Senators introduce legislation to place hard caps and close loopholes

Mar 23, 2012

Sens. Chuck Grassley, R- IA and Tim Johnson, D-SD, introduced legislation that would place a hard cap on the farm payments an individual farmer could receive in a year and would close what they consider, longabused and well-documented loopholes in the farm payment program.

The new Grassley-Johnson payment limits bill sets a hard cap for farm payments of $250,000 per married couple, and closes loopholes they say allow nonfarmers to qualify for federal farm payments.

The senators had introduced similar legislation earlier this Congress, but wanted to be sure the legislative text would accommodate any type of safety-net program adopted in a new farm and nutrition bill. This is particularly important in light of the growing prospect that direct payments are unlikely to be included in a farm and nutrition bill.

“A strong safety net is critical to ensuring a safe and affordable food supply. In order to maintain that safety net, we can’t have the mentality of the past where the government looked the other way and allowed people with no connection to the farm to take farm payments,” Grassley said. “It’s unacceptable that small- and mediumsized farmers get so little of the very program that was created to help them.”

“The farm safety net was designed to help family farmers but it has increasingly led to a windfall for owners of our nation’s largest farms. Congress should act to close the loopholes and better target payments to our small and mid-sized family farmers. This legislation represents our best chance to move forward with reforms as consideration of the farm bill continues,” said Johnson.

Specifically, the new Grassley-Johnson payment limits bill has a hard cap on marketing loan gains of $75,000 ($150,000 for a couple). The remainder of the payment limit would be a cap on the total amount a farmer can receive in safetynet payments in general.

For instance, if the Congress were to adopt a shallow loss program, the Grassley-Johnson bill would set a limit of $50,000 ($100,000 for a couple) that a farmer could receive.

In addition, the bill sets a measurable standard for someone to qualify as actively engaged in farming by providing management for the operation, and the bill provides an exception for farming operations where there is only one manager of the farm. This exception should help the Department of Agriculture administer the standard.

In a letter sent to Sen. Patty Murray, D-WA, and Rep. Jeb Hensarling, R-TX, they call their plan a “common sense change to agriculture policy.”

The bill, titled the Rural America Preservation Act of 2011 (S.1161), according to the letter would:

• establish caps of $20,000 on direct (fixed) payments, $30,000 on counter cyclical payments, and $75,000 on loan deficiency payments and marketing loan gains.

• combine limits for married couples at $250,000. These limits would be reduced by varying amounts depending on the farmer’s participation in ACRE, essentially setting the payment limitations at the effective caps, less the reductions in direct payments and marketing loan gains.

• improve the “measurable standard” by which USDA determines who should and should not receive farm payments. It requires that management be personally provided on a regular, substantial, and continuous basis through direct supervision and direction of farming activities and labor and on-site services.

•! provide savings of approximately $1.5 billion.

“While we support commodity programs that provide a needed safety-net for farmers, the programs should not help big farmers get even bigger,” the letter reads. “There’s no problem with a farmer growing his operation, but the taxpayer should not have to subsidize it. Under current law, nearly 70 percent of commodity farm payments go to the largest 10 percent of farmers. There comes a point where some farms reach levels that allow them to weather the tough times on their own. Smaller farms do not have the same luxury. In addition, setting a measurable standard for management of a farming operation will help prevent abuse of farm programs that is present under current law.”

Sens. Michael Enzi, R-WY, Sherrod Brown, D-OH, Kirsten Gillibrand, D-NY, and Ben Nelson, D-NE, also joined the bill. — Traci Eatherton, WLJ Editor