QUESTION: Good morning, Senator. Well, I have yet another question about ethanol. There's a controversy, a new one that has popped up. Some newspapers have reported that, in some ethanol plants, if the yeast that's used to make the beer that ultimately becomes ethanol, if that yeast is faced with infections by bacteria, then the plant will add antibiotics to the beer or to the -- and, apparently, those antibiotics remain in the distiller's grains when the process is done. And, of course, there's some controversy about whether that may be a problem for livestock. We have an interesting discussion group on our Web site today basically of corn farmers and hog farmers calling each other names over this problem. But I wondered if you have heard anything about it and if you have any thoughts on whether or not the distiller's grains will ultimately have to be regulated either by USDA or FDA.
GRASSLEY: Well, first of all, you're the first I've heard of it, so I'd be smart not to comment at all. But I think I could give a generic comment. That debate would be applicable more than just this situation but would be basic to a lot of questions. And that is that we ought to make sure that there's a legitimate reason for regulation and it's not just based on emotion or some bureaucrat trying to grab and make use of power or that there's not some interest group that is using a faceless bureaucrat to grab some power and give somebody an advantage over the other. That would be the first basic principle that I'd want to follow.
The second basic principle is based upon what we call "sound science." Is there a need for regulation? And is there a science for the regulation? And in the instance of when you get into ethanol, I would want to make sure that, in regard to the first point I made, that big oil wouldn't be a part of it or agricultural groups that, for 28 years were always behind ethanol, have found some reason to be anti-ethanol all of a sudden with 28 years of silence and what's the motivation there.
QUESTION: OK. Thank you.
GRASSLEY: Say, I want to make my opening statement because it was something that I told Beth I wanted to talk about, and I kind of forgot, in my own mind, what it was. And that is a Friday event that I have. I'm going to be addressing a group of scientists and researchers, and it's called -- the organization is called "Iowa- Chinese in Agriculture." And I have been asked to address them on the issues of agricultural trade. And, of course, we all know how important international trade is to Iowa farmers. And, of course, China plays a very major role in the success of our exports because they are such a large consuming nation because of 1.3 billion people. China has, as you know, a potential to be a major market for other U.S. agricultural commodities beyond what we've already done. We've had mixed results in entering the Chinese market. One of our commodities, soy beans, is benefiting significantly from trade with China.
But our pork industry is a different one. It's been limited due to scientifically unjustified sanitary barriers; in other words, not scientific based because, you know, China will give us the importation of pork treated with ractopamine. And we consider that a safe food additive used by our pork producers but, obviously, the Chinese don't consider it so or else it's an excuse for an unfair trade barrier.
And we also have a problem with imports of U.S. beef being prohibited because of DSE. And from that standpoint, I think China's regulations don't reflect international standards set by the -- we've got an organization called Scientists -- I think it's called the "World Organization for Animal Health."
And while China is a major producer of corn, it's good that U.S. farmers are still trying to open up markets for that product to a greater extent and, particularly, for distillers dried grain. China has high tariffs on our -- on some of our products going in there. And we need to press them in the Doha round to negotiate lower tariffs.
So we're at a point where, as we move forward resolving these trade for instances, we have a great potential of exports to China, and we should be prepared to use all the tools that we have available to fight their non-tariff trade barriers.
So these are the point that I'm going to be making Friday to the Iowa-Chinese and Agriculture. And from that standpoint, I hope that we make some progress. And I guess I'm going to -- I see myself using the meeting Friday to maybe send a senator's message to the political leadership of China because I've observed when you just make statements in news conferences in Washington, they take umbrage at it. Somehow, we're interfering with the domestic affairs of their country. You know, we don't care if they interfere with ours; why do they care if we give suggestions to them?
But making going through a group of scientists, Chuck Grassley's message can get through.
Let's follow up with the next questions.
QUESTION: Before you continue, Senator, somebody is typing into the phone and making other noises. So could people please mute?
GRASSLEY: Yes. Now, I didn't hear that, but if that's a problem for Gary, then I hope people will mute.
OK. Do you want to go ahead with the next questioner?
STAFF: Sure. Michelle or Tom in Yankton?
QUESTION: Yes. Tom in Yankton. Good morning, Senator.
Senator, I understand that President Obama wants to double U.S. aid for agriculture in developing countries up to a billion dollars. And I was just curious your thoughts on that or if he'd even be able to find the funding to be able to do that.
GRASSLEY: Well, I don't know about the latter because everything's a matter of priority in Washington. But the president has a big leverage in setting priorities. So I'd be surprised if it didn't have a high priority with members of his party.
For me to answer that question, I need to know where the money might be taken from. For sure, I hope it's not adding to the deficit that I can show you is going to increase our annual deficits from less than 4 percent of gross national product -- or I should say a 50-year average of gross national product of 2.3 percent to 8 percent by the end of this decade. And it's not a sustainable amount of borrowing, so I'm very concerned.
But I don't know, per se, object to money to help agriculture in other countries because we have seen -- well, you know, the obvious cases are South Korea, Japan, and Taiwan where we put a lot of money in, in the '50s and '60s. We found that it wasn't competition against American farmers. It may have been early on, but it ended up increasing the protein intake of people in those countries to the point where they became very productive, became a middle class. And we find the middle class eating a lot of our value-added agriculture products that maybe wouldn't otherwise have an export market for.
So it can be considered an investment as well as an expenditure.
STAFF: Gene, Iowa Farmer Today?
QUESTION: I'll ask a very basic question, Senator.
What are you hearing at your meetings this week?
GRASSLEY: Well, last week and so far two meetings today and then I've got 15 more over the next three days -- and that doesn't include a whole series of meetings I've got in Polk County on Friday. And those aren't town meetings, but they're still meetings where we're going to be discussing public policy.
From the standpoint of talking to radio broadcasters, not agriculture as much as I expected even considering the low price of milk. And today I heard -- and the only time -- you know, it's come up twice now in two weeks, the lack of facilities for horse slaughter. And, obviously, coming from people that are in the horse business that are suffering because of the decline in value. And they're wanting Congress to do something about it.
I had some conservation issues come up but more on an ad hoc basis of personal problems that we've had to work on not so much changing policy. And that's about it on agriculture.
Now, did you ask me about other things coming up or just about agriculture?
QUESTION: Primarily agriculture.
GRASSLEY: Yes. Not as much as you'd expect but maybe it's -- you know, there's outrage -- I don't want to -- even in rural Iowa, there's outrage over the massive amount of spending with bailout and stimulus, people not seeing it doing any good. So I don't want to say that everything's been smooth. It may have been smooth for me because I voted against that stuff, but people have expressed a great deal of outrage on these issues but not a whole lot in agriculture.
Maybe it's because agriculture, compared to the nation as a whole, is -- has a lot more income right now and not as much unemployment.
STAFF: OK. Tom at Brownfield?
QUESTION: Hi, Senator.
The Obama administration says the embargo is still on but there are some signs that there is some normalization at least with Cuba. How do you feel about that? And what do you think the chances are of, perhaps, loosening up trade with the island nation?
GRASSLEY: I don't -- what are we getting for it? I don't think we're getting anything for it, and I don't think we're going to get anything for it.
If I had some thoughts that we were going to have some are political and economic freedom on for Cubans -- because you understand that their economy is about as low of the lowest of the undeveloped nations around the world. And so the philosophy of the Castros is no friend of humanity.
And political and economic freedom would very much enhance their well being. And we ought to use all the political leverage we can.
GRASSLEY: If I had some thought in mind, some light at the end of the tunnel that we're going to see things improve -- because in the United States, we're taking the steps we're taking, I wouldn't hesitate to say OK. But I have drawn a line in the sand, except for humanitarian aid, that we would -- that we would hold out our present position until we see political freedom for the Cuban people. And I think it's legitimate because political freedom brings about economic freedom which brings about people pulling themselves up by their boot straps.
And don't forget that the economy of Cuba was a lot better even for low-income people than it is under Castro.
STAFF: Ken at WHO?
QUESTION: Senator, good morning.
There is a rally going on at the Iowa State Capitol right now of dairy farmers who are quite unhappy with their economic plight that they are seeing low prices. And I wonder if you have a response to that group and also if you've heard any other complaints about this and potentially what can be done by government to help them?
GRASSLEY: Well, I don't see the farm bill opening up to help any interest group right now. There might be some bills in -- like Specter, from time to time, has put bills in on the dairy industry. I haven't seen those bills reintroduced at this point.
Senator Leahy is also one that has tried to step in -- sometimes in an emergency basis, sometimes successful, sometimes not. But I don't see an opening of the farm bill. So I do see some things that the milk producers got in the last farm bill -- what we call the feed cost adjuster.
When the MILC -- you know, the acronym MILC, M-I-L-C, those payments are going out now. They're going to have the new feed cost adjuster in them. And then there's one other things that we can do not only for milk, and we're going to do this for milk, but we also do it from time to time to other commodities. We have just recently announced the purchase of 200 million pounds of non-fat dry milk to help support prices and get some of the surplus off the market.
Those are about the tools that we have. One of them is new, the feed cost adjuster. No other segment of the economy has that. Beef producers don't. Pork producers don't. But dairy people do.
And so they need to know that they have been successful in lobbying Congress in the past. And I guess I don't presume that they're picketing at the state house to get any help out of the state legislature because the state legislature can't help much with farm safety nets. If they can, I'm sure the state legislature is going to listen to them.
But I do think that that they're demonstrating does a good thing from the standpoint that I think consumers need to know when prices are cheap because consumers sure knew when prices were high and ethanol was being blamed for it a year ago. Well, then, when farmers are losing money hand over fist, as dairy farmers are right now, the consumer ought to know it to put the pressure on their local supermarket to grocery manufacturer to get the cost down.
STAFF: Dan at KICD?
QUESTION: Good morning, Senator.
First of all, I'm glad to hear that you weren't seriously injured in that leaf burning incident. Be careful out there.
My question this morning has to do with -- you mentioned the pork producers a moment ago, the National Pork Producers Council has sent a letter to the Obama administration asking that they study the economic impact of an expansion of corn ethanol production. It sounds like they're especially concerned about a possibly expanse from a 10 percent to a 15 percent cap and what that might do to their feed costs. Do you support a study like that?
GRASSLEY: I do support going to E-15, but I'm satisfied -- I would be satisfied with E-11, E-12, E-13. Any place to get us so that the present policy of Congress for mandate of nine and a half billion gallons of ethanol next year, I think, 11 billion gallons can be carried out.
The pork producers need to know we've already established a policy where we're not going to get any more than 15 billion gallons of ethanol from grain. Beyond that point, it's going to have to come from cellulosic ethanol which should not be a problem for pork producers.
But I would ask the pork producers to consider a recent study by the Congressional Budget Office which is a nonpartisan organization where they have said that the increased price of food is only like -- I think three to five tenths of 1 percent of the cost of living related to ethanol.
Last summer, you got the opinion that it was practically all related to ethanol. And then I would also ask the pork producers to consider that, if agriculture doesn't hang together, we're all going to hang separately. And as a result, I would ask pork producers -- because they're in agriculture -- to be just as supportive of ethanol as they've always been because when one segment of agriculture profits, they all profit.
And the other thing is that they came out last summer with resolutions like the one they just established when corn was $7. Corn is $3.63 at New Hartford now. So it's half what it was then. So why would they still be in the same straits now as they are then with corn being half the price? Although, I'd have to say that, in the pigs that I had last month, we didn't make any money either.
And in regard to my being burned, as long as I don't get infection in my right leg, I should be OK. And I have, so far, doctored it by myself, and I don't see any infection. So I think I'll keep on, but it will probably take me a month to get new skin.
QUESTION: Thank you, Senator. Glad to hear that.
QUESTION: Senator, Ken Root here. If I can jump in on that one.
Is it true the National Fire Marshals Association has retracted their invitation to have you as a speaker?
GRASSLEY: Well, they surely would, but I didn't get an invitation. So I don't have to go through the insult of not having it.
But they do know that, at one time, I thought I might have to call the New Hartford fire department until Andy, my neighbor, came and helped me out and we got it put out. And after I got it put out, I realized I was on fire, and I got that put out pretty fast.
STAFF: Gary at Arkansas?
QUESTION: Senator, a few weeks ago, you expressed skepticism that Congress would adopt a more generous estate tax regime than we current have, but the Senate did. The question is when it comes down to finding money to pay for the lower tax rate and the higher exemption, what do you think the Finance Committee is going to do?
GRASSLEY: Well, if we have to offset all, even at President Obama's level, we'll never get anything passed. And yet something has to pass this year.
So I see it passing without offsets based upon the fact that we're continuing something less than current law. Current law is no estate tax in 2010. So it seems to me if we're going to pass something like a five million times two exemption that we shouldn't need any offsets.
Now, that's more of a policy of the Republicans than it is Democrats, but I think the reality of having offsets for every tax change that's going to be made, even considering taxing the wealthy like President Reagan wants to do -- I mean, President Obama wants to do -- that there's not a -- that's not enough offset for some of the things that have to be done this year.
So I think reality is going to dictate without offset either at the $3.5 million exemption level or at the $5 million exemption level.
QUESTION: So you think Chairman Baucus and other Democrats will go along with that?
GRASSLEY: Well, I don't expect you to remember -- and maybe you never have seen it -- but I have a well chart -- you know, like a well where you get water out of a pail? And it's supposed to be the well of tax offsets. And it's about one-third full of water. And it's based upon the proposition that we can get one-third of the -- of the exemptions with bipartisan support, but where do you get the other two-thirds that's going to be needed in the course of a year? And I suppose last year is the year I'm talking about, but it's not a whole lot different this year.
And there's just no consensus for doing it, so it's not going to get done. So if you want, you know, alternative minimum tax passed and things of that nature, you know, you just can't offset it. But if people choose between an offset -- and I use alternative minimum tax instead of estate tax because I've got these figures in mind.
But you're going to choose between an off asset or taxing 23 million Americans, it doesn't take long until the political reality is you're going to not tax 23 million Americans and you're not going to have offsets.
QUESTION: OK. If I could throw another question at you. The White House indicated they would like to begin revisiting the immigration issue this year. Do you think there's time for it on Capitol Hill?
GRASSLEY: It will have to come in September and October because when we get health care, it's going to take a long time in the Senate.
STAFF: Philip at the Register?
QUESTION: Yes, Senator. What -- with regard to this pesticide permitting court decision on the Clean Water Act, is there any chance -- any real chance -- that Congress would go back and address the -- change the Clean Water Act to -- so that permits are not -- will not be required?
GRASSLEY: Are you talking about a recent court decision?
QUESTION: I'm talking about the Sixth court decision. It was back in January. I think -- I believe it takes effect this week that would require permits for pesticide application.
GRASSLEY: Oh, I know what you're talking about. When they decided that a point of pollution was the nozzle of a sprayer.
QUESTION: Right. Exactly.
GRASSLEY: Well, this gets -- I hate to tell you this because this is an answer I give on three or four different agricultural issues you might bring up. But it's almost in the category of one of those ridiculous things that some faceless bureaucrat thought up that's how held up by the courts that we would consider from two standpoints.
One, the very basic one that a sprayer nozzle is a point of pollution that was anticipated 30 years ago. And number two, that -- how ridiculous it is that the pesticide that falls on the -- or the herbicide too, I presume -- some crazy nut just pulled out in front of us.
Anyway, I lost my train of thought. Anyway, how ridiculous it is that the herbicide or pesticide that falls on the plant is not a problem, but if it falls on the ground, it is a problem. So think of that for a minute. How are you going to, as a farmer, regulate everything that goes -- that would go on a plant and not fall on the ground and then the extent to which it isn't a pollutant until it gets into the water that somehow the farmer has got some control over the amount of rain you're going to get in a particular rain.
It almost is ridiculous -- God decides when it rains. God decides when the wind blows. And, of course, in the case of fugitive dust -- so it's all so ridiculous to me that I don't understand how it's ever going to be enforced. Or if it's going to be enforced, it's going to be a prohibition. And just think that what does to agriculture.
QUESTION: Any chance that this Congress would amend the Clean Water Act to...
GRASSLEY: I'm sorry. I forgot your question.
QUESTION: Well, my question was -- whether Congress -- whether there's a good chance to Congress would address this or amend the Clean Water Act.
GRASSLEY: Yes. No, I don't think there's any chance that Congress will do it. This Congress -- the committees that have jurisdiction over this, with Boxer being in charge of it, I don't think she would let something like that out. And I think another reason it might not be let out is not just on that issue per se, but on the issue that once you open up the Clean Water Act, there can be a whole lot of other amendments as well.
Now, the only exception to what I said would be if there's a consensus that this is a ridiculous decision and you could do something by U.C. in the Senate. Then there's a possibility you might do something. But you know how little something dealing with the environment gets through by U.C.
STAFF: Bekha in Dubuque?
QUESTION: Sure. Good morning, Senator.
I was wondering if you could speak briefly about House Resolution 875 concerning the Food Safety Modernization Act. What do you think it means to American consumers and, more specifically, what is its impact on organic growers?
GRASSLEY: On what growers?
QUESTION: Organic growers.
GRASSLEY: Organic. Well, I'm not sure I can address the second part of your question, but I can address the first part. From the standpoint of keeping -- from the standpoint of keeping -- how would you say it -- competence in our food supply, it's very necessary that we have confidence for the benefit of the consumer eating our food and then for the prosperity of the farmer.
So we need to do a lot on inspection of food to make sure that we do have, in fact, safe food supply for the benefit of the consumers. So I am introducing some bills with Casey on this issue, but there's more comprehensive legislation being introduced by Durbin and by -- that's in the Senate -- and by Delauro in the House of Representatives.
QUESTION: Sure. Organic growers in our area, they seem very concerned that this is going to mean the end of organic growing, that you can't garden in your backyard any more. I certainly don't see that. What would you say to those claims?
GRASSLEY: Well, we don't want that to happen. And don't forget, I think that there's a general good feeling towards not just organic gardeners but gardeners of any kind for local consumption, locally produced. People consider the quality better.
I would think that there would be an uproar if that was going to put those kind of people out of -- out of business. You know, so I would think that we would -- we would be in a good position to over -- to overcome that based upon just public acceptability.
QUESTION: Thank you very much.
STAFF: That's everybody we had on the call. Does anybody have a follow-up?
GRASSLEY: OK. Goodbye, everybody.