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Monday, December 1, 2008

Millionaire Farmers (and Ranchers?) to Lose Subsidies?

Wouldnt that be nice!

When Barack Obama reached this week for an example of cuts that should be made in the federal budget, the president-elect cited a new Government Accountability Office report on “millionaire farmers” receiving subsidies.

“Millionaire farmers received $49 million in crop subsidies even though they were earning more than the $2.5 million cutoff for such subsidies,” Obama said at a news conference, citing the GAO report.

“If it’s true, it is a prime example of the kind of waste I intend to end when I am president,” he said.

Fed GAO report: 'Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent Payments to Individuals Who Exceed Income Eligibility Limits' (PDF)
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During the presidential campaign, Obama voted for the 2008 Farm Bill, which continues a wide range of farm subsidies and other direct payments. But in speeches and position papers, he made clear his preference that subsidy programs provide more benefits to small farmers and less to large ones, especially large corporate farms.

The GAO report, requested by the Senate Finance Committee, found that more than 2,700 U.S. farmers received subsidies between 2003 and 2006 despite having an average of more than $2.5 million in adjusted gross income over three years, which was the eligibility cutoff then. (The new farm bill lowers that to $750,000.)

Asked on Wednesday about the GAO report and Obama’s response to it, Rep. Collin Peterson, D-Minn., said such abuses should be curtailed — but that they hardly rank with the larger fiscal challenges facing the country.

“I haven’t seen (the GAO report) yet, but apparently it’s about making payments to people who are ineligible under the law,” he said. “That shouldn’t happen, obviously. We will be on top of this to figure out how to fix it.”

But the $49 million in overpayments pales in comparison to “the rate they’re spending money on this bailout” of financial and other corporate interests, Peterson said.

The overpayments also represent only a tiny fraction of the more than $16 billion farmers receive annually in federal farm programs for crop subsidies, conservation practices and disasters.

Safety net safe

Peterson said he isn’t surprised that Obama would seize on the GAO findings as an example of federal waste, but he isn’t concerned that it portends a broader assault on the traditional farm safety net.

“We’re always a target, and it sounds good” to criticize subsidies, he said. “But Obama can’t be any worse than Bush was on this, and we survived that.”

Peterson is chairman of the House Agriculture Committee and has been mentioned frequently as a potential agriculture secretary in Obama’s Cabinet, though he has just as frequently denied any interest in the administration post.

“I don’t know why it keeps coming up,” he said. “Maybe they’re using me as cover for what they really want to do. Anyway, I’m in the right place now. I can do more for my constituents where I’m at.”

Roger Johnson, North Dakota’s commissioner of agriculture, said the report and Obama’s comments

“didn’t set off any alarm bells” for him, either.

“In fact, I agree with it,” he said. “I’ve long been a strong supporter of income limits on payments, and I believe there’s been for a long time a too relaxed approach” to them.

The 2008 farm bill’s lowering of the adjusted gross income limit to $750,000 “is a move in the right direction,” Johnson said. “I would like to see it lower. That’s still a very high number.”

Johnson said the 2008 farm bill also mandated direct attribution of payments, which means that every subsidy dollar paid to a farmer must go to an individual’s Social Security number. “That should make it very easy now to track those payments to individuals instead of webs of interrelationships that were used to take in millions in government payments.

“Now you’re dealing with people who are actively engaged in agriculture. That will more clearly focus the safety net on folks who need it, the smaller and average-sized operators, and that’s where it should be.”

Bad publicity

Peterson also said he would “prefer we eliminate nonfarmers from the program entirely, so people who are actually farming would get the payments, not landowners. That’s what the program was intended for, to support people who are producing food, and that would force out these people who get all the bad publicity.”

The GAO report singles out (but does not name) some rich non-farmers who received big subsidies in the period covered, including a founder and former executive of an insurance company, an owner of a professional sports franchise and a top executive of a major financial service.

To qualify for the farm subsidies, the “farmers” were supposed to derive at least 75 percent of their income from farming, ranching or forestry operations.

The U.S. Department of Agriculture “does not have adequate management controls to identify potentially ineligible high-income individuals,” according to the GAO report. With the income cap lowered by the 2008 farm bill, “the number of individuals whose (income) exceeds the caps will likely rise.”

GAO recommended that the USDA’s Farm Service Agency “work with the Internal Revenue Service to develop a system for verifying the income eligibility for all recipients of farm program payments.” In their response to the report, USDA officials said they agreed with that.

Earlier investigations by the GAO found other shortcomings with direct payments to farmers, including a 2007 report that said USDA “needs to strengthen management controls to prevent improper payments to … deceased individuals.”

Reach Haga at (701) 780-1102; (800) 477-6572, ext. 102; or send e-mail to§ion=homepage

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