With the House farm bill proposal passed, the Senate proposal coming and Congress in recess, USDA head Mike Johanns visited RFD-TV studios in Nashville, Tenn., to again push the Bush administration proposal and jab at alternatives. Johanns was clearly unimpressed with the House plan and repeatedly said it would reward too many large farms while shorting rural infrastructure needs.
Among Johann's comments:
On House Agriculture Committee chairman Collin Peterson keeping his promise to a have a House farm bill proposal prior to the August recess…
“He did get it done. He stuck with his timeline and a lot of people were saying ‘you don't have to go this fast.’ But he was committed before the recess and good for him. He stayed the course.
“There were some good things Peterson did in his proposal, some things we actually liked. We liked what they were doing in conservation, by and large with additional funding.
“But there were some things we didn't like. We didn't like the tax increase.”
On the tax increase being a surprise…
“That was a curveball, I think for everybody. It came from nowhere.
“In fact, I came to the House Ag Committee markup and … they were having a discussion about tax increases. It seemed pretty clear that wasn't on the table.
“It wasn't a couple of days later that not only was it on the table but it was being proposed as part of the farm bill. And it was really historic. The only farm bill we could find that rolled in a tax increase was the 1933 farm bill, the first one — and that was ruled unconstitutional by the Supreme Court.
“So this isn't normal procedure. It was rolled in and we were clear that we couldn't sign a farm bill that increased taxes.”
On the dangers of a tax increase proposal when approaching an election year…
“I think (the House was) looking for revenue to balance this thing out and, all of a sudden, this idea came about.
“Here's the problem: it divided the House. This was a farm bill that, as far as I could tell, was moving forward in a very bipartisan way. In fact, at the end of the House Ag Committee markup, there stood Collin Peterson and Bob Goodlatte — the chairman and ranking member — talking about what they'd done and the merits of the proposal. Boom! The tax increase dropped and that really, really divided the House.
“So all of a sudden, what was a bipartisan effort — as farm bills usually are — became a very divided process. It passed by a number that was unusual because a lot of support dropped off.”
What does the tax provision do and why is Johanns opposed to it?
“Throughout the United States, in small towns and big cities, there are many companies that come from other parts of the world. They've established a presence here — maybe a manufacturing facility, whatever. And they create very high-quality jobs.
“In fact, we've done research at the Treasury Department on these jobs and they tend to pay 20 to 30 percent more than the average in that sector.
“Some of these countries have a number of locations in foreign areas. They work to find the most advantageous tax treatment they can find. That's the simplest way of describing it.
“The (proponents of the proposed House tax provision) call that ‘closing a loophole.’ Those companies said ‘wait a second, here.’ “In many areas, there are treaties involved. In fact, there are over 50 different treaties involved with countries…
“Of course, the business community said ‘where did this come from?’
“One of the difficulties is this was a situation where this never got a hearing before the Ways and Means Committee. It never went through the normal process … It was literally walked over and rolled into the rule by which a farm bill was to be debated. And it was passed in the rule-making process.
“The business community, very justifiably, said ‘what is this? We've been surprised, we haven't had a hearing to explain our position.’ Needless to say, they were very, very opposed to this.
“It wasn't good process, not a good situation. And the worst thing for agriculture was it took a typically broad base of support, a very bipartisan base of support, and created a situation where a lot of support disappeared and it became a very partisan initiative. It was unfortunate.”
While the Bush administration quickly said the House proposal would be vetoed, agricultural organizations like Farm Bureau said nothing…
“If you read the Farm Bureau's written information on tax increases, it's a conservative group. They oppose tax increases. But they didn't here.
“I'll be candid: it put members in a very, very difficult position. You have people out there saying ‘government is big enough and it spends enough. Let's find savings within government if we're going to spend elsewhere.’
“That puts them in a position of having to give that philosophy up — which isn't fair — or vote for the farm bill. These men and women are conservative people. They don't want to vote for a tax increase.
“I will also tell you, they want to be with our nation's farmers. That's where their heart and passion is. So I thought it put them in an extremely difficult spot.
“Another thing that troubled me about all this: I thought this thing was dead the day it passed. Now, on the Senate side, Chairman Baucus, a Democrat from Montana on the Finance Committee, and ranking member Grassley, from Iowa, are saying ‘no, we're not going in that direction in the Senate.’
“In my judgment, this thing was never likely to have any success. Yet, it put our members in a very difficult position.”
Johann's farm bill proposal has provisions for updating rural hospitals. Is anything similar in the House version?
“It is not. We had some real initiatives with rural areas in America, rural development. One was…creating a low-interest loan program where rural, critical access hospitals could rehabilitate themselves. That got stripped out of the House bill.
“About 85 percent of farm income now comes from off-farm sources. Every time I use that statistic I look at it and say ‘this proves the value of our rural development program, creating jobs in rural areas.’ It's a remarkable statistic because it shows how much agriculture and rural America has changed.
“We had a $500 million program we were going to use to rehabilitate sewer and water and bring high-speed Internet to these communities. That was gutted from the (House) bill, (as well).
A cattleman from Iowa told Johanns the Department of Natural Resources is buying “a lot of pastures in this area, tearing up tiles in them, and paying high rent to plant trees. For cow/calf producers it's very tough to compete. Pasture that's worth $50 per acre is going for (between) $75 and $125 per acre…”
“Probably the only real, consistent criticism we got on conservation programs is what (the Iowa cattleman) just said…By and large, conservation programs get a lot of support from farmers.
But in cow/calf country…they told us the conservation programs compete with them because they need the grassland. And there is competition.
“We try to administer these programs in a way that's fair and allows the cow/calf person to benefit from the conservation program…”
An e-mail from Massachusetts asked this: “As a middle-class taxpayer in the northeast, why should my hard-earned tax dollars go to support wealthy farm owners in the South versus feeding the hungry in this nation? What is another example where the government pays welfare to a wealthy American?”
“I don't know I envisioned payment limits getting as much debate as it has,” said Johanns, who produced a map showing a red-dotted Park Avenue in New York City. “(This is) some of the ritziest real estate anywhere…The red spots are people in Manhattan that get cash subsidy payments under the farm bill. The bigger dots are getting over $250,000 in subsidy payments annually…
“The House version won't impact this in any meaningful way. It impacts about 7,000 people in the entire United States. They set their payment limits on adjusted gross income of $1 million per year. For a husband and wife (the limit rises) to $2 million per year. So very, very wealthy people will continue to get cash subsidies under the (House proposal).
“(Our proposal's payment limit cutoff is) set at $200,000 AGI…
If you look at the number of people in the United States with an AGI of over $200,000, you're still in the wealthiest 2.3 percent (of the population)…
“We say there's a point where you graduate from subsidies. And that point should be $200,000. The House version says … $2 million for a husband and wife.
“I don't think people want that. I don't think farmers want that. I don't think there's a farmer in America that would argue that's what we should be doing…
“My hope is the Senate will take a long, hard look at this. We don't need a $2 million AGI (for a cut-off), we simply don't.”