M E M O R A N D U M
TO: Reporters and Editors
RE: Farm Bill Passes Senate
DA: Thursday, May 15, 2008
Senator Chuck Grassley today made the following comment after he voted in support of the Farm, Nutrition and Bioenergy Act. The farm bill passed the Senate 81-15. The bill will now be sent to the president.
“Passing the farm bill will help farmers already planting this year’s crop make plans for the future. The bill isn’t perfect and I’d hoped it would have gone further to address consolidation in agriculture and farm subsidy payment limits. We did get payment limits reform that will help close some loopholes, but there's a lot more work to be done in this area. After nearly seven months of work, in the end we were able to do some good things for family farmers, the hungry, and Iowa.
"The vote tallies in the House and the Senate send a strong signal to the president that there is a great deal of support on both sides of the Capitol. Whether he uses his veto pen has yet to be seen, but it appears we have the numbers to make this law and give farmers some certainty."
Here is a copy of the text of Grassley’s floor statement on the specifics of the bill.
Prepared Floor Statement of U.S. Senator Chuck Grassley
Senate Farm Bill Conference Report Floor Consideration
Wednesday, May 14, 2008
This Farm Bill has been a very long process. Last fall when the Senate Agriculture Committee asked the Senate Finance Committee to help make up the budget shortfall that we faced, the Finance Committee stepped up to the plate.
With eight members of the Finance Committee sitting on the Agriculture Committee, we had a real desire to make sure that rural America had the best farm bill possible.
I want to thank my fellow Senator from Iowa, Senator Harkin and our ranking member, Senator Chambliss for their countless hours and weekends on this bill for nearly a year. This was as difficult a farm bill to write and conference as I have ever seen.
My colleagues so far have given a good overview of what this bill contains and what it does for those who are hungry; those in rural America; those still running the family farm.
But I wanted to take a minute to highlight a few of the items that were most important to me and my home state of Iowa. I think I’ve got some experience to talk about this bill. I still share crop with my son Robin.
This isn’t a blanket approval of the bill.
I did have some reservations in signing the bill, because I didn’t think it went far enough in two true farm bill areas: payment limits and competition reform.
First, the ban on packer ownership failed in an amendment I offered in the conference committee debate. This is unfortunate because the livestock industry continues to become more vertically integrated and consolidated.
The recent announcement that JBS-Swift plans to acquire Smithfield Beef Group, National Beef, and 5 Rivers Feedlot should be alarming to us as legislators. I continually have to wonder if when we get down to a single packer, will the Department of Justice and Congress begin to question this trend?
This is a trend that continues to make it more difficult for independent producers to have choice in who they sell their livestock to, and making it more difficult to get a fair price for their livestock as the cash market continues to shrink.
We were able to include some reforms in the livestock title however.
The Senate version of the farm bill included my language which banned mandatory arbitration clauses in production contracts. I drafted this bill after hearing about problems where producers were being forced to enter into expensive arbitration proceedings, thus giving up all their right to have disputes resolved in the courts.
While we weren’t able to have the arbitration language from my bill included, we did reform production contracts to give growers a true choice in selecting dispute resolution, ending the practice of forced mandatory binding arbitration.
The farm bill conference report requires that contracts provide a clear statement of choice to producers, up front, as to which tract of dispute resolution they want to use. It also prohibits integrators from pressuring growers to make one choice or the other. Any interference with the choice will constitute a violation of the Packers and Stockyards Act.
Further, the language states that if a grower declines arbitration up front, they can still choose arbitration at the time the dispute arises if both parties consent to using arbitration. Together, these provisions constitute significant reforms and will help level the playing field for growers.
Secondly, I don’t think the payment limit reform goes far enough. We had 57 votes on the Senate floor to reduce the caps on all 3 forms of commodity payments: direct, counter cyclical, and marketing loan benefits and LDP’s. But we ended up having a fight in conference just to keep the levels at current law.
The Adjusted Gross Income limit did come down substantially, and so that’s a step in the right direction. For the first time we’ll have a cap on farm income at $750,000.
And we’ll bring a $2.5 million AGI cap on non-farmers down to a $500,000 cap on non-farm income. But these AGI limits are still too high frankly.
I’ve had the Government Accountability Office pull data for me on how many folks are actually getting payments over the new income limits, and honestly, there aren’t a lot.
The conference committee took steps in the right direction by eliminating the 3 entity rule and going to a system of direct attribution. Farmers will still be able to double payments if they are married.
I’ll continue to fight to put a hard cap on payments, and with the majority of the Senate supporting that position, we’ll look at that issue again.
Also on the commodity title side of things, the Administration, the House, and the Senate, all recognized the importance of including a revenue protection program for farmers. All three groups however took different approaches.
I’m pleased that an Average Crop Revenue program was included in the final bill as an option for famers. And not only that, we were able to make the program both a viable option for producers and available to them in 2009.
I am excited to see what type of participation we get in the program and the outcome of it, so that in the next farm bill debate we can decide whether revenue protection works.
In addition, the White House has continued to say that Congress can’t use timing shifts to save money. As if somehow they didn’t “count.” Well, they do count because farmers are going to have to make adjustments in the way they do things to accommodate.
Farm program payments will come later in the year, but they’ll be expected to make crop insurance payments earlier. So in fact, these do count and will pinch the wallets of our producers whether the White House wants to believe it or not.
All that being said, I am pleased that this farm bill is making significant investments in rural America. The Value Added Producer Grant Program is one of those.
Its had a bit of a face lift since I first worked on it, but its targeting funds directly to beginning farmers and ranchers is critical to getting young farmers into the business.
I continue to hear good things about these dollars being invested right into rural communities and so I was pleased we could get some mandatory money into the program, even though the farm bill dollars were tight.
I’ve also worked on giving black farmers applying for Farm Service Agency loans who were involved with the Pigford vs. USDA discrimination suit, a chance to have their claims heard. That’s why I introduced the Pigford Claims Remedy Act of 2007. There were circumstances out of these farmers’ control and they weren’t able to get their claims filed timely.
The conference report provides that these claimants, who have not had their cases determined on the merits may, in a civil action, obtain that determination.
It’s time that justice was done. Civil Rights at USDA has management problems that still need to be addressed so I’ll be watching over the administration of this very carefully.
Last year, I called for a GAO report on farm payments going to dead farmers and we held a hearing in the Senate Finance Committee on the issue. The Farm Service Agency paying dead farmers was a classic example of waste, fraud, and abuse.
Now, I’m not saying that there aren’t legitimate reasons to keep estates open for a few years.
But there was something wrong with folks who didn’t report that the structure of the farming operation had changed and continued to get farm program payments in a dead person’s name!
The farm bill is proactive in requiring USDA to check payments against taxpayer ID numbers at the Internal Revenue Service.
I am cautiously optimistic however. I’ve requested a new GAO report and in preliminary briefings I’ve learned that USDA doesn’t even enforce the current $2.5 million AGI limits.
It makes me wonder how they are ever going to enforce these more complicated AGI limits we have put in place.
I should also add that based on two Government Accountability Office reports, we closed a fraudulent farm loss loophole that allows operations to evade payment limits. We also were able to shut down the generic certificate abuse with new CCC-1099 reporting that I had asked the Treasury Department about in 2001.
Another issue that I often hear from constituents about is the abuse of rural broadband loans going into areas where service is either already provided by other capable entities, or a high percentage of households already have service. I don’t believe the government should be in the business of subsidizing competition.
We were able to include in the new farm bill a requirement that in order to be eligible for a loan, the provider needs to be applying for an area where 25 percent of the people don't have service and where not more than three incumbent service providers are already located.
I want to shift gears a bit from the Agriculture Committee’s role, to my role on the Senate Finance Committee. Through it, I was able to secure even more reforms to agricultural policy while protecting the interests of farmers and ranchers.
When the House passed this bill with a revenue offset for the extra agricultural spending, I raised a concern to the tax writing committees. By yielding several billion in new revenue for new spending, the Ways and Means Committee established a dangerous precedent.
There is always great temptation for committees that have a voracious appetite for new spending to view the tax writing committees as their cash registers. From a fiscal disciplinary standpoint, this pressure, if unchecked, will lead to larger and larger government and higher and higher taxes.
The hard-working American taxpayer is the loser because revenue offsets are diverted from their highest and best uses – tax policy and deficit reduction.
The proliferation of reserve funds in budget resolutions under both parties is evidence of this pressure as well. Those reserve funds might as well be labeled as “tax and spend” funds because the committees that request them are not likely to cut their spending.
So, I raised concerns about the dangerous slippery slope. I’m pleased to say that, in the Senate process, Chairman Baucus heard my concerns and agreed. We made it clear we’d hold the line. And we did hold the line.
The Finance Committee marked up a bill that took care of agricultural priorities, but where we used Finance Committee resources, we kept the benefits within the Finance Committee.
Everyone knows the Finance Committee action made it possible for the Agricultural Committee to move forward. We took some of the policy pressure off the Agricultural Committee.
The schedule and press stories bear that basic point out. We held the line between agricultural policy in the Agriculture Committee and agricultural policy in the Finance Committee when the farm bill was processed on the floor.
Conference was a different matter. In the end we kept a decent, but much smaller, package of agricultural tax relief offset with agricultural tax reforms. We also split the baby on the jurisdictional matter.
An extension of the customs user fees, which is a tax writing committee offset, was used to offset about $10 billion in new agricultural spending. About half of that, the part dealing with the new agricultural disaster relief trust fund, is in Finance Committee jurisdiction.
The balance is going to pay for new agricultural spending above the budget baseline. In my view, this was an unfortunate and troubling compromise for the tax writing committees. We mitigated some of the damage to the institutional structure of the tax writing committees, but we opened the door.
It is a door I was glad to keep slammed shut during the years I chaired the Finance Committee.
I worry greatly about the precedent that has been set here. Pressure will be brought to bear in the future for more non-tax writing committee spending to be offset with Finance Committee resources.
I sincerely worry about the effect of this precedent on the power and resources of the two chairmen, my friends, Mr. Rangel and Senator Baucus. Other committees are loathe to cut their spending and reform the large programs in their jurisdictions.
The easy street for them is to assign their funding problems to the tax writing committees and to blame the tax writing committees for any funding problems. As my friends, the two chairmen, know better than anyone the demands within the tax writing committees for offsets are a big challenge.
I hope we all have learned a lesson here. We should not use the tax writing committees’ resources as an easy way out for other committees who are reluctant to make the tough choices in the oversight and development of programs in their jurisdiction.
The farm bill also includes some customs and trade provisions that I want to address. First, it includes a compromise on expanding our existing trade preference program for Haiti.
This was a priority for the chairman of the House Ways and Means Committee. In addition to expanding Haiti’s trade preferences, the compromise calls upon the President to identify any textile or apparel producers in Haiti that fail to comply with core labor standards, as defined in the legislation, or the labor laws of Haiti that relate to the core labor standards.
The statement of managers accompanying the conference report states very clearly that the Conferees recognize that the core labor standards defined in the legislation refer to the rights as listed in the 1998 International Labor Organization Declaration on Fundamental Principles and Rights at Work and its Follow Up.
We voted for the 1998 ILO Declaration. We respect, promote, and realize the labor standards stated in the 1998 ILO Declaration. Moreover, the legislation applies only with respect to labor practices in Haiti. It does not address and cannot impact our domestic labor practices in any way.
Now, the legislation further calls upon the International Labor Organization to report periodically on the compliance of individual producers in Haiti with the core labor standards and the labor laws of Haiti.
And, the legislation directs that in identifying producers that fail to comply with core labor standards, the President shall consider these ILO reports. The President is free to consider any other information, and the final decision rests entirely with the President.
Nothing in the legislation forces the President to make any particular determination. It just says that the President shall consider these reports.
And if the President determines that a producer in Haiti is not in compliance and refuses to comply, the legislation directs the President to withdraw, suspend, or limit benefits to that producer under the trade preference program until the producer comes into compliance.
As I said at the outset of my remarks, I’m not making a blanket endorsement of the farm bill. I have my reservations. Had I written the Haiti provisions from scratch, they would have looked very different. But this issue was part of a broader negotiation, and compromises were necessary if we were going to produce a final product.
The proponents compromised too. Originally they proposed requiring the President to withdraw trade benefits solely as a consequence of the ILO reports. That was never something I could accept. Ultimately, they dropped that demand and agreed to defer to the President’s discretion.
The compromise language that’s in the bill is specific to Haiti and responds to the unique economic and political situation in that country. I accepted it based on that narrow context as part of an overall compromise to conclude these negotiations.
Another issue that we addressed in the farm bill is a recent proposal by the Customs and Border Protection agency to change the way certain imports are valued for purposes of assessing duties.
The agency proposed eliminating its current practice of allowing importers to base customs value on the first price paid in a series of transactions that culminate in the importation of a product into the United States. Customs has instead proposed a mandate that importers must use the last transaction price.
This proposal has drawn significant concern from the business community and in Congress, for a number of reasons. First, it appears to counter an established practice that’s been around since at least 1988. And some argue that it would lead to tariff increases of 8 to 15 percent.
Moreover, Customs doesn’t collect data on the extent to which the so-called first-sale option is used. Nor does the agency have a clear sense of the economic impact of the proposed change. Yet, the agency did not consult Congress or the business community before proposing this change in administrative practice.
Consequently, we included a provision that directs Customs to collect additional data for one year on the usage of the first-sale option. We further directed the International Trade Commission to submit a report to Congress analyzing the data to be collected by Customs.
Finally, we included a Sense of Congress that Customs shall not implement any change to disallow the first-sale option prior to January 1, 2011. After that date, Customs can implement a change but only if the agency consults with the committees of jurisdiction in Congress and the business community, and also receives approval for such a change from the Treasury Department.
That’s because the Treasury Department retains rulemaking authority over customs regulations, though a potion of that authority has been delegated to the Department of Homeland Security.
There have been some really significant benefits from the Senate Finance Committee’s involvement with this bill.
We create a new, temporary cellulosic biofuels production tax credit. This provision will encourage the development of a new cutting edge alternative biofuel industry.
Cellulosic biofuels can be produced from agricultural waste, wood chips, switch grass and other non-food feedstocks. With an abundant and diverse source of feedstocks available, cellulosic biofuels hold tremendous promise as a homegrown alternative to fossil-based fuels.
But because this is still science in the making, cellulosic biofuels are very expensive to produce, so government assistance will be instrumental in spurring these fuels to commercial viability.
The bill includes a new, temporary cellulosic biofuels production tax credit for up to $1.01 per gallon, available through December 31, 2012.
This provision is estimated to cost $403 million over ten years in tax credits to the American investor who is willing to take the risk of producing this new renewable fuel.
The new cellulosic biofuels production tax credit will be funded, in part, by a two year extension of the tariff on ethanol, and reform in the current ethanol blenders’ credit, which will be reduced from 51 cents per gallon to 45 cents per gallon on January 1, 2009, the first day the cellulosic producers credit will be available to producers.
And, last but not least in the tax title, we clarified that Conservation Reserve Program payments to retired or disabled individuals are to be treated as rental payments for tax purposes and are therefore excluded from self-employment taxes from a trade or business and will therefore not be used to calculate any potential reductions in their retirement or disability checks.
This has been a priority for me since 1999 and we now have the opportunity to make sure seniors and disabled farmers get permanent relief.
This fight is not really over paying the 15 percent self employment tax on the CRP payment.
This fight is over the injustice caused by the Clinton administration because if you have active income then the disabled and retired get a cut back reduction in their Social Security or Disability payments.
We owe this change to the American Farmers.
Is everyone happy with this bill? Or course not. I’m not even totally satisfied. But I do plan to vote for this bill because the payment limits are better than current law, and the investments we are making in rural America and nutrition are essential. I hope everyone has learned from the lesson of asking the tax writing committees to help finance their bills.