MINUTES ECONOMIC POLICY COUNCIL JULY 17, 1985 4:00 P.M. ROOSEVELT ROOM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00759R000100180015-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: December 9, 2010
• Sequence Number: 15
• Publication Date: July 17, 1985
• Content Type: MISC

Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
EXECUTIVE' ~,RETARIAT
ROUTING SLIP
ACTION
INFO
DATE
INITIAL
1
DCI
2
DDCI
3
EXDIR
4
D/ICS
5
DDI
6
DDA
7
DDO
8
DDS&T
9
Chm/NIC
10
GC
11
IG
12
Compt
13
D/OLL
14
D/PAO
15
VC/NIC
t
NI0/ECON
X
17
18
19
20
21
22
3637 (10.81)
ve Secretary
4 Jul 85
Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
 Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
THE WHITE HOUSE
WASHINGTON
July 22, 1985
NOTE FOR WILLIAM J. CASEY /J
FROM : ROGER B. PORTER ,/'
The minutes of the Economic
Policy Council for June 17,
July 2 and 17, 1985 are
attached.
Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
 Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
Executive Registry
85- 2729/1
MINUTES
,_ July 17, 1985
. _ 4'.--0-o--P-. m-.--
Roosevelt Room
Attendees: Messers,.__Baker, Block, Yeutter, Sprinkel, Whitehead,
Darman, Brown, Burnley, Wright, Friedersdorf, Kingon,
Porter, Thompson, Naylor, Chew, Lacey, Davis, Moore,
Niehenke, Khedouri and Stuckey.
1. Economic Conditions in the Farm Sector and Legislative
Alternatives
Secretary Block and Assistant Secretary Thompson reviewed
the current economic conditions in the farm sector. Govern-
ment policies have contributed to retaining excessive
resources in agriculture and pulling 55 to 60 million acres
back into production. During the late 1970s demand for
agricultural products increased significantly, largely due
to rising exports. From 1971 to 1981 U.S. farm land values
increased over four fold contributing to considerable
expansion in the agricultural sector.
Rigid loan rates and target prices provided little flexi-
bility in this sector of the economy and have contributed to
the difficulties faced by many American farmers to date.
Over the last four years land prices are down nationwide by
19 percent. This, however, masks much greater distress in
the corn states and great plains. Land prices in Iowa over
the last four years have declined by 49 percent and land
prices in Nebraska have declined by 46 percent. Weak
domestic demand and declining exports have dampened com-
modity prices and farm income.Depressed land prices and
increasing farm debt problems have contributed to rising
farm and financial institution failure rates.
Mr. Thompson described the environment in which the farm
bill is being drafted as consisting of three principal
elements. First, agriculture committee members recognize
that current farm programs are pricing U.S. producers out of
world markets and that prices must fall to restore inter-
national competitiveness. Secondly, committee members
insist, however, that any new farm legislation must seek to
maintain farm income. Third, committee members also recog-
nize that getting federal spending under control is essen-
tial, but many consider this less important than protecting
farm income.
Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
 Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
Minutes
Economic Policy Council
July 17, 1985
Page two
The Senate Budget Resolution provides some discipline at the
approximately $32 billion level as calculated by the Congres-
sional Budget Office. This is equivalent to the Administra-
tion's calculation of $38 billion since we include a loss
reserve for CCC export credit guarantees.
Mr. Thompson noted that approximately 10 percent of farmers
now owe 45 percent of the total farm debt. Ambassador
Yeutter noted that this may will understate the deteriora-
tion that is occuring due to the dramatic decline in land
prices in the Midwest that continues.
Mr. Thompson noted that the Administration's farm bill
received little support except from the National Cattlemans
Association. Members of Congress are now examining for
other basic farm program approaches.
The Boschwitz-Boren approach would discontinue target prices
and drastically reduce loan rates. In its place direct
income transfers or transition payments would be provided to
protect farm income. The marketing loan approach would
establish a program allowing a producer to buy back the loan
during the redemption period at the original loan rate or
the market price at the time of repayment, whichever is
lower. If the market price is less than the loan rate, the
Commodity Credit Corporation would incur the loss or the
difference between the loan rate and the market buy-back
price.
The Farm Bureau approach would gruadually move toward a free
market, continuing price supports as a percentage of pask
market prices and initially allowing them to drop no more
than 10 percent a year. Target prices would be frozen in
1986 at 1985 levels and then gradually reduced 5 percent
annually.
The final approach, which has received a good deal of
support in the House Agriculture Subcommittee, would impose
mandatory production controls. This approach would require
the Secretary of Agriculture to proclaim national marketing
quotas for major program crops and determine the acreage
each farmer could plant of each commodity. A producer
referendum would be held to determine whether producers
approve or disapprove the quotas. In the event quotas were
diaspproved, producers would receive price and income
protection at much higher levels.
Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
 Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
Minutes
Economic Policy Council
July 17, 1985
Page three
Mr. Thompson also reviewed the estimated budget costs
associated with each of these alternatives and their
strength in the Congress.
The Council's discussion focused on the impact of a one-year
extension of the current legislation, the need to reorient
agricultural policy toward the free market, the need for a
prompt and efficient transition, and the advantages and
disadvantages associated with each of the four approaches
under consideration in the Congress.
The Council also discussed the frequency with which transi-
tion arrangements are often changed in out years, the
accuracy of estimates regarding the cost of various pro-
grams, and the value in focusing programs more narrowly by
restricting eligibilty such as payment limitations on what
individual farmers can receive.
The Council discussed the pressure for export subsidies and
the acceleration of federal credit exposure associated with
a one year extension of current law, as well as the leverage
associated with a veto threat. Finally, the Council dis-
cussed the possibility for folding the farm bill into a
bipartisan budget reconciliation instruction depending on
the outcome of current budget negotiations.
The Council agreed that:
(1) Mandatory supply controls are unacceptable in any form.
(2) Marketing loans are unacceptable because they invite a
large budget exposure with no prospect of declining
over time.
(3) Failure to adopt a policy that permits market prices to
fall in order to restore export competitiveness is also
unacceptable.
(4) Extending current law, which would continue to make us
noncompetitive in world markets and accelerate federal
credit exposure because commercial banks would withdraw
more rapidly due to long term uncertainty, is
unacceptable.
Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
 Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2
Minutes
Economic Policy Council
July 17, 1985
Page four
The Council also agreed that:
(1) The Boschwitz-Boren approach more nearly corresponds
with the approach embodied in the Administration's
original farm bill proposal.
(2) Historically, transition assistance, as envisioned by
Boschwitz-Boren, has been subject to frequent
adjustment. This suggests the potential risk in paying
a high up front price for basic policy reforms.
(3) The Farm Bureau approach, while at least in the right
direction, in its current form moves too slowly to
establish export competitiveness in the near term.
(4) The Farm Bureau approach, at the present time, has the
best prospect for serving as a compromise vehicle.
(5) One promising approach is to modify the Farm Bureau
proposal by accelerating the decline in loan rates and
target prices.
(6) Another promising modification to keep the bill within
the Senate Budget Resolution dollar limits is to
restrict eligibility for certain programs, such as a
payment limitation on the amount any individual farmer
could receive.
Secretary Baker requested that Mr. Porter prepare a short
summary of the meeting for use by the Legislative Strategy
Group in its discussion of the 1985 Farm Bill scheduled for
Friday, July 19.
The Council agreed to defer discussion of agricultural
credit policy until its meeting on Friday, July 19.
Sanitized Copy Approved for Release 2010/12/09: CIA-RDP87T00759R000100180015-2