Pressure is on Congress to close farm subsidies loopholeby Philip Brasher on Jun. 20, 2007, under Opinion
A Florida real estate developer collects $3.2 million in farm subsidies over a three-year period. Texas’ legendary King Ranch, which owns vast cotton holdings in addition to its cattle, tops even that by getting $3.9 million.
No one has to cheat to get sums like these. Most of the money came through a loophole in federal subsidy rules that allows individuals and companies to claim payments on every bushel or bale they can produce.
Six individuals collected at least $1 million each this way from 2003 through 2005, and seven claimed more than $700,000 apiece over the three-year period.
There is a renewed effort in Congress to close the loophole. The type of subsidy the loophole affects would be capped at $150,000 per year under a proposal by Sens. Charles Grassley, R-Iowa, and Byron Dorgan, D-N.D.
Farmers and landowners could get an additional $100,000 a year through two other price-support programs, for a total of $250,000 annually.
To its critics, the loophole represents the worst of U.S. farm policy: encouraging farmers to grow more than the market needs and depressing world commodity prices while subsidizing big farms to get even bigger.
“Most farmers don’t believe – and the general public doesn’t believe – that there is a public purpose for unlimited subsidies to very large farmers to put their neighbors out of business,” said Chuck Hassebrook of the Center for Rural Affairs, a Nebraska-based activist group.
The loophole is known as the Commodity Certificate Program (a misnomer since no paper changes hands – only cash).
Congress authorized the program in 1999 at the behest of Southern lawmakers, who argued it was needed to prevent farmers from forfeiting a mountain of cotton to the government to satisfy price-support loans.
At the time, Sen. Thad Cochran, R-Miss., was chairman of the Senate subcommittee that writes the U.S. Agriculture Department’s budget.
Farmers and landowners immediately cashed in. Maurice Wilder, the real estate developer, collected $1.2 million during the first year or so it was in effect. Wilder, who said at the time that it was a “must in the agriculture business today to get some government support,” controls 180,000 acres of farmland from Indiana to Colorado.
There were attempts in Congress – all unsuccessful – to close the loophole in the 2002 farm bill. Farm groups argue it’s unfair to cut off subsidies to farms just because they are large. And crops such as cotton have traditionally been more dependent on subsidies than commodities such as corn and therefore more likely to hit a limit on payments.
But there is reason to believe the outcome may be different this year, when Grassley and Dorgan bring up the $150,000 cap.
New government data compiled by the Environmental Working Group is putting names and faces to many of the loophole’s beneficiaries for the first time. More than half of the $2.1 billion in subsidies paid out through the loophole from 2003 to 2005 was passed through cooperatives and other business entities. The recipients of those pass-through subsidies had not been identified before.
Even for them, the value of the loophole is falling because of the rise in commodity prices caused by the boom in U.S. and European biofuel production. Cotton farmers – by far the biggest beneficiaries of the certificate program – are seeing the prices of their crops go up as they convert some of their land into growing corn.
Moreover, the leadership of the House Agriculture Committee has shifted from 2002. The panel was run by Texans in 2002. Republican Larry Combest was chairman and Democrat Charles Stenholm was the top Republican.
The new chairman, Rep. Collin Peterson, D-Minn., says pressure is building on lawmakers to tighten subsidy limits in some fashion. He says the certificate loophole “is hard to explain to people.”
“It’s pretty obvious that there are a lot of folks that want reform, and one of the reforms they want is in the payment limits area,” he says.
His counterpart in the Senate, Tom Harkin, D-Iowa, says tightening subsidy rules “is a matter of basic fairness to the American taxpayer.”
“These are payments we can’t afford, going to people who don’t need them – and for what public purpose?”
• On the Web: www.ewg.org, information on certificate program.
Philip Brasher is a reporter for The Des Moines Register. E-mail: email@example.com.