SEC. MIKE JOHANNS: To everyone out there on the line thank you for your patience. I know we are starting a couple minutes late here, there are always final touches that need to be made. Let me start out if I might this morning and just say the administration appreciates the work of the House Agriculture Committee. I appeared before the Ag Committee during their markup session and indicated that, I indicate that again. We recognize long hours were spent going through many, many amendments. But we believe the bill put forth by the Committee misses a major opportunity. The time really is right for reform in farm policy. I feel strongly that the House bill fails to provide that. I'll talk in terms of the big picture for a few minutes then I will go in to detail about the missed opportunity for reform. If the contingency reserve concept is adopted without appropriate offsets the House bill would exceed the Administration's proposal overall by about $36 billion. That is not acceptable. Another important point, the Ways and Means Committee has now signaled an intention to raise taxes on certain businesses. Our understanding is that this tax increased would be used to pay for the House Farm Bill. Let me be clear about how I view this. I find it unacceptable to raise taxes to pay for a Farm Bill that contains virtually no reform.

The Administration did make difficult decisions. We did propose reform, and we did use those savings to increase funding for important priorities for our nation. The Administration submitted a Farm Bill proposal that provides real reform and funds priorities within a balanced budget plan, it did not raise taxes, and it provided a strong safety net for farmers.

Also, the House bill does not generate true savings when it comes to spending. The bill claims $4.7 billion in savings by changing the timing of payments so that they wouldn't count when the Budget Office estimated the cost of the bill. These shifts in timing, well, they don't save a dime in tax dollars. They are really nothing more than a budgetary transfer. One could even call them a gimmick.

And the House bill actually takes a step backward, creating farm policy that is less responsive to the free market, and it paints an even larger bull's eye on the backs of American farmers when it comes to international trade.

The statement of administration policy outlines these concerns and others. The official statement of policy makes it clear that myself and the President's entire team of senior advisors will recommend that he veto this bill if it is adopted in its current form. We are unanimous on this point.

I'll take a few minutes to highlight five areas of great concern in the reform arena. The first is payment limits, specifically the House version of the adjusted gross income cap. While we do appreciate the House adopting the AGI approach to payment limits, the House bill does not go far enough to set real limits. Current law contains an AGI cap of $2.5 million. Fewer than one-tenth of one percent of American tax-filers fall within this AGI, so this provision of current law really has virtually no impact.

The House bill decreases the AGI cap but only to a $1 million annually. It also affects those with AGI between $500,000 and $1 million, but only if less than 67 percent of their income is derived from farming. The House bill also eliminates the limit on loan deficiency payments and marketing loan gains entirely.

We estimate, based on IRS data, that approximately 3,000 farm operators and landlords would be potentially affected by the $1 million AGI cap, 3,000. Another estimated 4,000 have AGI between $500,000 and $1 million, so just over 7,000 people would be impacted across the entire United States. So our economists have taken a look at it, and they believe that the maximum number of people likely to be affected by the House approach is about 7,000.

Compare that to the Administration proposal to set an AGI cap of $200,000, which we would average over three years. We estimate based on IRS data that 38,000 farmers could be affected by our proposal. That's more than five times the number of operators who are doing very well by any definition, who would no longer receive government subsidies under our proposal as compared to the House bill.

The potential savings tell an almost identical story. The House AGI approach saves $473 million over the 10-year score period. The Administration AGI approach saves three times that amount, $1.5 billion.

Here's the bottom line. The Administration's proposal would affect only those who are among the wealthiest 2 percent of Americans.

Now we celebrate their success, but we also believe strongly that there is a point at which people graduate from receiving government cash subsidies. We don't take these savings away from the Farm Bill; instead, we propose directing these dollars to beginning farmers, rural communities, and other very important Farm Bill priorities. It's the right thing to do.

The second area of real concern focuses on an unintended consequence of the '02 Farm Bill. This led to $3 billion in unplanned, unneeded payments for the 2005 crop year. I call it the pick-your-price phenomena, and the reality of this phenomena is that it actually happens annually to some degree. In Farm Bill lingo, it's referred to as "beneficial interest." It involves very complex farm programs.

But let me explain it as simply as I can. Under current law, if you get a loan deficiency payment, you are allowed to lock it in anytime after harvest, even if prices are temporarily low. Yet because they still own the crop and therefore retain beneficial interest, you can sell the crop later when the prices have rebounded.

Probably the most significant example, although I have pointed out already that this occurs to some degree in every year, but probably the most significant example happened in 2005 with Hurricane Katrina. Shipping on the Mississippi River backed up, causing a temporary drop in corn and soybean prices from about $2.00 a bushel for corn to about $1.50, $1.60, in that vicinity. Many farmers locked in their loan repayment rate at $1.50 or $1.60, and collected $.40 to $.50 per bushel. Of course, the taxpayer pays for that. But of course, the crop was still owned, and so when the price recovered, and it did as everybody anticipated it would, the crop was sold.

So a payment was received from the government to make up for low market prices, and yet the crop was sold at the higher price at a later date. Under the 2002 Farm Bill, this was absolutely legal, yet it did cost taxpayers $3 billion for the 2005 crop year, when in fact no loss was suffered.

The Administration's proposal requires producers to lock in loan deficiency payment rates when they sell their crops, so producers receive the price support provided by loan rate, but it changes that pick-your-price phenomena that has occurred as a result of the '02 bill. The House bill again fails to address this phenomena.

The third area of concern relates to the increased loan rates and target prices in the House bill. It raises loan rates on 14 of 25 eligible crops and raises target prices for 12 of 17 eligible crops. Now I just strongly suggest that these provisions clearly represent a step backward in farm policy. Farmers across this country for as long as I have known farmers, which is all of my life, have told me they want to farm for the market. Planting decisions should be based on a free market demand, but loan rates that exceed market prices create an incentive to plant one crop over another, regardless of market demand.

Additionally, the marketing loan program is categorized as the most trade-distorting, amber-box program under our World Trade Organization obligations, making it subject to intense scrutiny. That's that bull's eye that I talk about being on the farmer's back.

No one can convince me that there's wisdom in painting an even larger bull's eye. We should be protecting our programs from challenge and thereby protecting our farmers, not the opposite. The Administration proposed setting loan rates at 85 percent of the market price averaged over the previous five years, excluding the high and low years. Loan rate caps would be set at the level agreed upon by the approved version of the 2002 Farm Bill. Clearly this is more market-oriented, and it prevents government subsidies from influencing market decisions, and it better protects our safety net from challenge. It better protects our farmers.

And this has an impact, a positive budget impact of about $3 billion.

Fourth on my list of serious concerns are the budget issues, the gimmicks if you will. There are five gimmicks that change the timing of payments. They don't actually change the amount of the payments or the obligation. In other words, the same amount of tax dollars will be spent, but because of the way they are timed they are not counted under the 10-year score.

The House bill claims $4.7 billion in nonexistent savings. This is not acceptable. The Administration proposed real reforms which produced real savings which then financed real priorities within a balanced budget plan. The real reforms that I've outlined for you today proposed by the Administration add up to real savings of more than $4 billion, while the House bill contains more than $4 billion in these gimmicks that produce no real savings.

I think we can ask the question; is that real reform? And I think the obvious answer is; it is not.

The last point I want to make is, there are many other important provisions contained in the Administration's Farm Bill proposal that we believe need to be considered. We believe our 11 conservation programs should be consolidated into three to reduce administration costs and make the programs easier for farmers to understand and utilize. This is what farmers told us they wanted when we did our Farm Bill Forums.

We believe farm policy should reach out to beginning farmers with more predictable direct support to provide a stabilizing force amid the uncertainties of production agriculture. We believe that support of rural communities is essential. About 90 percent of total farm household income now comes from nonfarm sources, so our farmers and ranchers, they depend on our rural communities. We propose funding to renovate many rural critical access hospitals so they can provide that much-needed care and emergency care.

We also want to reduce a backlog of projects in our rural communities that would provide safe drinking water, fire trucks, telemedicine, among other things. We are disappointed that the House bill provides virtually no increase in mandatory funding for renewable energy. The Administration proposed $1.6 billion in increased funding targeted at cellulosic ethanol, part of the future for our farmers. Our proposal helps to meet the renewable energy goals of Congress and this President. These provisions support the future of American agriculture instead of relying on farm policy of the past.

Let me offer a couple closing comments and then I'll be happy to take questions. The Administration took the best of the '02 Farm Bill. We did keep the structure. I would strongly argue we made it better because we heard from farmers all over America as to how to make it better. We listened to the grassroots wisdom that was conveyed to us beneath State Fair tents and in community centers across this nation.

We just can't be satisfied with farm policy that fails to embrace the future. We will deliver this message to the very best of our ability to the House of Representatives and then to the United States Senate and then to those who are chosen to conference on the bill. I can tell you this, and I know it for a certainty, President Bush wants to sign a Farm Bill this year, a bill that he can wholeheartedly support and believe in. We will do everything we can to make certain that that bill ultimately arrives on his desk and that bill is worthy of his support and a presidential signature.

Now I'd be happy to respond to questions.

MODERATOR: Thank you, Mr. Secretary. Reporters, as we prepare to receive your questions, we remind you to press #1 on your telephone touchpad to indicate that you'd like to ask a question. Our first question today comes from Alan Bjerga from Bloomberg News, and behind Alan will be Chris Clayton.

Alan, go ahead, please.

REPORTER: Yes. Taking a look at the veto threat, how much influence do you think this is going to have over the Congress given that it's controlled by Democrats, and they have their representation for the farm constituencies that they've been working with?

SEC. JOHANNS: Alan, I do believe it's going to have a substantial impact, and here's why I believe that. This has been a Farm Bill proposal that has been put together literally a step at a time along the way. As you know, we haven't even seen the final steps. One of the things that we did see within the last 12 hours was that taxes are going to have to be increased to pay for this Farm Bill and a specific proposal to increase taxes is now making its way through the process to finance this Farm Bill.

I don't believe there's a farmer or a rancher in America that says, let's have higher taxes in any respect to start financing Farm Bills. I can't remember of a single instance certainly in any time I've paid attention to farm bills where the party in control said, Let's finance a farm bill with higher taxes. I think this is a historic first, and I think that's going to be very, very difficult for both sides of the aisle.

And you can argue that to finance a given important item, but the reality is that it is financing a Farm Bill that really asks for very little, if any, reform. So I do believe that the President's statement of administration policy is going to be well-received. I think it's a very important statement.

And again I would point out that this was a unanimous decision, myself included.

MODERATOR: Our next question comes from Chris Clayton from DTN. And standing by should be Matt Kaye. Chris?

REPORTER: Secretary, what is that tax increase you've mentioned from Ways and Means? What exactly is that? And secondly, do you have some lawmakers, some members of the House, who are willing to put forward more of the Administration's proposals to the amendments on the floor tomorrow?

SEC. JOHANNS: Chris, two great questions, and I'll start with the last one. The last one relates to amendments that will be put forward. The answer is, on virtually every point I've raised, not every point but virtually every point, there's an amendment out there. I think when it's all said and done, depending on what happens with the Rules Committee, there will be an opportunity to vote on most of these issues.

The other thing I would say about this is, keep in mind this is a process that involves two legislative bodies, the House and the Senate, and we're working today on the House side. Once the House concludes its work, we will move to the Senate side and start working with them in every way we can on these issues, and then ultimately it's likely, in fact probably 100 percent certainty, you'll have different bills. And so you'll have a Conference Committee where you can work at that level to deal with some of the issues we've raised.

In reference to the question you've asked about the tax provision, here's what I can offer, and keep in mind that the Secretary of Agriculture is not the best tax expert in the Administration. But here's what I can offer. Congressman Doggett has introduced a bill, yesterday, as I understand it, which we believe will serve as the basis of a tax increase. And a copy of that bill is now available. As we understand it, the tax increase is aimed at companies that have a location here, let's say a manufacturing plant, that is owned by a company that is located in another part of the world. And boy, in every community practically in the United States of any size this is very common. Many foreign companies have established a manufacturing plant, a delivery facility, a something that could be impacted.

So I can tell you that that's the area that we are dealing with in terms of the higher taxes that they would pay. So it very definitely will have an impact on businesses because it raises, under the estimate I've seen, about $7.5 billion over 10 years, so obviously somebody is paying higher taxes.

MODERATOR: Matt Kaye from Burns Bureau has the next question, followed by Sally Schuff. Matt?

REPORTER: Thank you so much. Thank you, Mr. Secretary. A couple of questions. On the spending issue, we talked with Senate Ag Chairman Tom Harkin yesterday who plans to move his own Farm Bill in September. And he says the Administration, quoting him, "Doesn't come to the table with really clean hands on the Farm Bill spending issue." He says that your proposal is about $5 billion over available dollars over a baseline essentially.

What is your response to that? Maybe you can correct the record if that figure is right.

And secondly, we are continuing to see stories as you know in the mainstream press about USDA not thoroughly reviewing spending, and one of the issues obviously from this past week was a story in the Washington Post about payments to estates of deceased farmers, more than $1 billion. What do you propose to do about these payments that are going out that are not being thoroughly reviewed and continue to go to people who should not be getting them?

SEC. JOHANNS: Matt, I visited with Senator Harkin. I was back in Iowa recently, and we had a great conversation on farm policy and we kind of exchanged some ideas. And he told me the same thing. He said, Mike, I've looked at your score and you're at $5 billion over baseline, and we said that when we released it on January 30. We pointed that out. We've consistently pointed that out.

Here's what we did. We worked with the Office of Management and Budget to make sure that if farm policy was going to be a priority that it would fit within the President's plan to balance the budget within five years. We would not have been allowed to release that farm bill proposal if we did not fit.

To this president, this is a priority for him, and he feels very strongly about doing what we can. Now here's the important thing though. He made adjustments throughout the other area of the federal budget so he could fit us in and fund things like cellulosic ethanol, better nutrition services, $7.8 billion in additional conservation funding, again because he believes in these priorities.

The other thing I would say is that, again referencing the House bill, if you went the full boat they are way over. I mean they are $36 billion over. If you discount the current bill and recognize the funding for the gimmicks and whatever else is out there, it looks to me like they are still over baseline if you treated those things appropriately.

So there's where we're at, and then the final thing I would point out is that our proposal actually spends $17 billion less than the '02 Farm Bill. So just about on any score it was just a solid, paid-for Farm Bill proposal that we released in January.

In reference to the story that you refer to, first thing let me point out that was a GAO analysis. The GAO did not accuse anybody of fraud or anything like that. The headline is always kind of catchy because it conjures up this image almost like Social Security, and I'm not saying this happens, but that somehow payments just continued going and going and going, somebody was deceased and nobody was paying a bit of attention, and we just kept sending out checks.

Our farm programs don't work that way. Our farm programs are directed at the farm operation, and in some cases, in fact in probably most cases, there's multiple members of the operation. There could be a father and sons and daughters and everything else working in that farmer's operation.

One of those operators could pass away and you could have an estate that you're dealing with. But, for example, in the case of direct payments or if you're entitled to countercyclical or loan deficiency, it doesn't mean that payment ceases on the date of death because we again make the payment to the operation.

Now we take these suggestions by GAO very seriously. Last May we started a process of checking all of the outstanding estates that are out there, and some estates can stay open for a long time because there might be a challenge to the will, or whatever else, a challenge to the distribution, a lot of things can happen. But we're trying to identify where those issues are at and identify why that estate hasn't been closed. We should be able to have a nationwide report on that I believe before the end of the year so we can really get down to what that GAO report is about and identify where there are issues and where there aren't.

But again, legitimately we can make payments following the death because again, what we do with our farm programs relates to the farm operation in most respects.

MODERATOR: Next question is from Sally Schuff of Feedstuffs Magazine. Standing by should be Christopher Doering. Sally, go ahead, please.

REPORTER: Good morning, Mr. Secretary. I would like to ask you about the policy debate versus the political will on this bill. Your proposal has certainly elevated the policy debate, but during committee action of the House it was firmly rejected, and the bill that the House Committee appears to have a great deal of momentum, a great deal of support from a wide-ranging farm organizations, do you have any indications at this point of any changes of heart during the floor debate? Do you have a sense of confidence that the amendments that will be offered on your five key points will prevail?

SEC. JOHANNS: I'll offer a couple of thoughts, Sally. I'll start out and very respectfully take issue with your statement that our proposals were firmly rejected and in fact point you to item after item, title after title, where not only were our proposals adopted in the House version, but in many cases our actual language from the legislation we sent up was adopted. And needless to say, we feel very good about that. And I said that when I appeared before the committee.

The commodity title is always the most challenging title whether you're the chairman of the House Ag Committee, the Secretary of Agriculture, whoever. But even there, for example when we released our proposal and said we're going to put our support behind a revenue-based countercyclical, I think most people said, fat chance! Guess what; it's there! It gives the farmer the option which is a different approach, but even at that I think the way this was scored there's an anticipation that the majority of farmers will pick our option, our revenue-based approach. I feel really good about that.

The AGI approach was adopted, not the numbers. We want the numbers to go further, and we believe that people in America want the numbers to go further. But the methodology was adopted. Again, we thank the House Committee for that. We appreciate that.

And again, you can just go item by item, and there are very important things. Three Entity Rule was eliminated. Again, that was a proposal we made, and we feel very good about that. Direct attribution was a proposal we made, and that was adopted in the House version.

So again, you just work through this, and we feel very, very pleased about the things that were included. But we've got some basic issues.

Now the issue of what happens now. Well, we know some things for certain. One thing we know for certain is that the area we're working in now is on the House side. The Senate has not released a mark yet. I know Chairman Harkin and his team have been working diligently, and I'm anticipating that that mark will come out in the not-too-distant future, hopefully after the August recess. And we're anxious to work with Chairman Harkin, and we have already. So there's a whole separate process out there.

The other thing, Sally, that I think is weighing very, very heavily on the debate-I happened to walk into the House Ag Committee debate, and I assure you it was completely unplanned. I came straight from a White House meeting that took longer than I thought it was going to, and I wanted to stop by and just say thanks to the committee because a they had been working around the clock to try to get this together. But I happened to walk in when Congresswoman Musgrave from Colorado was offering a Sense of the House resolution that said, We won't raise taxes to pay for a this Farm Bill. It was ruled "not germane."

Now, with 20/20 hindsight, and that's always more perfect than being there at the time that might have been the most germane thing that was offered that day because you know what? We're ending up with a situation where we've got a tax increase to pay for the Farm Bill.

Now some out there may say, But Mike, I favor that tax increase, and that's fine. But our policy is that we don't.

And so now you're off to a situation where even if it's hidden in a rule process, or whatever, what members are going to have to deal with are saying, Yes, I voted for higher taxes because we could not bring a Farm Bill in that truly did fund the important priorities and meet the baseline obligations that we had.

And I just think that is a very, very difficult message. So we'll see. We're going to do everything we can to work with the House and the Senate and in the end like I said we want to take a bill to the President that we're all proud about, and he wants to sign a bill. He wants to sign a Farm Bill before the year is over.

But the issues that I've raised today are fundamental, core issues. They are not a little incidental thing here and there. They are serious problems with the way this bill was put together, and we feel strongly about that.

Higher taxes when you have very little reform is just a very, very difficult message.

MODERATOR: Christopher Doering of Reuters has the next question. He'll be followed by Ken Dilanian. Christopher?

REPORTER: Thank you, Mr. Secretary, for taking my question. I understand that Deputy Secretary Chuck Conner attended a briefing yesterday on the new Kind-Flake amendment. I want to see if you can tell me what the meeting was about and what do you see in terms of the success of the Kind plan going forward?

SEC. JOHANNS: Here's what the meeting was about. We were asked by Congressman Kind and/or Flake, I'm not exactly certain who extended the invitation, to come by and talk to staff people on the Hill about our AGI proposal. I think he talked about beneficial interest, and I think there was one other issue that he visited with them about just to explain the administration position.

There were some I think who started the rumor that we had endorsed the proposal. We had not.

Now, having said that, we've done briefings like that on the Hill for the last five months. I've done some of them myself, Deputy Conner has done some, our chief economist has done some. I think literally my entire subcabinet with very few exceptions has been up on the Hill offering that same kind of briefing. And so that's what occurred.

Let me offer a thought or two about the Kind-Flake Amendment. As you know, they came out yesterday with some ideas as to what that amendment is now going to look like as it makes its way to the floor, and they've moved in the direction of the administration proposal on some really key issues - AGI being one of them. We're at $200,000; I think their proposal is at $250,000. We see that as positive. We see that as a real attempt at reform, no doubt about it.

Now they are still higher on the AGI than we're at, and I can point out differences here and there, but I would not criticize these congressmen in terms of their effort toward reform. I think they've made a genuine effort toward reform.

I believe because of that they are going to pick up some support on the House floor. Now how much, you know we're not counting votes. I'd leave that to somebody else. We try to articulate what we think is good policy and educate and offer ideas as to how that policy might work and answer questions when they arise. Somebody else is going to count the votes.

But it just seems to me that in this time where I think there's been more discussion about reform than any Farm Bill in history, they are making a case that they are working toward reform, not quite to where the Administration is, and I think that's going to gain some momentum when the debate starts and the votes are taken.

REPORTER: Thank you.

MODERATOR: Next question is from Ken Dilanian from USA Today. And standing by is Philip Brasher. Ken.

REPORTER: Thanks, Mr. Secretary. Could you explain to the general reader who doesn't understand the nuances of this policy why it is that you think the House Agriculture Committee, both Republicans and Democrats, so completely disregarded some of the key Bush reform proposals. Do you agree with, for example, Representative Kind who said that that the Ag Committee is essentially a captive of entrenched interests and that they are not going to produce reform?

SEC. JOHANNS: No, I never said that. I support farm programs, and I will to the day I die. I also want to be very clear, although I can say some positive things about Kind-Flake we support the Administration proposal. We worked hard on it for two years. And I believe as strongly about that proposal as I did the day I released it.

Again what I would point out to you is, there's many key areas that were adopted through the process of working with subcommittees. We don't call a news conference when we sit down with the subcommittee chairman, and he or she says, "You know I like your idea; we're going to put that into our proposal." And that happened with a fair degree of regularity, and I will tell you we appreciate it.

We see many instances in the House version that incorporated key administration proposals. The revenue-based countercyclical was about as key to our proposals as you get, and it's there; it's an option. And like I said, it was scored in a way where it looks like more than a majority of farmers are going to adopt that option. We feel really good about that.

We feel good that the methodology relative to the AGI was adopted. We don't think the number is reform-oriented enough, but the methodology was adopted. Again, I don't think there's any piece of our proposals that got more attention than our AGI approach, and many at the start of this debate said, well you won't see AGI in the final House bill. It's there -- like I said, not at the level we want, but the mythology is there. The Three Entity Rule was eliminated as we proposed, direct attribution was adopted.

So I just really disagree with your premise. But here's the point I'm making today. There are some key fundamental issues here that are very, very troublesome. They kind of go to this Farm Bill, and we want to see those issues addressed.

Now there's a lot of process left. We've got House, and then we've got Senate process, conference process. We're going to work as hard as we can with the House and the Senate to get those addressed. And this is a step-by-step process, but I have to tell you what I've seen so far in terms of key proposals being adopted has been gratifying. But we just need to get these other issues and deal with them, and we'll work with the House and the Senate to get there.

MODERATOR: Philip Brasher of Des Moines Register has the next question. He'll be followed by Matt Doetsch. Philip, go ahead.

REPORTER: Yes, Mr. Secretary. Could you address on the payment limits specifically how you all have assessed this? Of these, how much is actually saved with these farmers or landowners with AGIs over $1 million, the ones between $500,000 and $1 million? How much money is saved from that? And is there any savings from the - I just have three questions here - any savings from the Triple Entity?

SEC. JOHANNS: I'm going to ask Dr. Keith Collins, who is sitting next to me, our USDA chief economist, and he's got some information that I think he can bring to bear on your question, Philip.

DR. KEITH COLLINS: Philip, the best I can do here is point you in the direction of the Congressional Budget Office which is now the important scorekeeper in the evolution of the Farm Bill. And if you look at their estimate for the combined payment limit AGI provisions that are in the House Bill, over 10 years it's a savings of $550 million. Of that $550 million, $473 million of it would be due to the AGI proposal of excluding people with $1 million or more and between $500,000 and $1 million, if they have a farm income below 66.7 percent.

And so the difference between the $550 and the $473 million, which is $77 million, that would be due to the payment limit part of it, not the AGI part.

MODERATOR: Matt Bilds (ph) from KRVN Radio has the next question followed by Jim Weisemeyer. Matt?

REPORTER: Mr. Secretary, my question for you is, what will we do for producers if we can't get the bill through the House and the Senate before the expiration of the current Farm Bill? What do we tell them, and how will we approach that?

SEC. JOHANNS: Well, we've got a ways to go, no doubt about it. Here's the ins and outs of that. If you flat could not get any action, you literally revert back to the 1949 Farm Bill, and I don't think anybody is interested in reverting back to the 1949 Farm Bill.

But that would be the bottom line. I mean if this thing, just nothing happened, nothing, nothing, nothing, you'd revert back to that.

Now the other thing I will tell you is that it's not unusual that Farm Bill reauthorization will actually extend into the year following the last year of a Farm Bill. For example, I think the '02 bill was actually done in May of '03 if I'm not mistaken. No? May of '02? So these things can extend, and so that's possible although I have to tell you that I think the spirit is such that people do want to try to work through these issues and solve problems.

And like I said we've only seen half of the process at this point. Now after the House is done, we go to the Senate.

MODERATOR: Jim Weisemeyer of Informa Economics is next, followed by Bill Tomson. Jim?

REPORTER: Yes. Secretary Johanns, if my research is correct, not including a major bill that President Ford vetoed, this would be the first omnibus farm bill vetoed by a president since 1956. I was in the second grade at the time, and I remember it well.

Let's cut to the chase. If the House Farm Bill is approved without major amendments on the House floor, do you and the Administration have the votes to override any veto? My congressional sources say you do, and if that's the case I guess I can conclude that you would prefer an extension of the 2002 Farm Bill over the pending House Farm Bill. And some people say that may play into what cotton and rice producers actually want and secretly what Chairman Petersen may have wanted from the beginning. Can you comment?

SEC. JOHANNS: Jim, I just would want to comment that you're pointing out that you were in second grade at that point. You are vastly older than I am, so I want everybody on the line to know that. If I could, Jim, though, to get to your question, this idea of extending the '02 bill as you know has come up on various occasions, actually pretty much from the time I arrived here two and a half years ago, certainly within the last year and a half. We've never favored that.

We just feel very strongly that the '02 bill structure is supported by farmers, but what we heard in the Farm Bill Forums is that there's many opportunities to improve the bill.

And so our preference is to continue our efforts to work with the House and the Senate. These are tough issues. They should be tough issues. This is a debate that comes by only once every five years. It's important that we have a full debate and that the administration weigh in and the House and the Senate and everybody get to say their piece. That's why we felt so strongly about doing the forums so we could start by farmers saying their piece.

So our goal is still going to be to get a bill that we can be proud of that we can put on the President's desk that he can sign. He wants to sign a bill before the end of the year, and I want to do everything I can to help him get that bill so he can sign it. So please do not assume any preference toward extension of the '02 bill. I've spoken as very specifically as I can that we do not support that approach. We do not support an extension of the '02 bill.

MODERATOR: And our final question today comes from Bill Tomson of Dow Jones. Bill?

REPORTER: Hi, Mr. Secretary. You talked about this before, but I wasn't quite clear. How did, A. or one, how did you plan to pay for that extra $5 billion above the baseline? Was that, again I'm assuming it's not with a tax increase. Would it be with an offset?

And B., okay forget B. That's it.

SEC. JOHANNS: No, Bill, that's a very good question. Here's how we did our process. We recognize that the Department of Agriculture is a piece of the overall federal government, and so we built our farm bill proposals in lockstep with Rob Portman and the Office of Management and Budget. And ultimately what we were trying to achieve is the balancing that takes place in creating a whole federal budget plan that balances the budget within five years as the President has set as the goal, but funds important priorities.

We were able to make the case that U.S. agriculture, our farmers, were an important priority, that our nutrition programs were an important priority and our conservation programs and our energy programs, and in the overall picture of the federal budget and the President's plan to balance the budget we were able to convince them to allow us to go $5 billion over the baseline.

Now every opportunity I got I pointed out to them that we'd be spending less than the '02 bill spent, and in fact we do by about $17 billion. But that's how it all fit together. And so on the day I released the Farm Bill, I was authorized by Director Portman to say, Yes, we have been able to make the case that these priorities are important and should be funded, we've done reform, we've got a strong safety net for farmers, we've done all those things. And yet this Farm Bill is paid for and it fits within the President's plan to balance the budget in the next five years."

MODERATOR: Thank you, Mr. Secretary. Any other concluding thoughts?

SEC. JOHANNS: Just, again thank you everybody for being on the line, and again let me express to you my appreciation for your patience in getting started a few minutes late.

MODERATOR: Secretary of Agriculture Mike Johanns. I'm Larry Quinn bidding you a good day from Washington.