Monday, October 20, 2014

Speak Your Piece: Let's Fight a Rigged Game

01/17/2008
Senate painting T. Dart Walker

Spending Uncle Sam's Money/Painting by T. Dart Walker
Image: U.S. Senate

Will they do it again?

Remember, before Christmas the Senate failed to put real payment limitations on commodities (corn, wheat, soybean, cotton and rice) into the Farm Bill. It was one of those cases where those favoring the limits won the battle and lost the war. Of the Senators, 56 voted for payment limits, 43 voted against (Sen. John McCain, a supporter of the limits, was out-of-town with his presidential campaign). And, just like that, the Dorgan-Grassley amendment to the Farm Bill -- crafted to achieve real payment limitations -- went down to defeat.

You might ask, how is it that you can lose when you have 56 and they have 43? More on that later. For the moment, the point is that a minority prevailed over a majority on a matter that literally is overwhelming the ability of small and medium-sized farming to survive in America.

Now Congress is back in town. There are negotiations going on between House and Senate, and between Congress and the White House. There is still a chance that the majority could win, the farm program could be reformed and rural America could benefit.

Or Congress could scuttle reform — again.

Those involved in agriculture understand, with great precision, how programs for income supports and commodity credit loans work. Many others, including a large percentage of those living in rural America, are confused beyond words about what is involved here. There are three different and related elements to the program. They involve:

1. Direct Payments. These are payments made directly to a given farm based on the number of acres in production. The current effective cap is $80,000. The Senate version of the new Farm Bill maintains this level while the House version actually raises the cap to $120,000. Note: Under the current Farm Bill, a variety of loopholes renders the $80,000 number sheer fiction.

2. Countercyclical Payments. When commodity prices slip below targets set for them, farmers are eligible for countercyclical payments. Right now, this is not much of an issue since prices are strong. Under current law, you can receive as much as $130,000 in these sorts of payments. The Senate bill imposes a slight reduction, to $120,000, while the House bill leaves the limit at $130,000, except for single farmers whose limit is cut in half. How's that for Congressional logic? Think for a minute about a single farmer paying alimony and child support"¦. You are tempted to just laugh out loud.

3. Loan Deficiency Payments. This is where the real fun and games begin. A farmer borrowing money does so with an expectation the loan can be repaid due to the crop being sold at a particular price (or better). When that does not happen, it becomes hard to repay the loan. Currently, in name only, loan deficiency payments are capped at $75,000. However, in reality, a loophole called "generic certificates" allows for unlimited payments. In a startling fit of transparency, both the Senate and House versions simply eliminate the cap entirely and remove inclusion of these payments from the calculation of any limit.

government farm subsidiesU.S. farm subsidies 1997-2007 Countercyclical & loan deficiency payments in green
Source: ERS

Though it's hard to untangle these new rules, here's an effort to simplify the facts without distorting them. The Farm Bill reported out of committee in the Senate actually increased payments available to farmers. The claim is that the limit was reduced from $250,000 to $200,000. At first blush, it might appear that way. Nothing could be further from the truth. "¦

What happened is that direct payments and countercyclical payments were set at the $200,000 limit. Then, loan deficiency payments disappeared from inclusion in the determination of limits; the new bill would eliminate them from being factored into the equation in any way. So instead of a cap (in name) of $250,000 that DOES include loan deficiency payments, we now have a cap of $200,000 but one that allows UNLIMITED dollars to be paid as loan deficiency payments. Just like that, the rich get richer—all at taxpayer expense.

Against this backdrop comes the proposal from Senators Byron Dorgan (D-North Dakota) and Chuck Grassley (R-Iowa) to achieve real limits. The Dorgan-Grassley proposal would have limited direct payments to $40,000, countercyclical payments to $60,000 and loan deficiency payments to $150,000.

In a system that presently awards 73 percent of payments to the top 10 percent of farms, you might think Dorgan-Grassley could hardly fail. Supported by environmentalists, public opinion polls (including actual farmers), organizations dedicated to family farms (the moral equivalent of small business in political terms), academic experts, rural community groups, and virtually everyone other than large corporate agribusiness and a handful of cotton and rice farmers, you could even be tempted to think success would be hard to avoid. Ah, but it is such thinking that misses the charm of Washington, D.C. being 15 square miles surrounded by reality. In politics, those with resources, who are willing to fight the hardest, tend to win.

So, now we have a Senate Farm Bill where direct payments and countercyclical payments can increase to $200,000 and loan deficiency payments will be made but not factored into any limits.

Taking a step back, you might wonder a little why this is even a problem, just as long as the small and medium-sized farmers do get what they deserve under the formula. From my perspective, the answer is clear. Using taxpayer dollars, huge agricultural interests are furthering their economic gains at the cost of a viable and diverse rural America.

increasing farm land valuesChanging price of U.S. farmland
Source: USDA

How can such a statement be made? With a fair degree of certainty and a ton of facts to support it. A recent Kansas State University revealed that agricultural land values have increased 64 percent since 2002. How can it be that land values in areas with declining populations have risen by nearly two-thirds in less than five years? The farmers in the top ten percent, those receiving almost three-quarters of the crop insurance payments, are bidding up the price of land. With land values skyrocketing, cash rents (the money paid to landowners by farmers for farm property they do not own themselves) are also going through the roof.

rising cost of cropland rentRising cost of cropland rent (1998-2005)
Source: USDA

What does this all mean to rural America? It means that small and medium-sized farmers are being priced out of the market, because their larger competitors are using tax dollars to alter dramatically the economics of farming. It means that fewer and fewer people are involved in actual farming. Where communities are dying and populations decreasing, land values are going up; if we keep heading in this direction, corporate agriculture will be the only game in town.

If an agricultural enterprise grows and grows as a result of being smart and efficient, most people won't complain (some might). But we all ought to be able to agree that this kind of success is not the same as the rich getting richer merely because of a game that's rigged -- so that a handful of large enterprises are set up to get the lion's share of federal dollars dedicated to crop insurance.

Is there anything that can be done? It would be nice if the Senate would not allow a Senator to get the benefits of a filibuster without actually engaging in one. Remember the 56-43 vote mentioned at the outset, the vote where 56 Senators voted for real payment limitations, but needed 60 to prevail? This was the result of Senate Majority Leader Harry Reid (D-Nevada) yielding to the threat of Senator Blanche Lambert Lincoln (D-Arkansas) that she would filibuster. Instead of testing this threat, instead of determining if there were some Senators who might agree with Senator Lincoln on payment limitations, but who would also support limiting debate so the entire bill could go forward, Senator Reid agreed to the equivalent of a "rule" that would require 60 votes for passage. That sort of leadership is hardly helping rural America.

doney and elephant
Bipartisanship --Democratic donkey and Republican elephant
greet U.S. election watchers in New Delhi, India, November 2004

Just so this does not come across as a partisan attack on Democrats, let me be clear: there were certainly Republicans who failed to support payment limitations, despite their past fights to limit government payments. Whether it is Senator Judd Gregg (R-NH), or Senator Tom Coburn (R-Okla.), or Senator Jim DeMint (R-SC), or several others who might be mentioned, the point is clear. The success, or failure, of payment limitations is entirely bipartisan in nature. Surely, each of these individuals has reasons for opposing payment limitations. Many of these senators have reputations as budget hawks and friends of small farmers, but they spit the bit on this issue. We need to convince these folks that we are right on the merits and right on the politics of payment limitations.

So, is there hope of anything better happening? Ever the optimist, I surely would like to think so. It is a fact that the growing of cotton and rice (predominantly done in the south) involves different economics than the growing of corn, wheat, and soybeans (primarily outside the south). In simple terms, it costs more per acre to grow cotton and rice than it does to grow corn, wheat, or soybeans. My answer to the problem is simple. Give cotton and rice growers a 2-1 deal where they can get twice as much in payments as their counterparts growing corn, wheat, and soybeans. It seems to me that a reasonable Senator from the south, one opposed to the $250,000 proposal, might indeed come to conclude that $500,000 is sufficiently generous. Maybe this is not the magic number. Maybe there is a better number. What ought to be clear, no matter what, is that we need real payment limitations, and we need them now.

The threat of rural America's continuing decline ought to be enough to have citizens everywhere, but especially in rural America, demand Congress do the right thing. There's only one reason that we don't have payment limitations: those who oppose them have fought and will fight tooth and nail. Those who would benefit from them, even those directly involved in agriculture, have not shown the same resolve and commitment. The numbers are on our side. The votes are on our side. However, we've sat on the sidelines and watched the rich get richer at the expense of everyone else.

The challenge is pretty clear to me. Unless and until those of us who are dedicated to assuring there is a viable rural America decide to engage in a multi-faceted, ongoing campaign to achieve payment limitations, we will only see more of what we have now. We need a fully funded effort that involves coalition building, direct lobbying, media outreach, advertising, a strong Internet presence, and more. It has to be structured in a way that assures that those putting their money into the effort and those supporting it are fully informed and able to determine the right things are being done by the right people at the right time.

Bill GreenerBill Greener

As you can see, I am passionate about this. For that, I make no apology. I appreciate that those who have not supported hard limits include a great many who honestly and honorably believe such a policy would do harm to agriculture in specific and rural America in general. I think they are wrong, and I am further convinced that with a program such as the one outlined here, we can prevail. I'm surely ready to be part of the good fight (again). Hope to see you.

Bill Greener has been a Republican communications consultant and strategist for 30 years. He's worked for the Republican National Committee and in 1996 he served as Convention Manager for the Republican National Convention.