Senate seeks farm bill funds to avoid veto

By Charles Abbott

WASHINGTON (Reuters) - Senators are looking for a revenue package to pay for the new $286 billion farm law and avoid a threatened veto by the president, Kent Conrad, a senior member of the Finance Committee, said on Thursday.

The White House nominee for agriculture secretary, Ed Schafer, offered to work with Congress to resolve an impasse over tax increases and tighter subsidy rules for the farm bill.

"I know the president wants to sign a new farm bill this year," said Schafer at a Senate Agriculture Committee hearing on his nomination. A former two-term governor of North Dakota, he could be confirmed as secretary as early as next week.

Conrad, a North Dakota Democrat, said the tax-writing Finance Committee was compiling a list of revenue-producing proposals that could be used. The list contains ideas that passed either the House or the Senate or were proposed by the White House in the past, but were never enacted.

"There is a very serious effort under way to identify new revenue sources for this bill that would be totally noncontroversial," said Conrad. "The goal at the end of the day is to have enough to fill the gap."

The White House says it will veto the farm bill if it raises taxes or fails to end crop subsidies to the wealthiest Americans. It says Congress is trying to raise taxes instead of closing loopholes to pay for billions of dollars in larger public nutrition, biofuel and land stewardship programs.

Administration officials are "very inflexible" in their demands, said Conrad, when compromise is needed. He said two revenue ideas from the Senate farm bill may resurface in the new package -- tax credit bonds and a requirement to show "economic substance" in some tax-sheltered transactions.

Agriculture and Finance committee staff met on Thursday "to find alternatives for funding that will be acceptable to the House, Senate and White House," said a spokeswoman for Agriculture Chairman Tom Harkin, Iowa Democrat.

The House failed on Wednesday for the second time to override President George W. Bush's veto of a children's health care bill.

During the Agriculture Committee session, Harkin said, "I believe we will reach agreements and get a (farm) bill to the president in short order."

Finance Committee chairman Max Baucus, Montana Democrat, asked Schafer to get the White House to modify its veto threat and allow additional revenue in the farm bill. Baucus left the hearing before Conrad disclosed the work on revenue alternatives.

A Republican, Schafer has no direct experience in agriculture but one of his home-state senators, Democrat Byron Dorgan, said "governing a farm state like North Dakota has prepared him well."

Schafer said he would work as secretary to "enhance our country's vibrant agricultural economy (and) advance renewable energy."

"I will devote myself to improving nutrition and health, enhancing rural infrastructure, promoting good stewardship of our national forests and conserving our natural resources," he said.

(Reporting by Charles Abbott; Editing by David Gregorio)