Ron Kind's FARM 21- Friend or Foe?

Yesterday, we put up a blog post detailing an interview with Congressman Ron Kind, and purposefully didn’t get too far into the specifics of FARM 21 or how we feel about it. Today, we’re putting up our analysis of FARM 21, and it didn’t turn out all that nice. But as we said yesterday, we always like to evaluate all proposals on their merits, and we hope our elected representatives do the same. Nearly all of this analysis is based on the work of the Sustainable Agriculture Coalition (SAC), of which the Center for Rural Affairs is a member. You can find their analysis here (pdf), and the below comments do not necessarily reflect the opinions of SAC.

We know this is long, so right off the bat here’s the main points:

  • While FARM 21 would change the basic structure of farm programs, it does little in the way of making sure that farm program benefits flow to small and mid-size family farms (jump to more about this);
  • FARM 21 does not close the loopholes used to avoid farm program payment limits (jump to more about this);
  • FARM 21 shifts large amounts of money to conservation programs- a laudable goal- but invests most of that money into the Environmental Quality Incentives Program, which subsidizes enormous manure lagoons and the concentration of livestock production (jump to more about this);
  • FARM 21 places much-needed resources behind some rural economic development programs, but others receive inadequate amounts (jump to more about this);
  • FARM 21 does not include any crucial livestock market competition reforms;
  • Despite our criticisms, every farm bill proposal should receive equal consideration (jump to more about this).

As we have said repeatedly, no matter what form farm subsidy programs take we believe the benefits should ALWAYS flow to small and mid-sized family farms (targeting). Unfortunately, FARM 21 completely misses the targeting boat and may actually be buying a train ticket in the opposite direction. There may be some widespread belief out there that FARM 21’s commodity program proposal is really about helping the little guy. Perhaps in the long run it would, but in the meantime, targeting farm payments and enforcing strict payment caps would impact the economic structure of agriculture and the profitability of family farms today.

When we look at Kind’s proposal for the commodity programs- Farmer Savings Accounts- we aren’t seeing anything close to targeting. First, the government will put cold, hard cash into your savings account, but that amount is based upon the size of your current direct payment. That ensures that those getting the biggest checks today will receive the biggest deposits in their Farmers Savings Accounts.

Additionally, the Farmer Savings Accounts allow tax benefits for the farmer in proportion to the amount of their own money they contribute, with a limit of $8,000 (similar to an IRA). So the more you contribute, the bigger the benefit, up to eight grand. Eight thousand may not sound like a great deal, but I can tell you that giant corporate farm owners have a lot more to contribute to those accounts, while small and mid-sized farms usually don’t have a lot of spare cash laying around to put into a Farmer Savings Account. Enormous farm owners will contribute the full 8,000 every year, gaining the lion’s share of the benefits.

Not only that, but income tax rates are progressive; the more you make the more you pay in taxes. And in fact, very low income individuals don’t pay any taxes at all. So the lower you go on the income scale, the less benefit this provision has. A very low income farmer who pays no income tax under current regulations receives no benefit at all if and when they contribute to their farmer savings account. This increases the percentage of Farmer Savings Accounts’ benefits going to those with the highest incomes- the owners of the nation’s largest farms. And let’s not forget, those taxes foregone are real dollars that could be used for programs whose benefits could be much better targeted to family farmers. (You can find more on who benefits from various types of tax provisions at the Center for Budget and Policy Priorities).

Additionally, Representative Kind’s legislation does not close the loopholes prevalent in commodity programs today. The various ways that mega-farms get around current payment limits would still exist in the farm programs that remain under Kind’s proposal. It is entirely possible that the commodity title proposed by Representative Kind will be similar to the current House commodity title draft that caused such a stir last week, in that there will be no limit on the benefits an individual can receive from commodity programs. Or, at the very least, the percentage of payments going to the nation’s largest farms and the percentage received by small and mid-sized farms will remain nearly unchanged. And that, to us, is unacceptable. We’re not going to support creating a tax shelter whose benefits primarily flow to the nation’s largest farms.

Kind’s proposal does include an Adjusted Gross Income limit on farm program participation, similar to that proposed by the administration (if your AGI is above $200,000, no farm programs for you). Brian Depew has discussed previously on the Blog for Rural America why that is insufficient, easily evaded, and could well produce unintended consequences.

In our interview with Congressman Kind, we asked about payment limitations and ensuring the benefits of farm programs flow to small and mid-sized family farmers. Here’s his response:

Jeff Flake [R-AZ] and I, historically and in the past, offered a [$250,000] payment cap in the House and we’ve gotten bipartisan majorities the last couple of times that came up for a vote, only to see it stripped in conference at the 11th hour… I have [supported Dorgan-Grassley] in the past and I’m very supportive of that today, but it goes beyond just the payment limitation… At the end of the day, you really don’t save that much money, with the payment limitation caps."

This is a decent answer, but does not address the real issue- his proposal is simply not targeted in a way that ensures family farmers receive the vast majority of the benefits. Further, saving money is not the only goal of targeting farm program benefits and payment limitations; enforced properly, they could well have a profound affect on the structure of agriculture. Payment limitations, like the livestock market competition reforms discussed below, can have a major impact on farm and ranch profitability and structure while costing the government little or no money. One can only conclude that helping small and mid-size family farms is not the overriding goal of his commodity program proposal. Which is certainly Kind’s prerogative, but the Center for Rural Affairs strongly believes helping family farms and rural communities should be the primary mission of the farm bill.

Moving on, Representative Kind’s Farmer Savings Account proposal would result in very large savings, and would direct those funds to conservation, nutrition, rural development, and other programs. We heartily applaud that particular strategy, and in fact it has long been our position to use any savings from payment limitations for conservation and rural development programs. But we should always pay close attention to where those funds go- how money is spent is just as important as the total amount of money involved.

When it comes to shifting money from commodity programs into conservation programs, Kind unfortunately chooses the wrong programs as the recipients of those funds. In his proposal, the Conservation Security Program, which has suffered enormous cuts in the past few years and pays for vital conservation on working lands, does not receive any new money. CSP could be particularly beneficial given the recent ethanol boom- properly funded, it could pay farmers to prevent runoff and preserve water quality, which is clearly decreasing as a result of the increase in corn acres planted. Coincidentally, Chairman Peterson also supported a plan to seriously undermine CSP in his draft conservation title, which caused quite a stir a few weeks ago.

Kind does propose that those receiving Farmer Savings Account benefits must conform to certain conservation practices (something similar is in effect today), and that farmers can receive bonus payments for enhanced conservation practices. We like the concept in principle, but why not just put the money into CSP? CSP does much the same thing. CSP has already proven that its basic principles work and with proper funding could be the premier working lands conservation program. No sense in reinventing the wheel. And Kind’s proposal ties the bonus payments to the Farmer Saving Accounts benefits, which, by the way, decrease every year and eventually disappear. So every year the producer will have less incentive to participate, and eventually none.

In contrast, the Environmental Quality Incentives Program (EQIP) would receive a massive funding increase. EQIP has an outrageously high $450,000 payment limit, and has turned into a conservation program that primarily pays enormous livestock facilities (CAFOs) to construct giant manure lagoons and clean up the environmental catastrophes they created in the first place. I’m quite positive most taxpayers do not like subsidizing such operations, and neither do we.

Regarding rural development programs, Kind does include substantial funding for a rural microenterprise program, a top priority of the Center for Rural Affairs and we congratulate him (this program has also been included in the current House draft of the farm bill, minus the funding so far; it has a very good chance of being included on the Senate side as well). On the negative side, Kind only provides 2/3 of the funds we would like to see for the Value-Added Producer Program and does not include language that would make sure the program primarily benefits small and mid-size farms (sound familiar?). Several other important programs (Community Food Grants, organic agriculture programs) also do not receive the support they should.

As noted in the last post, Kind also does not include any livestock competition reform measures in his legislation. Kind is often portrayed as some sort of urbanite who doesn’t understand agriculture and rural communities, even though he represents a heavily rural and subsidy-receiving district. To dispel that notion, one of the best things he could do is include vital competition reforms such as a ban on meatpacker ownership of livestock in his legislation. Combined with other competition reforms (pdf), such a measure could do much to support the production of livestock on truly diversified family farms, and supporting such measures would go a long way toward proving that Kind is truly aware and concerned about preserving family farmers and ranchers. Not only that, but competition reforms have been introduced in both branches of Congress by members of both Agriculture Committees, so it could be a source of common ground between Kind and some committee members.

All of this criticism should not be taken as a complete denunciation of Kind’s proposal and his concepts. We can and have subjected the legislation of many others to the same level of scrutiny, and we’re looking forward to the House Agriculture Committee’s final version of the farm bill with some amount of vicious glee. It is our goal to provide the fullest picture possible of various proposals, as the proponents of various proposals inevitably shade the truth about what their legislation would do, who it would benefit, and who it would hurt. That’s called politics.

Of course, we are not so naïve as to think you can eliminate all of the politics and rhetoric from the farm bill process. But we do feel one of the problems with the entire Farm Bill debate is the effort by many organizations and individuals to polarize various “factions”. Therefore, Ag Committee members and organizations who should know better say Ron Kind and others will destroy agriculture with their ideas and imply that Ron Kind is malevolently attempting to obliterate rural America. The organizations supporting Ron Kind spend much of their time discussing how evil the House Ag Committee is and how it can’t be counted on to support any sort of decent reform. These caricatures contain elements of truth as well as blatant falsehoods. Unfortunately, it is clear that both sides view this process of demonization as the most productive political strategy. That is a sad statement regarding the entire process, and both sides are performing a grave disservice to the country as a whole.

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