Lugar Statement on the Farm Bill Conference Report
May 14, 2008

The 2008 Farm Bill contains many worthwhile polices, including valuable investments in conservation and nutrition programs.  However, it fails to provide meaningful crop subsidy program reforms that most Americans would support. 

This Farm Bill continues a set of antiquated programs that send a majority of payments only to farmers earning over $200,000 a year. It exceeds the budget allocation by $10-20 billion through the use of tax policies and budgetary sleights of hand. The perception of being within the budget limit is not reality.

While it is true that subsidies are only part of the overall bill, Congress should not accept these outmoded policies in order to move along other priorities.  The fiscal, food and trade policy costs are too great and too damaging. 

This Farm Bill continues the “three-legged stool” of a “farm safety net” that targets mostly corn, soybean, wheat, rice, and cotton farmers. The first leg is the practice of sending $20 billion in direct payments to only 43 percent of U.S. farms. Of those, only 8 percent receive 58 percent of the payments.  These payments have nothing to do with markets, disasters, or need, and they have been ruled to violate trade agreements.  This Farm Bill reduces these payments by a miniscule 2 percent.  Farmers, who had received an average $94 per acre for a history of growing rice, would still receive$92.40 under this Farm Bill. 

Second, the Farm Bill continues counter-cyclical payments that are made when prices go down. Third, these targeted farmers may also receive unlimited marketing loan payments (farmers do not need to repay government loans if prices fall below a targeted rate).  Additionally, this Farm Bill retains a government administered supply and demand program that keeps sugar prices for consumers well above world market prices. 

Farm Bill conferees added yet a fourth leg to the farm subsidy stool by creating a new $4 billion standing disaster program to cover losses due to droughts and floods.  The idea of a permanent disaster program may have merit, especially when you consider that Congress has passed legislation to fund ad hoc disaster payment assistance nearly every year for the last twenty years.  But we should ask ourselves, if the current expensive Farm Bill is failing to provide a safety-net to farmers when these devastating events do happen, then what is the purpose of the Farm Bill?  Why do we need a new program administered by a separate federal agency to fulfill what most Americans believe is the core purpose of the legislation before us?  We should fix the root problem, namely that the current subsidy system does not work and wastes taxpayer dollars.

Trade distortion is yet another major problem with the bill. In 2004, Brazil won a World Trade Organization (WTO) case against U.S. cotton programs based on the trade distorting nature of direct payments, counter-cyclical payments, and marketing loan payments.  Similar cases against other commodities are now being deliberated.  Surprisingly, instead of fixing the programs to shield U.S. farmers from these challenges, this Farm Bill continues these programs and provocatively increases the subsidy rates. 

How, in good faith, can we ask other governments to join us in trading partnerships, or to abide by fair trade agreements, when this Congress blatantly ignores our own commitments?  Some Senators may wonder why we should be concerned about violating WTO commitments.  They might think that this is simply limited to agriculture or specific crops with little impact on our overall economy.  Others might even suggest that we are better off building up more barriers to trade; that this Farm Bill is about American farmers not farmers in Brazil or elsewhere.  However, if Senators look further down the line they will see that our WTO violations could cost the United States billions in revenue, intellectual property, and lost trade opportunities.  Failure to move toward compliance will invite retaliatory tariffs that legally can be directed at any U.S. industry.

It could be argued that flaunting these commitments would be justified in order to save the U.S. farming sector from sure ruin.  However, that would ignore the realities of our current farm economy and the actual structure of these farm programs.  Thanks to strong foreign and domestic demand, net farm income for 2007 was nearly $89 billion, up $30 billion from 2006 and $30 billion above the average for the previous ten years, setting a new farm income record.  Estimates for 2008 project net farm income to top $92 billion.  As a result, average farm household income is projected to be almost $89,000 in 2008, up 9 percent from 2006, and well above average U.S. household income of $67,000.

We need a new Farm Bill that ensures a stable farm economy and a healthy food supply.  I do not believe our nation is best served by this Farm Bill that continues to make payments that defy common sense, snubs our trading partners, and balloons taxpayer spending.  Last year I joined Senator Frank Lautenberg and others in offering a Farm Bill alternative that received 37 votes on the Senate floor.  It would have provided all farmers with a more equitable “safety net,” as well as greater investment in conservation, rural energy projects, and nutrition. 

Under the proposal, farmers, for the first time, would receive – at no cost to them – either expanded county-based crop insurance policies that would cover 85 percent of expected crop revenue, or 80 percent of a farm’s five year average adjusted gross revenue.   These subsidized insurance tools already exist, but our reforms would have made them more effective and universally used, while controlling administrative costs.  Farmers would also be able to purchase insurance to cover the remainder of their revenue and yields.  In addition, the amendment would have created optional Risk Management Accounts that would be available to every farmer and rancher and provide incentives for them to put away money in good years to cover lean years.  Our program would be available to all farmers in the country -- regardless of products -- and not just a select few corn, soybean, wheat, rice, and cotton farmers.

Using the savings from this approach could fund important expansion in conservation, nutrition, energy, and research programs.  In fact, the approach made more significant investments within the federal budget in these areas than the Farm Bill before us and even found savings to help pay down our nation’s budget deficit, which this year is approaching $400 billion.

I will vote against the Farm Bill conference report and support a presidential veto of the bill. I further suggest that the Lugar-Lautenberg FRESH Act remains a reform option, a constructive alternative that will save taxpayers billions, provide a generous safety net, and allow for funding of farm, nutrition, bio-energy, conservation, and rural development programs without budget-breaking gimmicks.

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