February 25, 2008

Reduce Wasteful Farm Bill Spending:

Support Meaningful Investment through Real Reforms

Dear Colleague:

As you know, the leaders of the House and Senate Agriculture Committees are nearing agreement on a proposed framework to complete negotiations on the Farm Bill.  Between the proposals put forth by the House and Senate, the compromise would spend $9 billion above the baseline.  This is despite the fact that the White House has vowed to veto a bill that uses new taxes to fund increased Farm Bill spending.  Further, the President has conditioned extra spending on implementing reform of the current subsidy system.  Fortunately, there is a way out of this funding standoff.  There are a number of possibilities to reduce Farm Bill spending without raising taxes or increasing subsidies. 

America’s farmers, ranchers and forest landowners are enjoying record income and record wealth.  According to UDSA, net farm income in 2007 was $87 billion, up $28 billion from 2006 and $30 billion above the average for the previous ten years.  Farm household income was $87,000 in 2007, up 8 percent from 2006 and 15 percent above the five-year average for 2002-2006.

Raising taxes during a time of record farm income and wealth to increase subsidies – including unlimited subsidies for wealthy landowners – during a time of increasing economic uncertainty and mounting deficits makes little sense.

We have identified ten common sense proposals that would allow conferees to develop a Farm Bill that makes needed investments and provides support to family farms through minor reforms of existing Farm Bill programs while rejecting costly new programs.  By finding savings through the following reforms, we can send President Bush a Farm Bill he would likely sign without raising taxes or increasing overall spending.  Specifically:

Roll Back Subsidy Increases – Farm bill conferees could roll back higher loan rates and target prices in the commodity title of the House Farm Bill, generating $2.3 billion in savings over ten years. (Partially included in House proposal)

2)      Reduce Direct Payments – Farm Bill conferees could reduce “direct” payments to corn, soybean, wheat, cotton, and rice farmers, which will cost more than $20 billion over the next five years. Created to wean farmers off subsidies, direct payments have instead become a costly entitlement that flow to farmers regardless of whether they produce a crop.

3)      Reduce Direct Payments for Corn and Soybean Farmers – Thanks to the renewable energy mandate, corn and soybean farmers are enjoying record prices.  At a minimum, Farm Bill conferees should lower direct payment rates for corn and bean farmers.  Simply reducing the direct payment rate from 28 to 20 cents for corn farmers would generate $6 billion in savings over ten years.

4)      Means Test Farm Subsidies – Farm Bill conferees could deny subsidies to those farm households that clear more than $200,000 – roughly four times the income of an ordinary American household.  Ending this subsidy to wealthy landowners would generate $1.4 billion in savings over ten years. (House proposal sets the hard limit at $900,000)

5)      Means Test Direct Payments – At a minimum, Farm Bill conferees could deny direct payments to farm households that clear more than $200,000, generating $1.1 billion in savings over ten years.

6)      Place Real Caps on Farms Subsidies – Farm Bill conferees could close loopholes and place real caps on subsidies so that no farmer could collect more than $250,000 annually in subsidies. Placing real caps on subsidies would generate $1.1 billion in savings over ten years.

7)      End Insurance Agent Windfalls – Farm Bill conferees could lower reimbursement rates for crop insurance agents and end unjustified windfalls. For example, lowering the reimbursement rate to 15 percent would generate $1.7 billion in savings over ten years. (House proposal reduces rates to 21.1 percent)

8)      End Insurance Company Windfalls – Farm Bill conferees could also include provisions to more fairly share the risk of crop insurance with crop insurance companies – and generate $1.1 billion in savings over ten years.

9)      Create a Revenue-Based Safety Net – Creating a true safety net that is linked to revenue – not simply prices – would support farmers when farm revenues fall and would be less susceptible to challenge by our trading partners. (House proposal creates an optional program)

10)     Reject Costly New Entitlement Programs – Farm Bill conferees should reject a Senate proposal to create a permanent disaster entitlement program and should instead encourage farmers to purchase crop and revenue insurance. (Permanent disaster provision not included in House proposal)

We urge the Farm Bill conferees to report a conference report that would support family farmers without raising taxes on hard working Americans, or increasing unnecessary subsidies that distort prices as well as conflict with U.S. commitments under existing international trade laws and agreements.  This is the only way that Congress will pass a Farm Bill that will be signed into law this year.

Sincerely,

                                                                        s/                                              s/
                                                                        Ron Kind                                        Paul Ryan
                                                                        Member of Congress                              Member of Congress