Reserve Programs are
    discussed in Chapter 6, ``Natural Resources and Environment.'' Another
    new 1996 Farm Bill program was the Farmland Protection Program (FPP),
    which provides financial assistance to State, local, and Tribal
    governments to permanently protect farmland from development and
    preserve open spaces. The new Wildlife Habitat Incentives Program (WHIP)
    provides financial assistance to landowners that wish to improve aquatic
    or terrestrial habitat on their land. Eligible practices include stream
    restoration, tree planting, and prescribed burning.

    [[Page 102]]

      Since the inception of these programs, USDA has:
      helped approximately 1,000 communities assess the status of
              their natural resource base and develop locally-led natural
              resource action plans through EQIP;
      worked with non-Federal partners to permanently protect
              approximately 150,000 acres of prime farmland from development
              through the FPP, maintaining communities' open spaces and
              helping sustain agriculture-related economies; and,
      entered into nearly 8,500 long-term WHIP contracts with
              landowners to improve wildlife habitat on over 1.3 million
              acres.

    Agricultural Credit

      USDA provides over $700 million a year in direct loans and over $2.6
    billion a year in guaranteed loans to finance farm operating expenses
    and farmland purchases. A portion of direct loans, which carry interest
    rates at or below those on Treasury securities, is targeted to beginning
    or socially-disadvantaged farmers who cannot secure private credit.
      The Administration acted to increase farm loan programs in response to
    the downturn in the farm economy. USDA's Farm Service Agency's direct
    and guaranteed farm loans, which totaled $2.1 billion in 1993, will
    reach over $3 billion in 2001--and close to $5 billion including funds
    that will carry over from 2000 emergency appropriations. As the farm
    crisis became apparent in 1999, USDA understood farmers could not wait
    for the Congress to enact additional funding. The Administration's
    timely response channeled funds to farm loan programs through
    administrative transfer authorities. Moreover, USDA monitoring of loan
    program activity allowed for strategic reprogramming of funds across
    loan programs to meet producers' greatest financing needs. In addition,
    the Secretary of Agriculture made it a priority to increase the amount
    of USDA lending to beginning and socially-disadvantaged farmers to 18
    percent, while simultaneously reducing delinquencies through the
    underwriting skills of staff and the hands-on loan servicing provided
    all borrowers. Consistent with the goals of the Vice President's
    Reinventing Government initiative, this improvement has come at a time
    of staff reductions, partially as a result of the Administration's
    efforts to streamline loan underwriting procedures.
      The Farm Credit System and Farmer Mac--both Government-Sponsored
    Enterprises--enhance the supply of farm credit through ties to national
    and global credit markets. The Farm Credit System (which lends directly
    to farmers) recovered strongly from its financial problems of the 1980s,
    in part through Federal help. Farmer Mac increases the liquidity of
    commercial banks and the Farm Credit System by purchasing agricultural
    loans for resale as bundled securities. In 1996, the Congress gave the
    institution authority to pool loans as well as more years to attain
    required capital standards, which Farmer Mac achieved.

    Agricultural Research, Education and Extension Programs

      The Federal Government underwrites agricultural research, education,
    economics and statistics programs whose goals are to make U.S.
    agriculture more productive and competitive in the global economy. These
    programs, currently funded at approximately $2.3 billion ($1.8 billion
    in 1993), provide for in-house research by USDA scientists at over 100
    Federal facilities; grants for research, education and extension work at
    eligible institutions, such as land grant colleges and universities;
    and, economic and statistical support for USDA programs and the
    agricultural sector.
      Through its in-house research program, USDA continued to support
    increases for high-priority initiatives of national importance in human
    nutrition, food safety, the environment, invasive species, genetics and
    genomics, and biobased products. In addition, USDA continued to
    emphasize the importance of competitive peer-reviewed grants for both
    research and education and extension grants programs, and saw funding
    specifically for these grants more than double during the last eight
    years, in large part due to new authorities in the 1998 Agricultural
    Research, Extension, and Education Reform Act, which includes $120
    million in annual mandatory

    [[Page 103]]

    agricultural research funding. In addition, USDA's Cooperative State
    Research, Education and Extension Service increased its support to
    minority institutions of higher education by 47 percent since 1993, as
    well as to areas such as integrated pest management and alternative
    control technologies (an increase of 53 percent), sustainable
    agriculture (an increase of 94 percent), and also initiated programs for
    food safety.
      USDA economics and statistics programs improve U.S. agricultural
    competitiveness by reporting and analyzing information. The Economic
    Research Service provides economic and other social sciences information
    and analysis of agriculture, food, natural resources and rural
    development policy issues. The National Agricultural Statistics Service
    provides estimates of commodity production, supply, price and other
    aspects of the farm economy, to help ensure efficient markets through
    informed participants.

    Marketing and Inspection Programs

      USDA's Animal and Plant Health Inspection Service is responsible for
    protecting America's productive land from foreign and domestic plant and
    animal infestations. As the international movement of people and goods
    increases, the threat of infestations becomes even more serious, as
    shown in recent years by the outbreaks of citrus canker, plum pox,
    Pierce's Disease, Medfly, and the Asian Longhorned Beetle. The
    Administration responded to these and other outbreaks by seeking
    appropriations and using existing emergency authority to provide funding
    for invasive species detection and eradication, as well as compensation
    for lost income where appropriate. During 1999 and 2000, the
    Administration provided an annual average of $180 million to combat
    infestations and compensate losses from them--eight times the annual
    amount made available during the previous six years of the
    Administration, and 11 times the annual amount provided during 1989
    through 1992. In addition, in July 2000, USDA and OMB submitted proposed
    guidelines to the Congress on the Federal role in responding to pest and
    disease infestations.
      The Administration also increased funding to improve border checks at
    airports, seaports, and land border crossings, to intercept dangerous
    goods. In 2001, almost $240 million will be available for this purpose.
    In addition, in order to comply with World Trade Organization
    requirements that trade decisions be based upon scientific, risk-based
    criteria, the Administration implemented a policy that requires
    countries seeking to import goods to the United States from regions
    where there may be a disease threat to American agriculture, to undergo
    a rigorous risk analysis and be subject to risk mitigation requirements
    to reduce the risk to a ``negligible level.'' These regulatory actions
    are open to public scrutiny and comment.
      Another growing concern to which the Administration responded is the
    increasing concentration in the livestock marketing industry, both
    horizontally across the entire industry, and vertically through
    agreements between packers and sellers that can limit competition. The
    Administration took action to create a more open market place, by
    providing additional funds to investigate anti-competitive actions in
    the industry, as well as to implement mandatory livestock reporting
    requirements that provide up-to-date information on contractual
    arrangements to better ensure a level playing field, particularly for
    smaller livestock producers.
      In December 2000, the Administration issued final regulations
    providing the first national standards for the production, handling, and
    processing of organically-grown crops and livestock. These standards
    provide consumers with confidence in the integrity of products
    advertised as organic, and provide farmers with clear guidelines on how
    to gain organic certification for their commodities in order to take
    advantage of the rapidly increasing consumer demand for organic
    products.
      USDA was also a leader in the Administration's initiative to improve
    food safety, particularly the safety of meat and poultry products. This
    initiative is discussed in Chapter 12, ``Health.''

    [[Page 104]]

    Improved Customer Service

      USDA has three agencies with a nationwide system of field offices, the
    Farm Service Agency, the Natural Resources Conservation Service, and
    Rural Development. These county offices deliver a diverse menu of
    programs including commodity price support, emergency disaster, and
    conservation programs, as well as farm real estate, operating and rural
    housing loan programs. The field operations' structure and operating
    procedures of these agencies had been essentially unchanged in decades.
    Their dispersed field office locations, with their high and increasing
    costs of maintaining the current delivery system including separate
    information technology systems, prompted significant reform. In 1993,
    the Vice President's National Performance Review called for creating
    ``one-stop shopping'' service centers from USDA county offices, to
    significantly improve customer service and achieve operating
    efficiencies. The streamlining devised by USDA included three key
    components: co-location of county offices, integration of their
    information systems, and modernization of their business processes in
    keeping with the new tools provided by enhanced information technology.
    Throughout the 1990s, with the support of both the Administration and
    the Congress, the field offices were largely co-located and work began
    on integrating business processes and information systems. Consolidating
    and relocating the field offices reduced their number over the last
    eight years from over 7,500 offices in 3,700 locations to approximately
    5,500 offices in 2,500 service centers.
      The USDA systems integration initiative, known as the Common Computing
    Environment (CCE), is scheduled to be complete in 2002. The CCE was
    planned as a common architecture and shared information system to
    replace outdated ``stove-pipe'' (single agency) systems currently
    supported by USDA agencies. The CCE's goal is to enable new technology
    and methods to be easily shared and implemented by all USDA agencies, to
    reduce the burden of data collection on its customers as well as the
    costs to the Government. The business process reenginering component of
    this initiative is still under way and, while dependent on the CCE for
    completion, will bring USDA agencies into compliance with the Freedom to
    E-file Act of 2000. These new procedures and information systems will
    allow electronic filing that will reduce the paperwork burden on those
    who participate in multiple USDA programs and reduce the county-office
    workload. Many of the forms used by USDA customers are now available on
    line, though e-filing is not available in most instances. E-filing
    capability is targeted for completion in the next two years.
      While true one-stop shopping and significantly improved customer
    service will not be available until these reforms are complete and USDA
    processes and administrative functions are harmonized, USDA made great
    strides over the last eight years to modernize its county-office program
    delivery.

    Civil Rights

      Since 1993, USDA's leadership made improvement of the Department's
    civil rights record one of its top priorities. The Agriculture Secretary
    re-established a USDA Office of Civil Rights, which was closed in the
    1980s, to provide a focal point for USDA's civil rights functions and
    oversight. The Office is responsible for policy development, analysis,
    coordination, and compliance activities. Comprehensive training in civil
    rights has been provided to USDA employees, and the accountability of
    managers has been clarified and increased. Even with downsizing,
    representation of minorities and women in USDA's work force improved. In
    addition, the Farm Service Agency increased its lending to African-
    American farmers by 67 percent over the last five years. USDA also
    worked to improve its civil rights complaint processing to reduce the
    time it takes to resolve cases. In the late 1990s, African American
    farmers filed a class-action discrimination law suit against USDA,
    primarily based on charges of past discriminatory treatment by USDA loan
    officers in the county offices. The suit exposed widespread
    discriminatory practices, and USDA settled the suit in 1999. That
    settlement, known as the Pigford Consent Decree, provides payments of
    $50,000 from the Department of the Treasury's Claims, Judgements, and
    Relief Acts Fund that is administered by the Department of Justice, and
    forgiveness of USDA debt to thousands

    [[Page 105]]

    of African American farmers. As of mid-December 2000, over 9,500 claims
    have been paid, totaling about $480 million.

    Tax Expenditures

      Tax expenditures for agriculture are estimated to be just over $1
    billion in 2001. Expenditures due to the treatment of certain
    agricultural income as capital gains rather than ordinary income
    increased by over $650 million, or over 500 percent, since 1993. In
    addition, legislation in 1999 made permanent the ability for farmers and
    ranchers to lower their tax liability by averaging their taxable income
    over the prior three-year period. Producers of certain crops, such as
    corn, also receive indirect benefits from the ethanol tax credit, due to
    the higher commodity prices that result from the increased demand for
    their commodities.