TRANSCRIPT OF REMARKS BY ACTING AGRICULTURE SECRETARY CHUCK CONNER TO THE OHIO FARM BUREAU FEDERATION
Columbus, Ohio - November 28, 2007
SEC. CHUCK CONNER: Bob, thank you very much for that introduction this morning, and I appreciate the ladies and gentlemen, all of you, having me here today. And I apologize for our scheduling change which I guess is to push things back for you a little bit. Thank you for accommodating me.
As Bob mentioned in his introduction, I am from Indiana, but I grew up in Benton County, Indiana, which is on the western side of the state. So we're not exactly neighbors with Ohio, but I will tell you it's good to be in the Midwest again, and there's that good Midwest feel out here. And I am always convinced the Midwest is the greatest region of our country, and that will never change.
My brother Mike, as has been noted as well, still lives in Indiana, the one who actually has an honest living for all his life, the one who works the family farm, who reminds me of that often. When I was growing up, I will tell you it was always my ambition to do the same as my older brother Mike.
But I do think it's for the best that I'm not working with my older brother right now. I will tell you, I emphasize "older brother." I think he would probably never allow me to drive the bigger tractor no matter how old I became.
But that would obviously be a big part of the job. So I do love, ladies and gentlemen, what I'm doing now. What I'm doing now I can tell you, as the Secretary of Agriculture, if I want to drive the big tractor I pretty much can do that.
In all seriousness though, my work at USDA does give me and our team a unique chance to serve our farmers and ranchers to help strengthen American agriculture. And I can tell you that this job we take very, very seriously. I've been presented with an historic opportunity to serve American agriculture as we develop the 2007 Farm Bill. This road has been a long one, it's been a challenging one, and I am sorry to say right now, ladies and gentlemen, there is no immediate end in sight to that road.
As many of you know, the Farm Bill has been stalled in the Senate. I know this is frustrating for farmers who are eager to make their planting decisions for next year. Believe me; it is frustrating for me as the Secretary of Agriculture. It's frustrating for all our team who are of course anxious to have an early start at administering the new Farm Bill as well.
Fortunately, there is still time for the Senate to pass a good piece of legislation if the folks are willing to roll up their sleeves and allow fair and open debate and move toward getting this done. Today is, of course, November 28. We have more than four weeks until the new year, and I believe that's still plenty of time to pull together and produce a good Farm Bill.
I emphasize of course the word "good" because the President, as he has indicated, will not sign a bill that fails to provide some reform. Nor will he sign a bill that is paid for with budget gimmicks, and most importantly through increased taxes on the American taxpayer. I have a number of concerns with the bill as it stands now, and frankly I do not believe in my whole heart that it would be in the interest of farmers, farmers in Ohio and farmers across our nation, if that bill were enacted into law in its present form.
My first concern with that Senate bill as it stands, it does very little to reform farm policy at a time when our industry is changing very, very rapidly and I believe in need of some policy changes. The proposals we offered in January contained real reform, ladies and gentlemen. They increased support for agriculture but did so in a prudent way and in a way that did focus on some new priorities.
For example, let me just give you an example if you will - Ohio as most of you know is a big producer of a lot of specialty crops, greenhouse and nursery crops in particular, and they account for over 11 percent of this state's farm receipts. Of course, specialty crops have never really been part of the farm bill in the past. They aren't supported under our current farm policy, and I don't think frankly that is in our best interest, given the growing state of this industry and given the fact that specialty crops like this now represent a majority of our agriculture production in this country. So USDA's proposals did call for increased support in the form of research and marketing initiatives for our specialty crop producers, to include them under the farm bill.
Along with this help for specialty crop producers, we also added more incentives for renewable energy, obviously a key driver in the future of American agriculture. We added more incentives for conservation as producers find it more and more difficult to compete under state and federal environmental requirements. And of course we promoted trade.
The goal of these proposals was not simply to increase our support for American agriculture but to enhance that support. That does mean spending our dollars as efficiently as we can. It means looking where we can do the most good, and yes ladies and gentlemen it does mean trimming some fat from outdated programs that are no longer serving their original purpose.
Today I do want to focus on three reforms that are crucial to making, I believe, more efficient use of our agricultural subsidies. First, we need to I believe put an end to what is referred to as the "beneficial interest" or "pick your price" phenomena. As our policy now stands, government payments can be locked in by producers when the market price is low. Their payments can be determined. But they also have the option to hold off and wait to sell those crops until a much later time when the price is recovered because under current law there is no link between the loan and the sale of the commodity.
This could lead to outcomes that I am confident Congress simply never intended. For instance, in 2005 in the aftermath of Hurricane Katrina and the price fluctuations that followed it, the option of locking in loan rates when the prices were low, but selling later when they fully recovered, generated $3 billion in payments to farmers that, while they were perfectly legal, they weren't based upon any actual loss on the farm; $3 billion worth.
Now folks, one of the reasons I like being back in the Midwest as opposed to being on the East Coast is, when you start talking about $3 billion that's real money out here; that's real money! You know, we may throw that around as rounding, but it is real money, and we need to recognize that is the case.
The Administration's proposal is simple; it simply would require that producers would give up their beneficial interest in the crop at the time that they lock in the loan. Price support executed, price guaranteed, no opportunity for locking in at a low price, selling at a high price. This will ensure that producers receive the price support, do the loan rate while again eliminating this fix-the-price option, payments without corresponding losses.
Secondly, I do want to talk about as well something we'd talked about extensively around the country, and that is the adjusted gross income cap of $200,000. Ladies and gentlemen, I know this has been controversial. We believe though that this change would affect only about 38,000 people who are among the wealthiest 2 percent of Americans; yet it would generate by enactment over $1.5 billion in savings. We have used a map pretty extensively, and Scooter is going to hold up a copy. Excellent, thank you. This is a map, and each one of these red dots on this map you see in front of you designates farm program payments, and as you can see from these dots some of those dots are bigger, and they represent bigger payments, in fact $250,000 or more on these maps.
Now here's the problem, ladies and gentlemen. The map that I've got up there, it wouldn't be a problem if this were Mercer County, Ohio, or Benton County, Indiana, something like that where people are obviously working hard on the land. This map is of Manhattan. That's not Manhattan, Kansas, folks; that's Manhattan, New York City. And those big red dots that you see represented there basically track millionaires living off Park Avenue in New York City.
Now, again, ladies and gentlemen, farm subsidies are paid for by taxpayer dollars, and when we allow payments like this to go to people with adjusted gross incomes of more than $200,000, understand the flipside of that equation and that is, we are asking 98 percent of our Americans to subsidize the very people who are absolutely and without fail some of the wealthiest Americans that exist.
Ladies and gentlemen, I believe that is wrong, and again I know this is controversial and I know it's controversial within Farm Bureau, but it's wrong. This type of situation up and down Park Avenue I believe is just inherently wrong. I don't see how we can justify that. I do believe in the future that we risk jeopardizing support of all of our agriculture and rural programs and the safety net that is so important to all of our producers during times of need if we simply can't take some action to eliminate this kind of situation and to eliminate payments, taxpayer payments going from 98 percent to our very wealthiest 2 percent. It's a fundamental point if you ask the question, How do we get the Farm Bill back on track? This is one huge step towards getting it back on track.
I'll leave that point and thirdly just mention that the Senate bill does also increase target prices and loan rates on 80 percent of the crops that we are involved in supporting. This is I believe, ladies and gentlemen, a step in the wrong direction. It does increase trade-distorting support, and I believe paints a bull's-eye on the back of the American farmer, unjustly so I might add. And at a time when we are enjoying a $28.1 billion increase in net farm income, it is hard to see how we can justify asking middle-income taxpayers at this point to do more than the current farm bill, which again I think has rightfully been a generous bill.
The Administration's Farm Bill proposal called for tying loan rates to the actual market prices averaged over five years. This will continue to provide a strong safety net, but it will ensure that planting decisions are driven by the market, not according to government benefits. As the other proposal making this change saves $2 billion. We've been very upfront about that. This change will provide some real reform, strengthen our industry, make it more secure, more secure against challenges under international trade rules that currently exist and of course promote future growth. If you ever need to understand the need for market forces to drive farmers' planting decisions, obviously you can look at the corn/soybean dynamic with the 2007 crop, and the amount of acres of soybeans that were shifted over, including Ohio, into corn production. And that was a good thing because we needed that corn; we still need that corn, obviously to meet our demands for food, feed and energy.
So we need the market driving the planting decision. We don't need distortion through the raising of our price support and loan rates and target prices.
The second problem I have with the current version of the Senate bill is the way that it is being financed, ladies and gentlemen. It does rely upon tax increases and budget gimmicks. Our analysis shows that it contains nearly $22 billion in budget gimmicks and another $15 billion of brand new taxes on Americans. Again, we believe this is simply unacceptable.
As many of you know, Congress has adopted a so-called "pay as you go" policy which requires new spending be offset with savings. The current version of the Senate bill might appear to meet those pay-go requirements on paper, but it certainly does not meet the spirit of this rule. I believe the Senate is not being straight with the American people when it does refer to the cost of this bill. Instead I believe it is making our budget process in Washington, DC, a joke. The bill claims $10 billion of illusionary savings simply by delaying the timing of the payments under the commodity and crop insurance programs. The whole point of the exercise is to move revenues from one period to another without them showing up on the budget ledgers. The problem is, of course, none of the shifts in payments actually reduced one dollar of taxpayer's money being spent.
Again, I don't think accounting gimmicks are what farmers want to see. It's not what I hear them talk about when I'm with farmers. They are straight-up people. You folks are straight-up people who want very prudent use of your tax dollars. You don't like excess government spending. Certainly if something is going to cost, we want to be upfront about that cost. We don't want Congress saying, On the one hand, watch these budget accountings. No. We want to be totally upfront. As your Secretary of Agriculture, I want to be totally up front and go to people and say, "Absolutely, this is what it costs, and that's a darned good investment!" And I cannot do that under the current bill.
I also see a problem, ladies and gentlemen, with raising taxes to pay for farm programs as the Senate has proposed. The Senate Farm Bill raises nearly $15 billion of new taxes to pay for new programs. I don't believe as a general rule that other sectors of our economy should be asked to pay additional taxes for our farm programs. I will tell you, if we pursue this course it is going to make future farm bills much more difficult. We have not raised taxes for farm programs since 1933, what many regard as the original farm bill, which was eventually declared unconstitutional.
So there is a reason that we don't do taxes as part of this. Had the House-passed farm bill actually been referred to a committee in the Senate, it would have not been referred to the Agriculture Committee. It would have been referred to the Finance Committee of all things. Again ladies and gentlemen, this is not the direction we need to go for the viability of future farm programs, future safety net for farmers of which I am a strong advocate.
And $37 billion in taxes and new budget gimmicks is simply bad fiscal policy. If we ran the whole government like this we would be in the ditch, and we cannot stand by and let this happen. I believe farmers deserve a strong safety net, but Congress risks undermining that safety net by refusing to focus government support where there is a true need and then asking other sectors to bear the cost for their inability to focus those resources properly.
One other thing that is at stake in this discussion, and that is international trade. Ohio agriculture exports $1.7 billion of its agricultural goods each year. And you know how important this is to your economic well-being. Overall, U.S. agricultural exports are on track to hit $79 billion each year. They are going to rise, we believe, to over $83 billion next year. This is a significant part, not only of our agricultural economy, but creates jobs for the entire national economy as well.
Now when we were conducting our listening sessions across the country last year to gather input on the farm bill, we heard a lot of comments from farmers who wanted to see farm policy that encouraged open markets. One of the men who came up to the microphone in our Ohio session, in fact, was a gentleman by the name of Bob Petersen. Bob, I hope you don't mind me quoting you, but you went on to say, "In a world where we have access to foreign markets and where farmers are allowed to compete with other farmers and not against national treasuries, it's clearly the ideal situation for us."
And I will just tell you, ladies and gentlemen, that I couldn't agree more, and to create that situation we do need farm policies that encourage trade, encourage open markets for our goods, not policies that are likely and can be challenged by our international trading partners.
The increase in trade-distorting support in the Senate bill, together with the budget gimmicks and the lack of real reform simply makes this package unacceptable. And this is something I say with great angst and with a heavy heart. I've been involved now in six farm bills. I have a track record of getting farm bills done in matters that are acceptable not only to the members of Congress but to the Administration. I will tell you that is not the path that this bill is on.
And as the acting Ag Secretary, I can't frankly in good conscience recommend that this is something that the president should sign. I believe American farmers deserve a better farm bill, and that is why we're taking such a tough position here because we want a better farm bill for our producers, a stronger safety net, but a safety net also that contains the types of reforms to include the reforms for Manhattan, New York City, Park Avenue that I have outlined. Our concerns are serious. I need to be clear about that. But I also want to be clear that I do remain optimistic that the Senate can still put together a good farm bill, a good farm bill that the President can sign and be proud to sign yet this year.
I know the Ohio Farm Bureau and the American Farm Bureau Federation are just as eager to see this bill signed certainly as all our folks are at USDA, and I hope we can work together to make that happen going forward. The time is right for this to happen. Obviously we know that prices are high; net cash income and farm equity are good. Overall, our farm economy as we know is very, very strong. Now is the time I believe to set policies in place, policies designed for one purpose and one purpose only, and that is to continue the economic growth in agriculture that we have seen over the last two or three years, that frankly have been remarkable.
I tease about my brother, but my brother if he were here would tell you, and maybe you received this as well, the last two or three years in his farming career have been the best in the 40-plus years he's been farming in Benton County, Indiana. And that's a good thing for all of us.
If we fail to come together on the new farm bill this year, we will lose the good things that we have been talking about in this present bill -- like for example, one final example, the reforms of the countercyclical program that both the Farm Bureau and ourselves both support. These give us a program based on total revenue instead of price levels and will provide more help for farmers when they need it the most. Obviously we know as we traveled the countryside we heard directly from farmers that prices are very, very high today. You know, ladies and gentlemen, if you have no crop I don't care whether soybeans are $11 bucks, I don't care whether corn is $4 bucks or wheat is $9 bucks. If you have no crop, you don't benefit from that. You know under the current bill, guess what? You don't get any help because prices are high even though you've had absolutely nothing to sell and perhaps, perhaps have had maybe your worst year in agriculture.
That is wrong. That is bad farm policy. Farm policy should be about helping the most when you need it the most and not helping much when you don't need it, and certainly not helping those who don't need it ever.
This is where we are, folks. I appreciate the chance to walk you through this, to explain our rationale to you. I hope we can have a productive discussion on how to overcome these issues that are still blocking the way forward because I believe this bill can be changed. I believe it can be changed to provide a responsible and better support to American agriculture, one that will benefit all of us, and certainly make this farm bill far more comprehensible to all of the American people. This is something I want to do. I want to go and travel the countryside and defend the new farm bill, whether in an urban setting or a rural setting, and simply say, this is exactly what American agriculture ought to be doing. This is exactly what your tax dollars ought to be doing. That is where we are trying to drive. I believe we can still get there. We can still get there within the next four to five weeks, and that is what we're going to be pressing for in Washington.
Thank you all for the chance to be with you today. The Farm Bureau is a great organization; my family has been lifelong Farm Bureau members as well. I have a very high regard for what you guys do, representing the interests of the real producers out there on the ground.
So thank you all very much for this opportunity to be with you today.