Congressional Budget for the United States Government for Fiscal Year 2008

Floor Speech

CONGRESSIONAL BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL YEAR 2008 -- (Senate - March 21, 2007)

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Mr. GRASSLEY. Mr. President, I rise to offer an amendment on the agricultural portion of the bill to provide payment limitations on payment to farmers. The American people recognize the importance of family farmers in our Nation and the need to provide an adequate safety net for family farmers. That is what a farm program is all about.

In recent years, however, assistance to farmers has come under increased scrutiny, and it should. Take a look at some of the headlines that ran last year on the front page of the Washington Post. The first headline reads:

Farm program pays $1.3 billion to people who don't farm.

That is going to make any taxpayer, rural or urban, mad because the general assumption is that farm programs support family farmers and do not go to people who don't farm.

A second headline reads:

Federal subsidies turn farms into big business.

In other words, the Federal taxpayers are paying to help big farmers get yet bigger.

The article goes on to say:

The shift in subsidies to wealthier farmers is helping to fuel this consolidation of farmland. The largest farm's share of agriculture production has climbed from 32 percent to 45 percent, while the number of small- and medium-size farms has tumbled from 42 percent to 27 percent.

These were just a couple of headlines from a series of articles from the Washington Post on waste and abuse in farm program spending.

Critics of farm payments have argued that the largest corporate farms reap most of the benefits of these payments. What is more, farm payments that were originally designed to benefit small- and medium-size family farms have contributed to their own demise. Unlimited farm payments have placed upward pressure on land prices and have contributed to overproduction and lower commodity prices driving many family farmers off the farm.

The law creates a system that is out of balance. This is pointed out in the chart I have, which shows that we have a system where 10 percent of the farmers--10 percent of the farmers--maybe I should say just 10 percent of the farmers get 72 percent of the benefits, and the top 1 percent of the biggest farmers get almost 30 percent of the benefits. I believe we need to correct our course and modify the farm programs before those programs cause further concentration and consolidation in agriculture and lose the support of urban taxpayers because without their support, we could not have a farm safety net.

Today, most commodities are valued off demand. Markets dictate profitability. When farmers overproduce by planning for, according to the farm program, whether its a loan or the LDP Program or whatever it might be, then markets are not functioning.

I mentioned earlier that the Federal farm programs are influencing land prices across the country. Iowa land is now selling for between $4,000 and $6,000 an acre in counties near my home of New Hartford, IA.

When I was chairman of the Senate Finance Committee, before the last election, I was also a member of the Budget Committee and the Agriculture Committee. I have used those committee positions as opportunities to file amendments that I believe will help revitalize the farm economy for young people across this country.

My amendment today will put a hard cap on farm payments at $250,000. The average taxpayer listening to me might say: What planet did you come from--$250,000 is an awful lot of support. But I am saying in comparison to limits that are now in the bill of $360,000 and legal subterfuge to get around the law to allow some farmers to get millions of dollars. So this is a $250,000 hard cap--still too high for some family farmers but a compromise that has gotten through this body in the past and I am counting on getting through this time.

No less important, this will close those legal subterfuges or loopholes--whatever you want to call them--that have allowed large operations to evade even the $360,000 limit and, as a result, receive benefits many times larger.

To remind everybody, I voted against the conference report of the present farm bill in the year 2002, and this was one of my many reasons, because it did not have this hard cap in there, even though it passed the Senate. I have been fighting to reduce large-scale subsidies for over 30 years. If one looks at the Congressional Record in the 1970s, it will show I was leading in that area. More recently, I worked with the good Senator from North Dakota, Mr. Dorgan, on a similar measure in the 2002 farm bill, and it passed with bipartisan support of 66 to 31. That amendment, as I said, was taken out in conference. So I urge my colleagues to check their past votes on this issue during the last farm bill debate.

One section that was added in the farm bill was section 1605, which set up a Commission on the Application of Payment Limitations for Agriculture. The purpose of the Commission, after the failure of our legislation in 2002 in the farm bill because it didn't come out of conference, was to set up this Commission. The purpose of the Commission was to study this issue. The Commission also said that the 2007 farm bill is the time for these reforms to be made as part of the change to permanent law. So that is why it is legitimate to have it as part of this budget debate.

Congress enacted the Agricultural Reconciliation Act of 1987, called the Farm Program Integrity Act, to establish eligibility conditions for recipients and to ensure that only entities engaged actively in agriculture receive farm payments. To be considered actively engaged in farming, that act required an individual or entity to provide a significant contribution of inputs--capital, land, equipment--as well as significant contributions of services of personal labor or active management to the farming operation. But people have been able to find loopholes around this act, facilitating huge payments that our hard cap is meant to overcome.

I held a hearing through the Finance Committee on a Government Accountability Office report that was released about 3 years ago, April 24, 2004. The GAO report recommended that measurable standards and clarified regulations would better assure that people who receive payments are, in fact, engaged in farming.

Of the $17 billion in payments the USDA distributed to recipients in 2001, $5.9 billion went to just 149,000 entities. Corporations and general partnerships represented 39 and 26 percent of these entities respectively.

Here is an example from the March 2005 Washington Post article of someone who qualified for payments. I quote from the newspaper:

If the purpose of farm subsidies is to make family farms viable, it's hard to see why payments of more than $400,000 a piece should have gone to 54 deceased farmers between 1995 and 2003, or why residents in Chicago should have collected $24 million in farm support over that period.

This type of arrangement, and others such as that, raises questions about the interpretation and enforcement of the 1987 act's requirements that each partner be actively engaged in farming. This is why I wrote the Government Accountability Office to conduct that study I referred to on which we held a hearing in the Finance Committee. I encourage Members of this body to take a look at that report as well.

During past markups of the Senate Budget Committee, I was able, with the help of the current chairman, Mr. Conrad, to include a sense-of-the-Senate amendment expressing support for stronger farm payment limits. The proposed amendment would cap Farm Commodity Program payments at $250,000 a year per person during any one year. This would encompass direct payments, countercyclical payments, loan deficiency payments, and marketing loan gains. Gains from commodity certificates will be counted toward limitations, closing another very abusive loophole, particularly those farming in cotton and rice.

By adopting this amendment, it could save the taxpayers over $500 million in savings over a 5-year period of time and more than $1 billion over 10 years. With these savings, the amendment that is being presented by Senator Grassley and Senator Dorgan would put money toward conservation, nutrition, research, value-added agriculture, and renewable energy programs.

The budget resolution before us provides a very much needed reserve fund for the farm bill of $15 billion. Every penny of this fund will be needed if we are to adequately respond to the major needs and opportunities to increase energy independence, restore cuts in conservation, improve farm income through value-added grants, reduce hunger, and invest in the future of food and agriculture through cutting-edge research.

However, the reserve fund is conditioned on offsets. The amendment I am offering is part of the solution to this reserve fund dilemma. A vote for this amendment, then, will help us get a better farm bill done, not just to help farmers but to help the entire society as it includes so much that benefits people just beyond agriculture.

Not only has the Senate previously agreed to payment limit reform, but the President, in his past budgets--I think at least the last 3 years--has supported a broad set of savings proposals recommending reduction in subsidies for larger, more financially secure farmers and promoting more efficient production decisions, although this year the administration proposed that no one should get farm payments if they have an adjusted gross income of over $200,000 a year. That is just another way, and not a bad way, but another way of getting what I am trying to get through this hard cap. So I don't find fault in what the administration is proposing in that area. I think the administration is proposing a very good bite and another bite at the apple.

I have been hearing directly from producers for years exactly what the Secretary of Agriculture heard at his farm bill forums. We are hearing that young producers are unable to carry on the tradition of farming because they are financially unable to do so because of high land values and cash rents.

Neil Harl, a distinguished agricultural economist at Iowa State University and one of the contributors to the Payment Limitation Commission, wrote this:

The evidence is convincing that a significant portion of the subsidies is being bid into cash rents--

Making the cash rents higher--and capitalized into land values.

All making it very difficult for new, young farmers to get started in farming. If investors were to expect less Federal funding or none at all, land values would likely decline, perhaps by 25 percent.

On March 20, 2005, the Atlanta Journal-Constitution printed this:

As time has gone by, smaller farmers most in need have received less and less of the government's support and corporate-like farms more and more.

By voting in favor of this amendment, we can restore the cuts that were made to conservation, rural and renewable energy programs during the markup of the Ag section of reconciliation. We can allow young people to get into farming and lessen the dependence on Federal subsidies. This will help restore public respectability for Federal farm assistance by targeting this assistance to those who need it, where it has traditionally been over the 70 years of the farm program.

Before I close, I wish to remind everyone who voted against a similar amendment during the 2005 reconciliation vote, the argument that we need to wait until the farm bill debate is not going to work anymore--that was the argument some people who changed their vote used at that particular time--because this is the year of farm bill debate. This is the budget that contains the baseline for the farm bill that we are going to pass this year.

Let's stop kicking the can down the road and say we have to wait until the farm bill debate. The here and now is the here and now. How can you say you are for conservation or you are for renewable energy or you are for child nutrition--that you are for all those things and then come to the floor and vote the opposite way? This is an opportunity to show to the people of this country we are not going to subsidize the biggest farmers getting bigger, wasting taxpayers' money, keeping young people off the farms and out of the farming profession and bringing ill-repute to a farm program that it takes city folk, represented in the Congress, to vote for in order to sustain the safety net for farmers.

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Mr. GRASSLEY. Madam President, I appreciate very much that the Senator from Texas has offered his amendment. I support it. I supported it during the Budget Committee's markup of the legislation that is before us right now, and I am happy to support it on the floor.

This amendment adds a new reserve fund which identifies some very important priorities that complement the reserve fund in the legislation that has come out of the Budget Committee.

The reserve fund in the budget stipulates the legislation reported out of the Finance Committee must ``maintain coverage for those currently enrolled in [the State Children's Health Insurance Program].''

As my colleagues in the Senate know, this current population includes children, pregnant women, parents, and childless adults. The cost of extending coverage to these populations has been roughly estimated by the Congressional Budget Office to require a net increase of budget authority of approximately $8 billion.

The Cornyn amendment would put kids first--after all, wouldn't you think that is what the State Children's Health Insurance Program ought to do, put children first--prioritizing lower income children and limiting the use of State Children's Health Insurance Program funds for nonpregnant adults unless States are covering those children.

We will have to make some very difficult choices when it comes to the limited funds available for the SCHIP. The cost of covering children who are uninsured but eligible for SCHIP continues to rise.

According to the Center on Budget and Policy Priorities and their analysis--and this was in a recent memo from the Congressional Budget Office--it will take $47.5 billion to cover the estimated 6 million children who are uninsured but eligible for either SCHIP or the Medicaid Program. To quote the center, even this figure is ``too low''--those are their words: ``too low''--because it does not include the cost of the policies necessary to increase enrollment in Medicaid and SCHIP.

Given the priorities placed on pay-as-you-go and the limited offsets available to pay for increased SCHIP spending, it appears some priorities have to be set. We are faced with that every day--setting priorities, that everybody cannot have everything they want.

Republicans have taken the position--and I emphasize that position--we want to prioritize putting kids first. So I support Senator Cornyn's emphasis upon this key principle.

I also agree with the language in the budget that would support States in their efforts to move forward in covering more children. However, this language can be improved by emphasizing that reauthorization should make State flexibility a priority. With State flexibility, we can get more bang with the State's money, we can get more bang for the Federal dollars going into the program. We found that in Medicaid last year when a bipartisan group of Governors came to me, when I was chairman of the Finance Committee, and sat down and said: If you can give us more flexibility in Medicaid, we can save State tax dollars, we can save Federal tax dollars, and we can serve more kids who have need--because States know what their local situation is, they know better than we do in Washington to get the most bang for the taxpayers' dollars. So we can do the same thing for the SCHIP program by giving the States greater flexibility.

Much of the success we have seen relative to the SCHIP program is because the Congress gave States the authority to manage the SCHIP caseloads, to control costs, and to experiment with innovative strategies to increase access to health care.

This country is so geographically vast, our population is so heterogeneous that if you try to make all policy by pouring policy in the same mold in Washington, DC, it is not going to fit New York City the same way it might fit Des Moines, IA.

But we ought to give those States in the case of New York, Albany, and in the case of Iowa, Des Moines, give those leaders, Governors and State legislatures, some leeway so we get more bang for our buck.

Reauthorization then should build on the State flexibility that was already there and should be a key feature of the priorities set in the budget.

Finally, given my zeal for oversight, meaning congressional oversight of what our bureaucracy does and how the taxpayers' money is spent, I must also commend the Senator from Texas for including, as a priority for the SCHIP reauthorization, improving and strengthening the oversight of Medicaid and SCHIP to prevent waste, fraud, and abuse. We have made improvements to preventing waste, fraud, and abuse, but we can certainly do more. We can always do more.

I commend the Senator for his amendment. It builds on the language already in the bill, and I urge my colleagues to vote in favor of it.

I reserve the balance of the time on our side.

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