SAXBY’S SCANDALOUS SUBSIDIES

May 8, 2008

Recently, Congress has been debating the Farm Bill Extension Act of 2007 and the Food and Energy Security Act of 2007. Saxby Chambliss is the ranking Republican on the Senate Agriculture Committee. He is a strong advocate of preserving and expanding farm subsidies.

The vast majority of food crops do not receive subsidies. Approximately ninety percent (90%) of farm subsidies are paid to farmers of five crops: corn, wheat, soybeans, cotton and rice. The majority of farm subsidies are paid to companies, billionaires and multimillionaire commercial farmers who make hundreds of thousands of dollars each year. According to the USDA, record farm profits were recorded for 2007, and 2008 is expected to be even better than 2007.

Since 1997, political campaigns of Saxby Chambliss have received more than $1,000,000 from agricultural PACs, farmers and farming organizations.

Allen Buckley said: “Farm subsidies are a perfect example of what is wrong with our government and our political system. They are an entitlement that should not exist.” Mr. Buckley also said: “Given our country’s incredibly erroneous financial and non-financial problems, the fact that Saxby Chambliss spends a tremendous amount of his time and effort protecting the farm subsidies racket is clear evidence that he is not effectively serving Georgians or the United States. As part of the solution to our nation’s financial problems, we need to wean American farmers off subsidies.”

Specifics of the scandal follow.

1.       According to “ontheissues.org,” on December 13, 2007, Saxby Chambliss voted NO on limiting farm subsidies to people earning under $750,000. Specifics follow.

Vote on an amendment to bill H.R. 2419 (Farm, Nutrition, and Bioenergy Act): To improve the adjusted gross income limitation and use the savings to reduce the Federal deficit.

Proponents support voting YES because:

Sen. KLOBUCHAR: The focus of this amendment is to make sure the subsidy and the safety net in the farm bill go to the people whom it will most help; that is, family farmers. The top 20 business recipients in the country have each gotten more than $3 million under this farm bill. Under the current system, a part-time farmer can have an income as high as $2.5 million from outside sources and still qualify for Federal farm benefits. I do not believe we should be handing out payments to multimillionaires, when these payments should be targeted to family farmers. This amendment places reasonable limits on the incomes of those who receive farm payments: If you are a full-time farmer, you can get the subsidies as long as your income does not exceed $750,000. If you are a part-time farmer or farm investor, you can participate in farm programs if your income does not exceed $250,000.

Opponents recommend voting NO because:

Sen. CHAMBLISS: I am disheartened that farm program critics continue to try to lead us into believing that there is a vast army receiving benefits to which they are not entitled. Stories about people receiving program benefits continue to make the headlines. But most of the people I know in these situations don't consider themselves wealthy. This debate is not about wealthy landowners and millionaires receiving program benefits. It is really about farmers in general, regardless of their economic situation, receiving program benefits. A few short months ago the debate was about making payments to millionaires and now we are at $750,000 and people want to go even further. This amendment is actually an assault on everyday farmers; but is disguised as an assault on wealthy landowners and millionaires.

2.      According to a September 6, 2005 article by Tom Philpott in Bitter Greens Journal titled “Saxby Chambliss and Family Values”:

For now, let’s just say that it’s no surprise that Sen. Chambliss, whom I have already taken to task here and here, is such a popular beneficiary of big-ag cash.

But his rock-solid support for commodity subsidies may also have a familial angle. I learned from this interview that Sen. Chambliss’ son-in-law is one Joe Baker, owner of Baker Farms in Norman Park, Ga., and board member of the Georgia Fruit & Vegetable Growers Association.

According to the Environmental Working Group’s invaluable Farm Subsidy Database, Baker Farms got about $171,000 in federal subsidies between 1995 and 2003, the great bulk of them from the controversial cotton program.

Now, in the grand scheme, $170k isn’t so very much. By comparison, Georgia’s top-20 most-subsidized farms all received in excess of $2 million over the same period.

Still, comparing Baker Farms’ annual take with that of the state of Georgia as a whole yields an interesting trend: Baker Farms’ percentage share of its state’s total subsidy allotment increases consistently over the period.

And that period--1995 to 2003--roughly coincides with Chambliss’ ascent from member of the U.S. House (where he was first elected in 1994) to his entry into the Senate (2002).

3.       In 2005, Saxby Chambliss voted against limiting subsidies to $250,000 per married couple. He based his opposition on low commodity prices and high prices and weather related disaster. He said “This is not the time to say to our farmers… we’re going to change the program in midstream.” So, tough times apparently was the rationale. As explained in the next item (4), The USDA recently reported that 2007 was, by far, a record year for farm income, and 2008 expected to be even better.

4.       According to the USDA: 2008 Net Farm Income Is Forecast To Be At Record Level… Net farm income is forecast to be $92.3 billion, up 4.1 percent above the $88.7 billion farmers are estimated to have earned in 2007 and 51 percent above the 10-year average of $61.1 billion. …Net cash income at 96.6 billion is forecast to be $9 billion above 2007, which was the previous record for net cash income. …The story for 2008 is the value of crop production which, at $175.5 billion, is forecast to exceed its previous record (attained in 2007) by $25.9 billion, a 17-percent increase. Prices of major crops (corn, soybeans, wheat) were trending upward in late 2007 and are expected to maintain those gains in early 2008 and perhaps go higher.

Net cash income is forecast to be $96.6 billion in 2008, up 10.3 percent from 2007 and $29 billion above its 10-year average.

Since about 1990, net cash income has not been as volatile as in earlier decades. A continual upward trend in crop yields has contributed to higher production. Increasing populations and rising standards of living throughout many developing countries have kept demand strong for U.S. agricultural commodities, both crop and livestock. This combination has resulted in consistently higher net cash income over the last two decades, as evidenced by net cash income generally exceeding its 10-year moving average.

States that are leading producers of corn, soybeans and wheat stand to benefit the most with prices for their production rising faster than most other commodities and their expenses rising roughly in line with those for other crops. Thus, the Midwest and Corn Belt should be the big beneficiaries.

If current commodity and input market prospects hold for the remainder of the calendar year, 2008 will be a record year for the value of crop production, crop receipts, revenues from forestry and services, total value of farm section production, gross value added, net value added, net farm income, and production expenses for both purchased inputs and payments to stakeholders. …This string of record and near-record economic activity across so many components of the farm income accounts is unparalleled in the last several decades, and both crop/livestock operations and suppliers of services and inputs should share in U.S. agriculture’s record economic showing. The past 4 years have witnessed exceptional earnings for U.S. agriculture. Including the forecast for 2008, these values of crop and livestock production will each have established new highs three times in the five most recent years (2004-08).

5.       According to the Heritage Foundation (in a July 25, 2007 article by Brian M. Riedl titled “The Dirt on Farm Subsidies”): “Wheat, cotton, corn, soybeans and rice receive nearly all of the subsidies.” (Note that, according to the USDA, corn, wheat and soybeans are producing record profits.)

According to the Department of Agriculture, the average farm household earns $81,420 annually and enjoys a net worth of $838,875 -- both well above the national average. Farm incomes are setting records, and the industry's business failure rate is among the lowest.

Of course, some family farmers continue to struggle. But if subsidies were really designed to alleviate farmer poverty, then lawmakers could guarantee every full-time farmer an income of 185% of the federal poverty level ($38,203 for a family of four) for under $5 billion annually -- one-fifth the current cost of farm subsidies.

Instead, federal farm policies specifically bypass family farmers. Subsidies are paid per acre, so the largest (and most profitable) agribusinesses automatically receive the biggest checks. Consequently, commercial farmers -- who report an average annual income of $200,000 and a net worth of nearly $2 million -- collect the majority of farm subsidies. Fortune 500 companies, celebrity “hobby farmers” and even some members of Congress collect millions of dollars under this program.

These farm policies are more than merely ineffective -- they impose substantial harm. They cost Americans $25 billion in taxes and an additional $12 billion in higher food prices annually. …Cotton subsidies undercut African farmers, keeping them in desperate poverty.

6.       According to A December 18, 2007 article in the International Herald Tribune titled “WTO Releases Official Ruling Against US Cotton Subsidies,” although the World Trade Organization (WTO) ruled that cotton farm subsidies were illegal under the WTO pact, the U.S. Senate joined the House of Representatives in approving a new $286 billion farm bill that would leave cotton programs largely intact for the next five years. Saxby Chambliss said: “Critics of the U.S. Cotton programs and of all farm programs will no doubt call for drastic changes to the farm safety net …Let me assure producers in Georgia, across the cotton belt and the country that this will not happen.” NOTE: There are approximately 121 million full-time workers in the U.S. Thus, the $286 billion farm bill breaks down to more than $2,300 per full-time worker.

7.       According to Oxfam, 12,500 cotton producers receive $3 billion of subsidies. The average is around $240,000 per farmer.

8.       According to an April 3, 2007 article by John Frydenlund of Citizens Against Government Waste (a public charity) titled “Farm Subsidies: Myth and Reality”:

Despite the exaggerated claims that are used to perpetuate these outdated practices, the reality is that the current farm program structure helps the richest farmers get richer, but doesn’t help small farmers stay on the land. It is also costly to taxpayers and raises prices to consumers. By concentrating wealth in the hands of the few, it undermines the economy of rural America. Finally, it interferes with international commerce (which impacts the entire U.S. economy) and hurts poor farmers in developing countries.

Myth: Farm subsidies are necessary to preserve the “small family farmer.”

Reality: Farm subsidies amount to little more than “welfare for the rich.”

For the past 70 years, the primary justification used to defend farm subsidies has always been that they are necessary to preserve the “small family farm.” The U.S. farm lobby does everything possible to perpetuate this myth and the idea that farm subsidies are also essential to assure an abundant food supply.

However, the truth is that farm subsidies benefit the largest, wealthiest agriculture producers, not the “small family farmer.” The subsidy payments really amount to corporate welfare for the rich. The food supply argument is fictitious, since there is either surplus production of every agricultural commodity or supply control to prevent a surplus.

First, 60 percent of farmers don’t even produce crops that are eligible for subsidies. More than 90 percent of farmers either receive no subsidies or receive less than $2,000 annually.

Large farm operations, with ten times the wealth of the average American family and annual incomes averaging more than $230,000 -- four times the income of the average American household -- receive most of the subsidy payments. (Emphasis supplied.) In 1995, the top 10 percent of farm subsidy recipients received 55 percent of total payments. By 2003, the top 10 percent of farm subsidy recipients collected 72 percent of total subsidies and the top 5 percent collected 55 percent of payments. The largest 10 percent of grain farmers, with an average net worth of $2.4 million, receive 50 percent of all grain subsidies. And, 60 percent of sugar program benefits go to the wealthiest one percent of sugar farmers.

Furthermore, 95 percent of landlords don’t even farm, but they own 60 percent of U.S. farmland eligible for subsidies. These absentee landlords collect subsidy checks directly from the government, while also receiving much of their tenants’ subsidy payments through higher rental rates. A November 2005 University of Maryland study found that landlords captured up to 25 percent of the total amount of subsidies.

Second, despite the record-setting amounts of money that have been spent in the last decade on farm subsidies, small farms that depend on farming for their livelihood continue to disappear from the American landscape. According to the USDA’s 2002 Census of Agriculture, there were almost 100,000 fewer farms than in 1997 and average farm size increased from 431 to 441 acres. In comparison, when farm programs began more than 70 years ago, there were almost 7 million farms and the average size was less than 200 acres.

Myth: Farm subsidies are really a good deal for the American taxpayers and
consumers.

Reality: Farm subsidies deliver a double whammy to taxpayers and consumers.

Although farm subsidies have done nothing to preserve the mythical “small family farmer,” they have cost taxpayers a great amount of money, particularly in recent times. In some cases, taxpayers get hit twice, because the commodity subsidies and other farm programs, such as the dairy and sugar programs, also raise prices to consumers.

From 1995 to 2004, farm subsidies cost taxpayers $143 billion, averaging $14.3 billion annually. By comparison, between 1990 and 1994, the average was $9.6 billion annually. Between 2002 and 2006, the cost to taxpayers for subsidies and so-called disaster assistance rose to $100 billion, an average of $20 billion annually. In 2005, the federal government paid out approximately $25 billion to subsidize producers of a handful of farm commodities, a year in which U.S. cotton farmers alone received $4.2 billion.

From 2003 through 2005, farm subsidies increased consumer costs by an average of $10.5 billion annually. In 2004, farm subsidy programs raised the cost of food to consumers by $16.2 billion, which is really nothing more than a consumer food tax.

By keeping the price of milk artificially high, federal milk marketing orders impose a $1.5 billion annual “milk tax” on consumers, with the greatest impact on low-income families with young children. The U.S. sugar program costs consumers $1.9 billion annually in inflated prices for sugar and sugar-containing products.

Myth: Farm subsidies are an essential engine of economic development in rural areas.

Reality: Farm subsidies actually undermine the rural economy.

Since farm subsidies redistribute so much money from taxpayers and consumers to farm payment recipients, it may seem counterintuitive, but farm subsidies are doing nothing to promote the rural economy. Farm programs funnel money to those farmers that produce certain commodities, which provides an incentive for these farmers to increase production in order to receive more subsidies. One of the best ways to accomplish this, of course, is to expand the farming operation.

The drive to get bigger leads to more farm consolidation. While productivity growth contributes to farm consolidations, farm subsidies, which distribute benefits in proportion to production or sales, play a very important role. As the Chicago Council on Global Affairs noted in its report, “Modernizing America’s Food and Farm Policy: Vision for a New Direction,” “Larger farm operations have often invested money received from government program payments in the purchase of even more farmland as well as newer, larger, higher-tech machinery with which to cultivate the larger acreage.”

In those parts of the country that are most dependent on farm subsidies, farm consolidation is moving the fastest. Because farm program benefits are distributed in proportion to the amount of sales, it makes it easier for larger farmers to acquire their smaller neighbors.

Farm consolidation leads to fewer jobs in all agriculture-related businesses in rural areas, including hardware stores, implement and equipment dealers, and banks. Farm consolidation also impacts other businesses such as grocery stores, and even affects a community’s ability to support schools, hospitals, and churches. The net result is that subsidies for growing certain commodities accelerates the consolidation of farms and contributes to the loss of jobs and population in rural areas.

In fact, according to a March 2005 study by the Center for the Study of Rural America at the Federal Reserve Bank of Kansas City, “farm payments are not providing a strong boost to the rural economy in those counties that most depend on them. Job gains are weak and population growth is actually negative in most of the counties where farm payments are the biggest share of income.”

Finally, the study concluded that “farm payments are not yielding robust economic and population gains in the counties where they should have the greatest impact. If anything, the payments appear to be linked with subpar economic and population growth.”

Myth: Farm subsidies are necessary in order for U.S. farmers to compete in the international marketplace.

Reality: Farm subsidies undermine international trade and hurt the world’s poorest farmers.

U.S. farm programs are an obstacle to expanding international trade opportunities, not just for the agriculture sector, but for the rest of the economy as well. These programs also hurt poor farmers in developing countries.

Farm subsidies distort markets by encouraging farmers to grow surplus crops that undercut subsistence farmers in developing nations that cannot afford to subsidize their own farmers, which forces those countries to resort to retaliatory tariffs to protect their own producers.

According to USDA, elimination of trade-distorting subsidies in exchange for significant tariff reductions could raise U.S. farm prices by 12 percent, increasing annual farm earnings by as much as $13.3 billion. In particular, livestock and specialty crop producers could enjoy significant increases in prices and exports if trade barriers were reduced.

9.       According to a December 9, 2003 article by Will Allen, Eddie DeAnda and Kate Duesterberg of the Organic Consumers Organization titled “U.S. Cotton Subsidies: Killing Farmers & Poisoning Consumers and Earth”:

Farmers don¹t rotate their crops. Instead, they plant cotton back to back for 25 or 30 years in a row. This practice causes tremendous environmental damage, because it depletes the soil of nutrients. It also contributes to a huge increase in damaging insects, mites and diseases since there is no break in the insect cycle which rotation enables. This causes farmers to use more chemical fertilizers and pesticides, which further poisons the soil and the ground water.

The high concentration of acreage ownership in the hands of a relative few farm corporations coupled with high subsidies and the reluctance to rotate subsidized crops with other cash crops causes enormous overproduction.

10.     According to a June 19, 2007 article by Brian Reidl of The Heritage Foundation titled “How Farm Subsidies Harm Taxpayers, Consumers, and Farmers, Too”:

The average farm household earns $81,420 annually (29 percent above the national average); has a net worth of $838,875 (more than eight times the national average); and is located in a rural area with a low cost of living. The farm industry’s current 11.4 percent debt-to-asset ratio is the lowest ever measured and helps to explain why farms fail at only one-sixth the rate of non-farm businesses. Overall, net farm income totaled $279 billion between 2003 and 2006—the highest four-year total ever. The farm economy is thriving, and farmer incomes are soaring.

Farm subsidies over the past decade have also been distributed to:

• Fortune 500 companies, such as John Hancock Life Insurance ($2,849,799); International Paper ($1,183,893); Westvaco ($534,210); and ChevronTexaco ($446,914).

• Celebrity "hobby farmers" such as David Rockefeller ($553,782); Ted Turner ($206,948); and Scottie Pippen ($210,520).

• Members of Congress, who vote on farm subsidies, such as Senator Charles Grassley (R– IA, $225,041); Senator Gordon Smith (R–OR, $45,400, plus a 25 percent ownership in three firms that received $2,114,622); and Representative John Salazar (D–CO, $161,084).

Payment limits do exist on paper. Subsidies are restricted to farmers with incomes below $2.5 million, and an individual's subsidy may not exceed $180,000 per farm or $360,000 for up to three farms. However, an entire industry of lawyers exploits loopholes, rendering these limits meaningless.

The Overall Impact of Farm Policy

Although farm policies serve no legitimate purpose, they have profoundly negative effects on tax-payers, consumers, and small farmers, including:

• Higher prices. James Bovard once wrote, “For almost every farm program, there is another equal but opposite farm program or provision.”³⁵ Commodity subsidies encourage over-production and therefore lower prices. The Conservation Reserve Program encourages underproduction and thereby raises prices. Tariffs raise import prices. Export subsidies lower export prices. Price supports triple the price of sugar and raise the price of milk. Calculating the net effect of these contradictory programs, the Organization for Economic Co-operation and Development estimates that U.S. farm policy raises food prices enough to cost consumers an extra $12 billion annually  in effect, an average annual food tax of $104 per household.³⁶

• High taxes. As the farm economy booms, Congress is expanding farm subsidies. After averaging less than $14 billion per year during the 1990s, annual farm subsidies have topped $25 billion in the current decade since passage of the 2002 farm bill, the most expensive farm bill in American history. All federal spending must eventually be funded by taxes. Thus, these subsidies cost the average household $216 in annual taxes in addition to $104 in higher food prices.

• No added rural economic growth. A study by the Federal Reserve Bank of Kansas City concluded that farm subsidies do not promote rural economic growth. Between 1992 and 2002, the vast majority of the 783 “farm dependent” counties experienced job growth below the national average. In fact, more of these counties suffered outright job losses than experienced job growth exceeding the national average.³⁷ While critics can argue that growth would have been worse without subsidies, these policies are clearly not creating new growth centers. Farm subsidies are likely funding farm consolidations, which in turn are reducing employment on farms and in related industries.

³⁵ James Bovard, “Farm Bill Follies of 1990,” Cato Institute Policy Analysis No. 135, July 12, 1990, at www.cato.org/pubs/pas/pal35.html (June 8, 2007).

³⁶ Organisation for Economic Co-operation and Development, Agricultural Policies in OECD Countries: At a Glance (Paris: OECD Publishing, 2006), p. 69, Table 2.12. The 2003-2005 average annual transfer from consumers was $12.285 billion.

³⁷ Mark Drabenstott, “Do Farm Payments Promote Rural Economic Growth?” Federal Reserve Bank of Kansas City, Center for the Study of Rural America, The Main Street Economist, March 2005, at www.kc.frb.org/RegionalAffairs/mainstreet/MSE_0305.pdf (June 4, 2007).

11.    According to FEC filings, from 1997 through March 31, 2008, the following agricultural and food PACs have given the following amounts to campaigns of Saxby Chambliss:

A review of individual contributors to campaigns of Mr. Chambliss shows that farmers all across the country, and family members thereof, have contributed tremendous amounts to campaigns of Mr. Chambliss since 1997.

According to C-SPAN Capitol Hill, as of April 4, 2008, PAC contributions to the campaign of Mr. Chambliss from agricultural or food-related PACs during the 2007-2008 election cycle included:

NOTE: the above list is a small subset of the total PAC contributions received by the Chambliss campaign.

See: May 13, 2008 article of Jim Wooten of The Atlanta Journal-Constitution