It's a huge controversy in California. Mega-farms with long-term rights to heavily subsidized public irrigation water are making a fortune selling the water back to, uh, you, the public. Often for a vastly higher price than they paid for it, of course. And they'll make more money selling it in the years ahead. We're talking millions. EWG has published extensive, original research on water subsidy controversies in California's Central Valley Project.

House Speaker Nancy Pelosi has praised as 'reform' provisions in the House Agriculture Committee's farm bill that will "eliminate millionaires" from the subsidy rolls. Data that EWG obtained and posted yesterday from USDA showed that the "crackdown" will affect at most 3,175 wealthy farmers and landlords out of 1.6 million or so USDA subsidy beneficiaries in an average year (0.2 percent).

With the help of our betters on the subject, we've thoroughly Mulched the House bill's payment limitation 'reform' as a sham here, here, here, here, here, here, and here.

However, we haven't heard Speaker Pelosi say anything about a provision tucked into the payment limitation 'reform' that specifically allows high-earning mega-farmers and landowners to count water rights sales as "income from farming."

Under current regulations (7 CFR 1400.601, pp. 337-338), income from farming is defined as derived from:

(1) Producing crops, livestock or unfinished raw forestry products; (2) Selling (including the sale of easements and development rights) their own farm, ranch or forestry land or water rights; (3) Selling, but not as a dealer, equipment purchased to conduct farm, ranch or forestry operations when the equipment is otherwise subject to depreciation expense on the IRS Form 4835 or Schedule F; (4) Renting land used for farming, ranching or forestry operations; and (5) Payments made under any program authorized under chapters VI, VII or XIV of this title.[various USDA programs]

EWG's Director of Government Affairs, Sandy Schubert, noticed that "income from farming" is capaciously redefined in the bill the subsidy lobby wrote for the House Agriculture Committee with reference, among many other things, to sale of water rights.

Under the bill (Sec. 1604), income from farming, ranching or forestry is defined as:

Here's the implication. Under the Pelosi payment limitation reforms, a big-bucks cotton farmer--in, say, the Westlands Water District of California--who pulls down between $500,000 and $1,000,000 in adjusted gross income (AGI, averaged over 3 years), is ineligible for crop subsidies unless he can demonstrate that 66.66 percent of the dough was "income from farming", as defined in the bill. If he sells water rights, it will count as income from farming under the bill, making it easier to continue receiving subsidies.

The inclusion of the sale of water rights in the Ag Committee's new, expanded definition of "income from farming" may not mean anything. Who knows, it could even have been a drafting error. Very common problem on the Hill when you're hellbent on 'reform.'

UPDATE: Several people have asked what the difference between the existing regulations and the committee bill is with regard to water rights. It's subtle. It's the the change from the sale of "their own...water rights" in the regs to "the sale of" presumably any water rights in the bill. And this will be in law, which is far harder to change than regulations.

Note also the additional, new categories of income from "the provision of production inputs" and from various "processing, storing, transporting" activities. The latter, we're told, cover income from cotton gins, ethanol plants and other business activities.

Rep. Tim Walberg (R-MI-7), who voted the subsidy lobby's farm bill out of committee, now says U.S. subsidiaries targeted by the bill's offset in Ways and Means would be hit by a 600 percent tax increase, and those companies employ 201,000 Michiganders. Take a gander. Clearly Republicans are rallying around this argument, which, for now at least, powerfully combines their convictions with their willingness to stymie Democratic leadership's ambition to prove they run a do-something Congress.

New as in the past few hours.

The companies that oppose the Democrats' preferred method for finding $4 billion for the Ag Committee's farm bill. Quick, think of a major corporation, any corporation. Yup, they're on the list.
Members of the Organization for International Investment.

From the Republican Leader, John Boehner, earlier today, claiming the Democrats proposal for adding $4 billion to the House Agriculture Committee's wasteful farm bill would increase taxes and threatens to destroy "millions of jobs."

Ranking Republican (and former chairman) of the House Agriculture Commitee, Robert Goodlatte of Virgina, testified before the House Rules Committee that he opposes the bill, and is requesting an "open rule" which would allow hundreds of Republican amendments to be offered, debated and voted upon.

We understand now that the Republican leadership is asking that the bill be pulled. Republicans are arguing that the proposed mechanism for providing the additional $4 billion for the farm bill from the Ways and Means Committee is a tax increase.

We've also heard that because of technical budget scoring issues, Ways and Means is finding only $3.2 billion of the $4 billion that Speaker Pelosi told that committee's chairman, Charlie Rangel, to provide. While the $4 billion technically is for an increase in the Food Stamp Program, it is really grease for the subsidy lobby's whole bill. Without that money, the overall bill will have to be recallibrated--and if more money isn't found and the full $4 billion is required, something else will have to be cut.

Here's the AP's Mary Clare Jalonick again:

Farm bill faces threats from right, left

WASHINGTON - Farm-state Republicans were threatening to defect from a multibillion-dollar farm bill in a spat over taxes, putting the measure in jeopardy as it headed to the House floor on Thursday.

Rep. Bob Goodlatte of Virginia, the top Agriculture Committee Republican, said GOP panel members felt "betrayed" by the plan and would vote against the farm bill if it were included.

With many Democrats already uneasy about the agriculture measure, which leaves in place and in some cases increases subsidies for major crops, Republican defections could spell defeat for the bill. Without the additional $4 billion for nutrition programs, however, Democrats would lose substantial support for the measure among lawmakers from urban districts that draw heavily on those programs.

A few excerpts from this morning's press conference. Full release on the jump.

Laura of Oxfam, you rock.

July 25, 2007 Contact: Laura Rusu (202) 496-3620 or (202) 459-3739 or lrusu@oxfamamerica.org

FISCAL CONSERVATIVES, ENVIRONMENTALISTS, FAITH GROUPS, HEALTH PROFESSIONALS AND SOCIAL JUSTICE ACTIVISTS OPPOSE SHAM REFORM BILL

Washington, DC— On the eve of the 2007 Farm Bill debate by the House of Representatives on Thursday, a diverse group of public interest organizations and faith groups gathered on Capitol Hill to call on every Member of the House of Representatives to support real reform and vote in favor of the FAIRNESS IN FARM AND FOOD POLICY AMENDMENT introduced by Rep. Kind (D-WI) and Rep. Flake (R-AZ). Below are some quotes in support of the amendment.

"If members from both parties vote for the interests of the people in their districts, the Fairness Amendment to the Farm Bill will win. Whether it is more money for small family farmers, conservation, an increase in food stamp benefits, or healthier school lunches, the "Fairness amendment" is the only option.” Ken Cook, President of EWG

"It turns out the USDA treats dead farmers better than black farmers who are alive. The fairness gap that has ignored thousands of black farmers for decades can finally be closed as Congress considers a new farm policy for the country.” Dr. John Boyd, founder of the National Black Farmers Association

“The Fairness Amendment is the only farm bill proposal that approaches justice. It will make our nation’s farm policy for farmers in the 21st century and help people who struggle to feed their families.” Rev. David Beckmann, president of Bread for the World

“Congress is faced with a real test of moral leadership in changing currently unjust policy that props up the wealthiest farmers and landowners at the expense of struggling family farms and people living in poverty at home and abroad. The Fairness Amendment provides desperately needed reform to improve conservation, nutrition, rural development.” Rev. Jim Wallis, Editor and Executive Director of Sojourners/Call to Renewal

“The Fairness in Farm and Food Policy Amendment would reduce and restructure subsidies to help reward -- not reject -- farmers when they take steps to help the environment.” Scott Faber, Farm Policy Campaign Director, Environmental Defense

“This farm bill stinks of rotten programs and taxpayer waste. Lawmakers need to do more than just hold their noses and vote for another pile of farm bill slop this year. The Fairness amendment gives them the opportunity to start cleaning up farm programs, making them market oriented, less costly and trade compliant.” Steve Ellis, vice president, Taxpayers for Common Sense

It means the issue breaks through the haze over the subsidy lobby's 'reform' bill, gets the attention of conservatives (a tax increase to fund a farm bill they already oppose), and generates a flurry of midday press that emboldens reformers (like EWG). Because Secretary Johanns also said favorable things--short of support--for the Kind-Flake Fairness Amendment ("We see that as a real step towards reform").

Here's AP's Mary Clare Jalonick.

Veto of House Farm Bill Threatened

WASHINGTON (AP) - The White House issued a veto threat against a multibillion-dollar farm bill, complicating passage of the legislation as House members scrambled Wednesday to find $4 billion to pay for food stamps and other nutrition programs.

Agriculture Secretary Mike Johanns said the House bill, which extends government agriculture and nutrition programs, doesn't do enough to reduce subsidies to growers.

``We believe the bill put forth by the committee misses a major opportunity,'' he told reporters.

The chamber is expected to begin consideration of the five-year farm bill Thursday. House Speaker Nancy Pelosi, D-Calif., has backed the legislation but has faced criticism from groups who say it doesn't go far enough to trim government programs.

The bill, approved unanimously by the House Agriculture Committee last week, contains modest attempts at reform. It would ban federal subsidies to farmers with incomes averaging more than $1 million a year and stop farmers from collecting payments for multiple farm businesses.

Pelosi called the legislation a ``critical first step for reform.'' But Agriculture Secretary Mike Johanns said Wednesday that the millionaires proposal would only affect about 7,000 farmers, noting that the administration has suggested limiting subsidies for those with incomes of more than $200,000. That proposal would affect 38,000 farmers, Johanns said.

``There is a point at which people graduate from receiving government cash subsidies,'' Johanns said.

Johanns also criticized a proposal by Rep. Lloyd Doggett, D-Texas, to pay for $4 billion in nutrition and food stamp programs by taxing overseas businesses that have subsidiaries in the United States. Doggett is on the Ways and Means Committee, which is charged with finding the nutrition money before debate begins Thursday.

``I find it unacceptable to raise taxes to pay for a farm bill that contains virtually no reform,'' Johanns said.

Republican officials said their members - even those from rural states that would benefit greatly from the farm bill - were loath to support what they viewed as a massive business tax increase that could invite retaliation against U.S. firms that establish operations abroad.

``It is bad policy and bad politics,'' said Rep. Jim McCrery of Louisiana, the top Republican on the Ways and Means Committee. ``Democrats are trying to sneak a far-reaching and potentially destructive proposal through the House without proper consideration. Any fair-minded person who cares about the U.S. economy will oppose this bill.''

With many Democrats already uneasy about the agriculture measure, which leaves in place and in some cases increases subsidies for major crops, Republican defections could spell defeat for the bill.

Without the additional $4 billion for nutrition programs, however, Democrats would lose substantial support for the measure among lawmakers from urban districts that draw heavily on those programs.

A statement of policy issued by the White House said the House bill ``moves backward'' and could compromise international trade negotiations.

The administration also expressed concern that the bill includes Davis-Bacon Act provisions on paying prevailing wages on ethanol plant construction projects. The requirement typically gives an advantage to unionized companies bidding for federal contracts.

Johanns praised a proposed amendment by Reps. Ron Kind, D-Wis., Jeff Flake, R-Ariz., and others to further cut back on subsidies and steer more money toward conservation, aid for specialty crops like fruits and vegetables, and nutrition and rural development programs.

``We see that as a real attempt at reform,'' Johanns said.

Kind's effort, which he said could cost $13 billion less, has divided Democrats and caused concern among farm-state lawmakers who argue it would devastate agricultural programs and cost the party its newly won majority.

Kind said Wednesday his amendment was ``still very much in play,'' and another proponent, Rep. Earl Blumenauer, D-Ore., said he was ``modestly optimistic'' it might have the votes to prevail.

Scott Faber of Environmental Defense said the group was disappointed with Pelosi for blessing a measure that leaves in place the vast majority of subsidies for big producers and contains less conservation funding than even President Bush has proposed.

From the Statement of Administration Policy on the subsidy lobby's farm bill (page 2, paragraph 2):

...the Administration does not support subsidies to farmers with an Adjusted Gross Income above $200,000 averaged over three years, who are among the wealthiest 2 percent of American taxpayers. The Administration strongly opposes the complete elimination of the payment cap on marketing loan payments, which would undermine the partial reform of payment limits in the bill and allows the largest producers to capture even larger subsidy payments.

We're reading this "SAP" [.pdf] even as we post it for the rest of you. We'll comment as we digest it.

Today, the NYT rightly slams the subsidy lobby's farm bill and House Speaker Nancy Pelosi's embrace of it as reform.

The Anti-Reform Farm Bill

American farmers have seldom been as prosperous as they are today. Yet the House is poised to approve a subsidy-laden farm bill more nearly suited to the Great Depression.

The bill would perpetuate an outdated and hugely expensive — $70 billion over the last five years — system of price supports and direct payments that disproportionately rewards big growers of row crops like corn, wheat and soybeans. More than half of this spending is concentrated in about 20 Congressional districts.

Incredibly, the House speaker, Nancy Pelosi, touts the bill as a big step toward reform. Ms. Pelosi seems especially proud of a new means test under which farmers with adjusted gross incomes of $1 million or more would no longer receive subsidies, down from the present cap of $2.5 million.

Reducing an outrageous cap to a lower outrageous cap is not exactly our idea of reform. The $1 million limit is also five times the $200,000 cap proposed by the Bush administration, which Ms. Pelosi is constantly accusing of catering to the rich.

The bill modestly increases spending for land conservation, and offers new financing for fruit and vegetable growers. But none of this can mask the bill’s denial of reality. Because of the boom in ethanol production, for instance, corn is setting all kinds of records — 92 million acres in production, prices at $3.30 a bushel. Even so, under the House bill, corn farmers will receive $2 billion in direct payments for each of the next five years.

Soybean farmers are similarly favored, as are cotton growers, whose subsidized cotton floods world markets, distorting trade and making it hard for farmers in poor countries to compete.

When the House debate begins later this week, Ron Kind, a Wisconsin Democrat, and others will offer an alternative bill that would shift money from the subsidy programs to conservation, nutrition and other worthy objectives. That would be real reform.

Both the House Agriculture Committee and House Speaker Nancy Pelosi have said that their 'reform' farm bill will "eliminate subsidies to millionaires."

But a new USDA analysis released today to the Environmental Working Group shows that the supposed crack down on subsidies to millionaires will affect almost no high-income farmers or landowners.

USDA estimates that only 3,175 wealthy farm owners and operators who receive farm subsidies would be hit by the House bill's provision to "eliminate" millionaires from the subsidy rolls. That means the provision would affect two-tenths of one percent (0.2 %) of the more than 1,601,694 individuals who received federal farm crop or conservation subsidy benefits, on average, between 2003 and 2005.

USDA estimates that another 4,025 other wealthy farmers receiving subsidies--0.25 percent of subsidy beneficiaries--fall into the Ag Committee's loophole-ridden "gimme cap" subsidy cut-off range of AGIs between $500,000 and $1 million. But USDA was unable to estimate how many of those very wealthy subsidized farms would slip out of the limits by virtue of existing loopholes and others added by the Agriculture Committee's bill to accommodate large farmers with significant earnings from cotton gins, equipment and input sales income, and investments in ethanol plants.

That means the total maximum number of wealthy people affected by the subsidy lobby's bill is 7,200--less than half of one percent of annual farm subsidy beneficiaries in recent years.

In contrast, USDA's proposal to cut off subsidies to individuals with incomes of $200,000 or more was estimated to affect 38,100 wealthy, subsidized farm operators and landlords.

CBO scored the savings for the House proposal at $550 million over 10 years. The score for the tighter Bush administration proposal was three times higher, $1.45 billion over 10 years.

Neither analysis takes account of the ability of wealthy subsidy recipients to exploit loopholes in current rules that married couples to partition their incomes in order to avoid the AGI cut-offs.

In response to a request from Environmental Working Group, the U.S. Department of Agriculture has released its analysis of the latest available (2004) IRS data on the maximum number of tax returns that would be affected by the "hard cap" of $1 million in adjusted gross income (AGI) and the loophole-ridden "gimme cap" for AGIs between $500,000 and $1 million.

Here is the USDA analysis verbatim:

HOUSE BILL

PROPOSAL:
* Decreases the Adjusted Gross Income (AGI) eligibility cap for all farm commodity payments and most conservation programs from $2.5 million to $1 million annually.
* If income is between $500,000 and $999,999, then 67 percent or more of income must be derived from farming to collect payments.
* Replaces the three-entity rule with direct attribution of payments.
* Permits double payment limits for married couples.
* Eliminates commodity certificates.
* Eliminates the limit on marketing loan benefits.

ANALYSIS:
* According to IRS data for 2004:
9,541 farm operators and landlords have AGI over $1M
3,175 of them receive farm payments
* USDA economists estimate that 12,090 farm operators and landlords likely have AGI between $500,000 and $999,9999 (based on IRS data)
4,025 farm operators and landlords would likely receive farm payments in this category (USDA calculation based on IRS data)

* Total maximum number of people potentially impacted by the House bill: 7,200

* CBO score indicates $550 million in savings over ten years under the House bill payment limit proposal (as a package)

ADMINISTRATION BILL

PROPOSAL:
* Decreases the Adjusted Gross Income (AGI) eligibility cap for all farm commodity payments from $2.5 million to $200,000 annually.
* Repeals the provision that waives the AGI cap if 75 percent of income is derived from farming.
* Replaces the three-entity rule with direct attribution of payments.
* Maintains single payment for most married couples.
* Maintains commodity certificates.
* Continues to limit marketing loan gains and loan deficiency payments.

ANALYSIS:
* According to IRS data for 2004:
o 114,300 farm operators and landlords have AGI of $200,000 or more
o 38,100 of them receive farm payments (among the wealthiest 2% of Americans)

* OMB & CBO budget scores reflect $1.45 billion in savings over ten years under the Administration's payment limit proposal (as a package)

Yes, gentle reader the House Agriculture Committee's 46 members do collect 42 percent of the entire country's farm subsidies. No wonder they love the 'reform' bill the subsidy lobby wrote for them. (But why does Speaker Pelosi?)
Here's the breakdown--just for you, Dr. Male!

I announced last week that it would go public this morning. I guess working with a former quarterback inspired me to call another play at the line. Two other plays, actually. You'll hear about them later today. Stay tuned for our piece on direct payments the subsidy lobby bill will make between 2008-2012. But please, don't let the children see it.

They've done Peter Milius proud on farm policy in this morning's lead editorial.

I've put the whole damned glorious thing in the jump. But here are the first and last graphs.

This Is Not Reform
Will the Democrats keep wasting money on farm subsidies?

WHEN THE Democrats took over Congress in November, they promised to legislate differently from their predecessors. Given the slimness of their victory and the voters' pronounced anger at Washington, they had a mandate to dispense with the worst manifestations of craven interest politics and to push for basic reforms in ethics and procedure. Now Speaker Nancy Pelosi (Calif.) and the rest of the new House leadership are in danger of failing a major test of their commitment to change...

So what is the speaker's take on this rotten bill? It "represents a critical first step toward reform," Ms. Pelosi said last week. That's the wrong answer. The House leadership should be pushing for significant reform of the crop subsidy system. It can start by supporting an amendment from Rep. Ron Kind (D-Wis.) that would lower the income cap and scale back some of the most egregious payouts. Mr. Kind's amendment is still too modest, but proposals like it, not the legislation on the table right now, are the critical first steps toward reform.

In a July 20 statement, House Speaker Nancy Pelosi endorsed the House Agriculture Committee’s farm bill, saying:

“The farm bill represents a critical first step toward reform by eliminating payments to millionaires.”

That's been the topline message from the subsidy lobby on the farm bill reported from the House Agriculture Committee last week. If they can sell the bill on this talking point--and play take away on the characteristic of the subsidy system that is most politically vulnerable in farm country, on editorial pages, and with sentient taxpayers everywhere--then they can sell everything else that's bad about it.

Speaker Pelosi is helping them.

Today, for example, the House Democratic leadership circulated talking points to the caucus that featured this statement right up top:

The House Farm Bill, a true reform bill, would:

Impose real payment limitations that will crack down on subsidies, save more than a half billion dollars, and redirect funds to people who need it most: working family farmers and ranchers...[my emphasis]

But two of the nation's leading authorities on payment limitation law and regulation told reporters on a call convened by EWG today that the House Agriculture Committee bill will not eliminate payments to millionaires. The experts were Chuck Hassebrook, Executive Director, Center for Rural Affairs, and Roger A. McEowen, Leonard Dolezal Professor in Agricultural Law, and Director of the ISU Center for Agricultural Law and Taxation, Iowa State University. Top USDA experts on payment limits have told us the same thing.

As Peter Shinn of Brownfield has already reported from the call:

Asked by Brownfield if he felt the House Ag Committee’s farm bill didn’t represent payment limit reform in any meaningful way, McEowen replied, "That’s exactly right. This is not."

As a hypothetical case study, the experts explained how even Speaker Nancy Pelosi and her family, or anyone of similar, substantial means, with family earnings of millions of dollars each year, could readily qualify for unlimited subsidy payments under the Agriculture Committee’s ‘reforms’, if they have farmland eligible for subsidy payments (which Speaker Pelosi does not).

Here's how it would work. The subsidy lobby's farm bill provides that an individual with a three-year average adjusted gross income greater than $1 million will be ineligible for subsidies (that's income minus most deductions and business expenses on their tax returns). About 0.1 percent (one-tenth of one percent) of tax returns report AGIs of $1 million and up across the entire economy (and remember, we are talking about an income measure here, not millionaires in terms of assets, who are far more numerous of course. Maybe you're one). So right there, you know we're not talking about a lot of million-dollar earners, whether they're getting subsidies or not.

This is the big "eliminate the millionaires" reform the subsidy lobby is talking about, because the current limit--which the subsidy lobby wrote for the 2002 farm bill--cuts off subsidies at a $2.5 million average AGI over three years. Unless the individual can show 75 percent of the income was farming related. So it is precisely big farms that can now drive a tractor through even that "limit."

Still, going from $2.5 million with exemptions to a $1 million "hard cap" sounds like quite a reform, doesn't it?

But as Professor McEowen (who in his days in private practice used to help farmers deal with payment limit rules) and Mr. Hassebrook explained, USDA regulations, which were not tightened by the committee, are easy for a couple earning millions to comply with and still receive subsidies.

In Speaker Pelosi's case, according to her financial disclosure forms (the latest, for 2006, is here), her earnings as an individual in recent years fall well below the $1 million "hard cap." (For that matter, she's below the $500,000 to $1 million "squishy cap" AGI range that can disqualify an individual for subsidies unless 66.66 percent of the income is "agriculturally related"--which the ag committee further loopholed and I'll deal with in a subsequent posting.)

Her spouse's income ('SP' on the form) clearly was much higher, but is not tallied exactly, consistent with House disclosure rules. Investment income is presented as fairly broad ranges in Schedule III of the House disclosure form; by my count, eight entries fell within $100,001 - $1,000,000. Almost none of the "unearned" (non-salary) income is joint ('JT').

No surprises here--this is a prosperous, successful family--and everything appears utterly and entirely above board.

However, under USDA rules (7 CFR 1400.601, pp. 337-338) the Pelosi family could acquire a large farm with huge subsidies attached to it, assign ownership to Speaker Pelosi or a company she controls, and she could qualify for subsidies (ownership automatically satisfies the 'management' test that requires an individual to be "actively engaged" in farming in order to be eligible for subsidies). Any family of such substantial means could do the same, of course.

It would be very easy if Speaker Pelosi filed a separate income tax return, because she'd be far below the hard and soft "caps." But the relevant USDA regulations for determining adjusted gross income offer relatively easy compliance even if a couple files jointly, and the House bill does nothing to change that.

In the regulations, adjusted gross income means (Section (b)(2)):

For an individual filing a joint tax return, the amount reported as ``adjusted gross income'' on the final federal income tax return for the applicable tax year unless a certified statement is provided by a certified public accountant or attorney specifying the manner in which such income would have been declared and reported if the individuals had filed two separate returns and that this calculation is consistent with the information actually supporting the filed joint return;

So either singly or jointly, families of considerable means like Speaker Pelosi's would easily be able to receive crop subsidies for eligible land under the payment limitation she has dubbed "reform."

I have no reason to believe Speaker Pelosi has the slightest idea that this is the case. It is unimaginable that in other realms of policy she would think of such a "reform" as anything other than pandering to the rich, via subterfuge and loopholes, at the expense of the nation's other needs and priorities. This payment limit proposal is the kind of monumentally unfair proposition that Nancy Pelosi has stood against, second to no one in Congress that I could name, her entire career.

Two more data points for perspective.

When the Commission on the Application of Payment Limitations for Agriculture, mandated by the 2002 law to study limits when Congress sold out on imposing tighter ones, issued its report in 2003, it didn't even bother to quantify any impacts of the current, soft $2.5 million AGI "cap."

Data provided to the Commission indicate that a very small number of those previously receiving farm program benefits will become ineligible for direct, counter-cyclical, and loan deficiency payments and marketing loan gains [basically all subsidies] as a result of the adjusted gross income limitation." p. 28

In part because it had no measurable impact, the Bush administration proposed not just tightening the details, but dropping the AGI limit to a 3-year average of $200,000 with no agricultural income exemptions.

The second point is one I've made before but is worth repeating. The Democratic leadership said (above) that its "crackdown" on subsidies in the House bill would save a half billion dollars. They don't say--and it is outrageous that they don't, since they're supposedly informing their own caucus--that those are savings over 10 years. The Congressional Budget Office scored the savings from the House Agriculture Committee's payment limitation reform at $227 million over 5 years ($45 mil./yr) with (in my view) a very generous $194 million of it estimated to come from the AGI provision. Over ten years, the overall savings were $550 million, of which $473 million is attributed to the AGI change.

The Bush administration estimated its savings for a tightened, $200,000 AGI cap at three times those savings over 10 years--about $1.5 billion.

The "eliminates millionaires" talking point is a scam, and everyone who follows this issue knows it--including members of the House Agriculture Committee from the Midwest and Great Plains who actually want tighter, smart, real limits.

No one involved in federal farm policy is surprised that the subsidy lobby is selling the AGI ruse as reform.

What is continues to shock is that Speaker Pelosi is making the pitch right alongside them.

The subsidy lobby is crying crocodile tears over the new payment limits in the reform bill they wrote for Nancy Pelosi.

But they are still awful grateful for her support.

From the Delta Farm Press:

As promised by Committee Chairman Collin Peterson, the new farm bill retains the structure of the 2002 farm bill. But it breaks new ground by providing a revenue counter-cyclical program, “rebalancing” target prices and loan rates and spending up to $1.6 billion for fruit and vegetable growers.

It also puts new limits on farm program payments that could cause some economic disruptions for cotton and rice producers who have been struggling with lost markets and resulting low prices in recent years.

The latter was the result of a last-minute compromise worked out between Peterson and House Speaker Nancy Pelosi. Peterson said he agreed to the new language because the speaker agreed to work to defeat even more stringent payment limit language on the House floor.

“This represents the biggest change in payment limits ever,” Peterson told reporters during a press conference held the morning after the committee approved its new farm bill by a unanimous vote.

The language would make any farmer with more than $1 million in adjusted gross income ineligible for farm program payments. It would also require direct attribution of farm program payments to individual farmers.

“This is beyond where I wanted to go,” said Peterson. “This is all part of the reform that a lot of folks wanted, but some of our members were clearly uncomfortable supporting it. They had to have some assurance they wouldn’t be subjected to even more changes down the road.

“The new rules don’t go as far as some people would like, but they also go further than we expected to go.”

Peterson said he felt wheat, cotton and rice organizations would oppose the new payment language. But groups like the National Cotton Council, USA Rice Federation and U.S. Rice Producers Association appeared to be reconciled to the changes.

“Although the rice industry would have preferred there be no further reductions to payment limits, the USA Rice Federation and U.S. Rice Producers Association have reluctantly agreed to the changes, recognizing the political realities Chairman Peterson faces in moving the bill through committee and across the House floor,” the groups said.

“We appreciated the strong statement from (House) Speaker Pelosi on this bill,” said Craig Brown, the Cotton Council’s vice president for producer affairs. “She said she thought the bill contained some strong reforms.”

Happy farm bill week!

With vigilance like this, you can imagine how USDA will enforce the Pelosi payment limitation "reforms" in the subsidy lobby's new farm bill.

From the top of the fold of this morning's Washington Post, data detective Sarah Cohen reports that Deceased Farmers Got USDA Payments:

The U.S. Department of Agriculture distributed $1.1 billion over seven years to the estates or companies of deceased farmers and routinely failed to conduct reviews required to ensure that the payments were properly made, according to a government report.

In a selection of 181 cases from 1999 to 2005, the Government Accountability Office found that officials approved payments without any review 40 percent of the time.

So it turns out some deceased farmers aren't pushing up daisies after all. They're pushing up corn, wheat, soybeans, rice and cotton.

Dan Chapman did a great piece on necrosubsidies a while back for the Atlanta Journal-Constitution (we'll track it down later this morning). EWG's star former analyst-turned-lawyer, Andrew Art, filed a legal complaint with USDA over 10 years ago about this matter, when Dan Glickman was running the Department. USDA's Office of Inspector General and the Justice Department looked into it, found out the government was doing nothing to see if taxpayers were providing crop subsidies to corpses, and of course USDA vowed to fix the problem.

Now the department tells GAO that the continued lack of enforcement couldn't amount to more than 1 percent of subsidy payments--it's mostly a harmless, fraud-free technical oversight.

Except the bureaucrats don't seem to have a pulse either.

The report cited a 1,900-acre soybean and corn farm in Illinois that collected $400,000 on behalf of an owner who lived in Florida before his death in 1995. The company did not notify the government of the death but certified each year that the dead shareholder, who owned 40 percent of the company, was "actively engaged" in managing the farm.

Most estates are allowed to collect farm payments for up to two years after an owner's death, giving heirs time to restructure their businesses and probate the will. After that, local USDA officials must certify every year that the estate is still farming and has remained open for reasons other than simply collecting subsidies.

But the GAO report found that the Agriculture Department depends on heirs and businesses to alert the agency to deaths and does not use other sources, such as Social Security records, to confirm eligibility.

The GAO study was requested by Sen. Charles Grassley, one of our heroes on subsidy matters. He stands up for stronger payment limits and now for, um, not paying subsidies to dead farmers. And here's where the two issues come together:

The GAO report said that, in some cases, people who had reached the annual limit on farm subsidies of $360,000 to an individual were able to collect additional money as a beneficiary of an estate.

"The 'Reform' That Wasn't" is a must-read rip of Speaker Pelosi's endorsement of the subsidy lobby's farm bill, by Dan Owens over at the Blog for Rural America.
If you've never tried typing with oven mitts on, this might be the time to try.

Dan's pretty burned up.

From a preview of the week ahead in Congress by Wyatt Buchanan in the San Francisco Chronicle:

The speaker also addressed criticism that the version of the farm bill moving through the House does not go far enough with reforms. The bill, which Pelosi supports, is expected to be up for a vote by the House this week.

Bay Area food and environmental activists had formed a new coalition to compete with the traditional farm lobby on the bill. They wanted the bill to put more of a focus on diversity of crops, local farming and increasing fresh fruits and vegetables in school lunches and the food stamp program.

Activists also wanted lawmakers to move money from subsidizing crops to environmental and nutrition programs.

Pelosi said she is "very proud" of the bill and that reforms were made in it that will shift the country's agricultural policies.

"It is a careful balance that I think says you're never going to see a farm bill that looks like past farm bills again," Pelosi said. "This one takes us into the future."

Whenever someone in the farm subsidy lobby utters the phrase "careful balance" in describing a farm bill, it means they got their usual, obscene amount of taxpayer money, and kept advocates for conservation, food stamps, family farms, and other priorities in their place.

This time they've done it with Speaker Pelosi's enthusiastic support--and absolutely zero consultation about the final bill with those in the progressive community who've worked so hard over the past five years to make the case for real change.

The dozens of people and organizations on the progressive side of the policy spectrum that I'm aware of who have been working to reform the farm bill are wondering why Speaker Pelosi didn't even have the courtesy to ask, before publicly flacking the subsidy lobby's "reform" line about their bill: "This is what the agriculture committee thinks is reform. Of course, those 46 members bring 42 percent of the crop subsidy money back to their districts. What do you think?"

I can attest that House Republican leaders never bothered with such considerations when they rammed through the last two farm bills--or any other legislation. They dictated from on high, brooked no dissent, and blew the whistle.

Wasn't that supposed to be one of the things that changed in November?

What do you think?

As House Ag Committee Chairman Collin Peterson has described the 5-year farm bill his committee completed on Thursday:

"This is not a deal just between me and the folks that represent these people," Peterson said, referring to members representing subsidized farmers. "The speaker is involved in this."

Indeed, critics of the bill from the progressive community who have had the privilege to speak to Rep. Pelosi's staff about the legislation have been told in no uncertain terms that she will not tolerate any significant changes via amendment on the House floor. To further frustrate reform efforts, the farm bill is being rushed to the floor this Thursday, July 26. Amendments like the reform package to be brought forth by Democrat Ron Kind of Wisconsin must be delivered to the Rules Committee by 6 p.m. Tuesday, and if approved, will be allowed limited debate and a vote on the House floor.

But Speaker Pelosi's staff have made it clear that she firmly supports the bill as it is, and will make sure enough Democrats vote with her and the subsidy lobby to kill any reform that displeases Chairman Peterson.

So let's take a look at Speaker Pelosi's farm bill, starting where Michael Pollan started his celebrated dissection of America's food system, The Omnivore's Dilemma.

Let's start with corn.

For the next five years, American farmers are projected to do what was unthinkable when Michael wrote his book just a few years ago: plant and raise more corn than at any time in history, and get a strong price for it. It's almost entirely because of the ethanol boom, itself a creature of government, which this year will consume more corn than we export--over 20 percent of the crop.

And what a crop! Over 92 million acres of corn are in the ground now, more than we've planted since 1944.

How much is 92 million acres? You'll be in the ballpark if you think of California, 99 million acres not counting water, covered in corn and nothing but. Experts are now trying to ponder the implications of more than 100 million acres of corn in the years to come.

Since the weather is looking very favorable in the heart of the corn belt, we should have high per acre corn yields, truly a bumper crop this fall. In my thirty years working on farm policy, that combination of record plantings and good weather has always spelled ruinously low prices. But not this year. Despite the rain we had in Illinois and Iowa this past week, corn futures contracts for December delivery--the market window right after harvest that is typically the low period of the corn marketing year--closed above $3.30 a bushel on Friday. That's about 50 percent higher than it's been in recent years, and was considered by analysts a "retreat" in the market from recent weeks (much the way Wall Street will smell a bear these days if the Dow "drops" below 14,000).

All of which goes to say that we're heading for the first corn crop in history that should be worth well north of $40 billion.

Again, it's ethanol. And with the push to expand the industry even more, the Congressional Budget Office projected in March that corn would not be getting any of the subsidies that are tied to various price triggers set by Congress in the 2002 farm bill. Why? Because the ethanol-driven demand for corn is so strong that market prices are projected to remain above the government triggers. Of course, if the price falls below the levels Congress has set, those price-related corn subsidies would flow once again.

So that means we won't be providing subsidies to corn farmers, right? Far from it.

Under the Pelosi farm bill, on top of record income corn farmers will earn from the market, taxpayers will be obligated to continue providing an automatic $2 billion per year in "direct payments" to corn farmers. These are subsidies paid regardless of price or income conditions.

Pure and simple, it's a windfall subsidy of $10 billion from taxpayers to corn farmers over the next five years.

To put that in perspective, the Pelosi farm bill adds $4 billion over five years ($800 million per year) to the food stamp program. That increase, designed in part to retain the "buying power" of the $1 per meal food stamp "benefit", could easily have been found by reducing the corn windfall subsidy. Corn farmers still would have had $6 billion in subsidies left over--on top of record earnings in the marketplace, of course. We might have doubled the food stamp increase to $8 billion and still had $2 billion to waste--and in this market, for taxpayers, it is waste--on a corn windfall.

Instead, Speaker Pelosi forced House Ways and Means Chairman Charlie Rangel to find the extra $4 billion to pay for the food stamp increase. That way, Chairman Peterson won't have to dip into the corn subsidy windfall.

For those who thought Michael Pollan was onto something when he said this time we should have a food bill, not a farm bill, let's put the corn windfall subsidy Mr. Peterson is taking home to his own district via this 'reform' bill into perspective.

MN-7 stands to collect $320 million of that corn subsidy windfall over the next five years.

That is marginally less than the $350 million increase the Pelosi farm bill adds over five years for the entire nation to a program that provides fruits and vegetables instead of junk food to our kids as a school snack.

No, this isn't the "food bill" we'd all talked about, worked for. The bill that would shift emphasis away from a handful of subsidized crops and make big investments in healthier food, local farms, organic agriculture, the environment, nutrition programs...

Not even close. This, I say with regret, is Nancy Pelosi's farm bill.

If you're already disappointed, not to say shocked, that this legislation bears the imprimatur of a leader so many of us have revered and supported over the years, rest assured it will only get worse as you learn more about it.

If you eat, pay taxes, worry about the environment and are fed up with the subsidy status quo, it's time to make some noise.

In her hometown paper, no less.

Carolyn Lochhead reports in the San Francisco Chronicle on the outrage the progressive community is beginning to express about the boondoggle farm subsidy bill House Speaker Nancy Pelosi has not just rubber stamped, but actually characterized as reform.

House Speaker Nancy Pelosi signed off Friday on a five-year farm bill that would keep multibillion-dollar subsidies flowing to cotton, corn and a handful of other crops, deeply disappointing Bay Area food and environmental activists who had hoped that Congress might shift federal farm policy this year to combat obesity, air and water pollution and industrial farming.

Pelosi, a San Francisco Democrat, hailed as reform legislation that would grant subsidies to farmers earning up to $1 million -- five times more than the cap sought by the Bush administration -- while increasing actual payments to farmers. The bill comes during the most prosperous era American agriculture has seen in decades as crop prices and farm income approach or set record highs.

"Bush seems to be taking a harder stance on millionaires than the Democratic Party, which is surprising," said Kari Hamerschlag, policy director for the California Coalition for Food and Farming, a Watsonville group urging lawmakers to move money from crop subsidies to environmental and nutrition programs.

But what do we know? The subsidy lobby Speaker Pelosi has sided with--making clear she will use the full power of her position to help crush amendments Agriculture Committee Chairman Collin Peterson doesn't like--can no longer hide its contempt for the people she actually represents.

House Agriculture Committee Chairman Collin Peterson, a Democrat whose Minnesota district receives large corn subsidies, said Pelosi backs his bill and will use her power to make sure it passes the House next week.

Peterson called the $1 million payment limit a "huge change in direction" and warned that the House leadership would quash any attempt -- a rebellion has been promised by Rep. Ron Kind, D-Wis. -- to make any significant changes.

"This is not a deal just between me and the folks that represent these people," Peterson said, referring to members representing subsidized farmers. "The speaker is involved in this."

Peterson dismissed critics outside the traditional farm belt.

"I know people on the outside can sit and complain about this, but frankly most of those people have no clue what they're talking about," Peterson said. "Most people in the city have no concept of what's going on here."

Wheat subsidy flack Daren Coppock must be kicking himself this morning that he didn't deride reformers' "San Francisco values" in the speech Lochhead cites from earlier this year.

Commodity groups ridiculed the idea that subsidies have anything to do with obesity.

"The farm bill did not require people to eat more than they should," Daren Coppock, chief executive of the National Association of Wheat Growers, told a Washington conference this year. "If the farm bill causes obesity, it also causes AIDS, global warming, the extinction of endangered species, bad grades in school and probably dancing."

That's what the subsidy lobby really thinks about Nancy Pelosi and the people and interests she represents. It makes her embrace of this farm bill--and her refusal to hear out much less heed any critics of it from the "outside"--doubly sweet for them.

And the more time we spend with the Pelosi farm bill, the more we understand why.

Next Tuesday morning at 10 a.m. Eastern Time, the Environmental Working Group will publish (here on Mulch) the names of every prospective beneficiary of the single, costliest farm subsidy provision in the farm bill the House Agriculture Committee will approve today, and the amount of benefit taxpayers will provide to each of them over the next five years.

I'm scrolling down the list for California now, and for the life of me I cannot find Constance Bowles.

There's a William H. Nichols, of Chico, who stands to collect $265,783; Clarence Ritchie, Visalia, who will qualify for $243,980 under the program. Peter Knight and Kimberly Van Ree, both of Glenn, are among the eight Californians whose benefits we project will exceed $240,000.

This particular subsidy for farm businesses with multiple owners will be even higher. The nine owners of Dublin Farms, in Corcoran, California, for instance, are in line for $1,930,025 over five years. Next come the eight owners of Sandridge Partners, whose benefits are sent by USDA to the Silicon Valley hamlet of Sunnyvale for farms in Kings and Tulare counties. They should be due $1,321,125.

By our calculations, 242 California farm businesses will receive at least $250,000 over the next five years.

To the uninitiated, it may be hard to fathom how a farm subsidy benefit could possibly be projected five years into the future with such precision, considering the vagaries of weather, cropping patterns and yields, oscillating market prices, and all the other confounding factors that make farming such an unpredictable business.

The answer, which may be even harder to fathom, is that these subsidy payments are utterly predictable. They're automatic, in fact. Taxpayers will be obligated to provide them even if crop prices climb and farm incomes soar, come rain or shine, bumper crop or bust. To qualify, beneficiaries won't have to sit on a tractor--or even look at one-- plant a seed, or so much as visit their farm, much less live on it. In fact, they won't have to be living at all. Beneficiaries can receive this subsidy even, heaven forbid, in death.

It's called a "direct payment," and it is the primary treasury-draining spigot in a farm payment package that Speaker of the House of Representatives Nancy Pelosi has declared to be 'reform'. It is the kind of policy you might expect if you allowed farm subsidy reform to be determined by the subsidized. Which is what Speaker Pelosi has allowed the House agriculture committee to do.

Their credentials on these matters are as immutable as money. Among their 46 districts they share 42 percent of total federal crop subsidies.

The list of beneficiaries consists of people and businesses who will share a staggering $26 billion in federal farm subsidy payments through the year 2012. Over 92 percent of that money will be restricted to just five crops (corn, wheat, cotton, soybeans and rice). California's share will be $844 million.

I'm looking for Mrs. Bowles because she is the improbable #1 beneficiary of federal crop subsidies in the state of California. Her crop benefits amounted to $1,210,865 over three recent years (2003-2005), according to USDA data EWG obtained under the Freedom of Information Act. I say "improbable" top beneficiary because an average of $403,621 per year is a fair amount of crop subsidy money for someone who lives in San Francisco (94118). Then again, she is hardly the only farmer in those parts; there's at least one for every dot on this map. That would include George Bowles, another of the nine owners of the Bowles Farming Company; his crop subsidy benefits amounted to $1,320, 856 over that period from the company's operations in Merced County.

Adding all the other owners and including additional conservation payments brings the company's total subsidy to $2,688,019 over three years.

Alas, Mrs. Bowles is not on the list for automatic direct subsidies. Nor is George Bowles, nor any of the companies' other owners.

What, under Speaker Pelosi's farm bill reforms, will become of them?

Next: In Part II, we'll learn about the payment limitation 'reforms' and changes in direct subsidies and loan payments in the House Agriculture Committee's farm bill. We'll learn that the average adjusted gross income of tax filers in the Merced Zip code where the Bowles Farming Company is located was $46,637 in 2004, according to the IRS. In Mrs. Bowles' s San Francisco Zip code, it was $124,213.

It's the kind that poses no problemo for the subsidy lobby, and offers no reform for everyone else.

Reportedly those are the annualized savings that CBO scored for Chairman Peterson's payment limit proposal over five years. It's no better over ten years: $52 mil. per year.

Payment limitation policy should not be about maximizing savings, but about protecting taxpayers, and investing scarce federal money fairly and equitably in support of people who demonstrate they need the help.

At the level of these savings, it is obvious that Mr. Peterson's proposal will have no effect on the flow of taxpayer funds to the largest, wealthiest subsidized farms in the country, and once again leave less for people and priorities that have gone begging for farm bill support year after year.

If this sham reform is acceptable to Democrats, they will have utterly sold out their principles of fairness in economic and social policy. If it is acceptable to Republicans, they will have dramatically sold out their principles of limited government and free market entrepreneurship.

If the ag committee's provisions on payment limits are what we get in the final House bill, abandoned principles, cynicism and hypocrisy will be piled almost as high as the money taxpayers will waste on farm subsidies over the next five years.

Let's say, purely for the sake of argument, that Ways and Means Chairman Charlie Rangel has not, in fact, agreed at this point to infuse the agriculture reserve fund with four billion dollars or so--the essential grease everyone says is needed to pass Chairman Peterson's bill through his own committee and the House floor. Because if the money isn't really there, a budget point of order can be raised on any item that violates pay-go rules. So the Rules Committee would be unwilling to approve the measure for the floor.

Now what if Mr. Rangel actually wants to see what Mr. Peterson's final bill looks like before he decides how much to provide? Isn't that reasonable? And what if, once he reviews it, he's unhappy--and hears from his fellow Ways and Means committee member, Ron Kind, that the bill does not represent acceptable reform--or worse, is in some important respects actually retrograde?

What if, as a result of his review, Chairman Rangel decides he'd like some changes himself --like asking for more cost-saving reforms in crop subsidies to large, wealthy farm businesses--before finding the money to get it passed, money that could be spent on lots of other pressing, politically hot priorities (like insurance coverage for poor kids)?

The much-discussed $4 billion Mr. Rangel has reportedly agreed to provide is being described by ag committee sources and some farm policy pundits as money dedicated to a food stamp program increase.

But in the big picture, of course, the crop subsidy lobby was taken care of with real money by the ag committee, while the food stamp program increase was dropped entirely into Mr. Rangel's lap.

If the agriculture committee's bill looks like it is far too generous to the subsidy lobby, won't Mr. Rangel be put in the position of enabling a multi-billion dollar giveaway? For instance, won't a giveaway of windfall, automatic direct payments to farmers, worth over $5.1 billion per year look bad for Democrats? What about payment limitation 'reforms' that turn out to be meaningless in curbing taxpayer funds for the biggest, wealthiest subsidized farm businesses in the country?

And if Mr. Rangel resists the role of enabler, will the subsidy lobby try to blame him for "bringing down the farm bill" or for "failing to fund" a food stamp increase? Will the Democratic caucus buy that?

The important thing about all of these questions is that they be classified as "hypothetical." Because once a question has been put in the 'hypotethical' category in Washington, no one expects an answer. And when someone in Washington refuses to answer a hypothetical, see if they don't work the word "frankly" into it.

Well here's my answer, Beltway conventions be damned:

EWG does not comment on hypotheticals.

But if we did comment, frankly, we'd say that if there's one member of the House of Representatives who's no fall guy, it's Charlie Rangel.

According to Reuters, that's what House Agriculture Committee Chairman Collin Peterson said in reference to the farm subsidy payment limitation proposal he announced late yesterday.

We're doing our best to double-check with Speaker Pelosi's office just to make sure that she considers this proposal reform. We'll update you later.

Mr. Peterson's proposal is complicated, and we'll respond to it in more detail later, too. But we know enough now to agree wholeheartedly with the Center for Rural Affairs: this is not what progressives would consider reform.

But let's assume for the moment the chairman is correct in saying Speaker Pelosi considers this reform.

Focusing just on one feature of Chairman Peterson's proposal--a provision that would deny farm subsidies to individuals with an adjusted gross income of $1 million or more (0.1 percent of all taxpayer)--we can now officially calculate that when it comes to restricting farm subsidies to wealthy individuals, the Bush administration, which proposed a threshold of $200,000 AGI for subsidies, is exactly five times more progressive than the House Democratic leadership.

Many more measurements to come.

The legislative language is yet to come. The numbers are all top secret. In fact, I'll only tell you what they are if you promise not to tell anyone else, including anyone who has already seen some of the numbers that were published hours ago here.

The fruit and vegetable snack program goes from relying totally on reserve funds to being allocated $350 million in real money over five years. Specialty crop block grants go from $265 million over five years to $365 million over five years. There is $215 million for specialty crop research and $30 million in additional funds for organic research. And more.

All together, the new chairman's mark will reportedly include $1.6 billion for specialty crops over five years, well more than double from Peterson's first mark. Savings were found in crop insurance programs to help fund the increases in f/v programs.

We've seen some variations and additional detail (that we really can't tell you), but in general this is very good news for Mr. Cardoza's leadership. He pushed against the crop subsidy lobby until he got his message through that fruit and vegetable growers will settle for nothing less than a fair share of this farm bill--and every farm bill to come.

As with everything else in this farm bill, no one is taking these numbers for granted yet. They remain significantly under the objectives set forth in Mr. Cardoza's original marker bill, the EAT Healthy America Act. Without further committee concessions, the only place to close the deal in the House is on the floor.

But any time someone makes gains like this for a better, fairer farm bill, you have to tip your hat.

Chairman Cardoza, well done, sir. This is a down payment to be proud of, and signals the promise of an important new direction in a farm policy, and an important reconfiguration of farm bill politics, that in the past has been 92 percent at the service of just five crops.

Dan Owens over at the Blog for Rural America has an excellent post about their recent comparative analysis of farm subsidies and rural development funding:

The numbers speak for themselves. In our home state, Nebraska, the top 20 farm payment recipients received more than $25 million while our top 20 lowest population growth counties received a little more than $4 million in rural development funding. Those 20 counties are home to 64,791 people. So 20 farm payment recipients received six times the amount of money invested in rural economic development programs for over 64,000 people.

Go here to read the whole post.

Everyone knows that House Agriculture Committee Chairman Collin Peterson is trying to develop a payment limit proposal to stave off subsidy critics on the House floor. He's said that Speaker Pelosi, who voted for Rep. Ron Kind's reform bill last time, is insisting on it.

But if the rumors we're hearing are true, what's emerging is anything but reform.

Here are things to bear in mind.

Adjusted Gross Income (AGI): Under the 2002 farm bill's so-called "Charles Schwab" provision (named after the wealthy financial advisor who used to collect big subsidy payments for his California duck hunting retreat), a farm program beneficiary whose 3-year average AGI exceeds $2.5 million is ineligible for farm benefits unless they can establish that at least 75 percent of their income is derived from farming, ranching and forestry.

Which means that some very large farms are not affected. Hardly any farm program beneficiaries have been affected--except, apparently, Charles Schwab.

The Bush administration wants to change the AGI trigger to $200,000, which is basically the top 2 percent of U.S. taxapayers, and it would repeal the 75 percent income-from-ag exemption.

Rumor has it that the committee is toying with an adjusted gross income trigger of $900,000, but that trigger has lots of locks on it. Oh, and then the gun isn't loaded.

Here's why. First--$900,000 is a joke. This is the stratospherically high realm of AGI for any walk of life. In 2004, the latest year for which IRS has comprehensive data, out of 132 million returns filed only 103,000 had an AGI above $1 million--that is, about 0.1 percent.

Then, apparently the loophole in current law that specifically exempts large farms will be made even more capacious, so that (reportedly) you'll be exempt if only 65 percent or so of your AGI comes from ag, forestry and related in come.

It gets worse.

New exemptions are being proposed, such as income from various investments like ethanol. That means big-time investors in ethanol plants will continue to get big commodity checks even if their AGI exceeds $900,000.

So this "AGI reform" is in all likelihood a step backwards.

We're also hearing that while the "commodity certificate" loophole may be closed by elimination of "certs", limits will be removed from "loan deficiency payments" (currently $75,000 per person or up to $150,000 under the 'three entity rule').

That's what the rumor mill is grinding out now, as the ag committee is about to begin opening day festivities and speechifying.

Stay tuned for more details.

In early July, House Agriculture Committee member Rep. Mike Conaway (R-TX) reportedly took exception to Agriculture Secretary Mike Johanns' suggestion that perhaps farm subsidy payments ought not go to the wealthiest Americans.

Johanns was referring to the Bush administration's proposal to discontinue subsidies to people who claimed $200,000 or more in annual adjusted gross income on their federal income tax returns--earnings that put them in the top 2 percent of taxpayers.

Conaway called Johanns’ statements regarding payments to the wealthiest 2 percent of Americans an “appeal to class warfare” among interest groups within the agriculture industry.

As Robin Toner mentions in a front-page story in this morning's New York Times ("New Populism Is Spurring Democrats on the Economy"), Mr. Conaway was using a talking point Republicans often deploy to frame social and economic policy debates that turn on questions of fairness and equity.

Populism is hardly new in the Democratic Party. Al Gore vowed to fight for “the people versus the powerful” in his presidential campaign seven years ago, and Republicans have long accused the Democrats of practicing “class warfare.”

But the latest populist resurgence is deeply rooted in a view that current economic conditions are difficult and deteriorating for many people, analysts say, and it is now framing debates over tax policy, education, trade, energy and health care.

The farm bill debate will be framed in just this way on the matter of payment limitations policy for large, often very wealthy farming operations. And some Republicans on the House agriculture committee will face an unusual challenge: defending unlimited payments to large farms in light of their votes against raising the federal minimum wage.

On January 10 this year, the House of Representatives passed H.R. 2 to increase the federal minimum wage for the first time in 9 years. After months of debate, the Senate followed suit and President Bush signed the increase into law.

As a result, the federal minimum wage will go from $5.10 an hour to $7.25 an hour. But workers won't get the full benefit right away. The $7.25 per hour wage doesn't go into effect until the summer of 2009.

According to the DNC's web site, the increase will mean a full-time, minimum wage worker will earn a bit more than $15,000 per year, up from the $10,700 the current wage brings annually. The Economic Policy Institute reckons the increase will help boost wages for over 12 million workers.

Twelve Republican members of the House agriculture committee voted against the measure, including Mr. Conaway. Most of their congressional districts, it happens, collect huge amounts of federal farm subsidies--in fact, the twelve of them collected over $6.5 billion in commodity program benefits between 2003 and 2005--over 15 percent of all the crop subsidies paid over that period. Three districts easily topped $1 billion:

Adrian Smith NE-3 $1,736,923,011
Randy Neugebauer TX-19 $1,227,192,312
Steve King IA-5 $1,154,206,630
Jeff Fortenberry NE-1 $660,393,707
Frank Lucas OK-3 $421,961,241
Marilyn Musgrave CO-4 $330,095,432
Mike Conaway TX-11 $321,921,524
Sam Graves MO-6 $269,009,533
Charles Boustany Jr. LA-7 $249,315,660
Timothy Walberg MI-7 $124,042,233
Kevin McCarthy CA-22 $63,137,654
Virginia Foxx NC-5 $10,759,438

(You can look up farm subsidies by congressional district here.)

It will be interesting to see how those twelve Republicans respond to "class warfare" proposals that may be introduced in the ag committee this week, or on the House floor the week following, to tighten subsidy rules for very large farm operations.

Having voted against the first increase in the minimum wage in nearly a decade, will these members now vote in favor of maintaining the currently unlimited flow of taxpayer funds to the elite, subsidized class who own some of the largest farm businesses in the country, and whose wealth and incomes far exceed those of most farmers or anyone working for a minimum wage?

What will make this debate especially interesting is that the populist charge is being led by the Bush administration and many farm state Republicans.

How do these rumors get started?

EWG can now confirm that was not the working title of Title X in the House agriculture committee's work-in-progress farm bill.

It is now, and has always been, "Horticulture and Organic Agriculture."

It's just been hard to convince Dennis Cardoza.

Mr. Cardoza, who chairs the (brand new) ag subcommittee with jurisdiction over that Title, wants a fair shake for fruit and vegetable growers in this farm bill--though his marker bill fell far short in helping the burgeoning, wildly popular and (when they put their minds to it) politically potent organic segment of that market.

Mr. Cardoza didn't get much of anything in the mark, except for things funded with "reserve fund" money, and he's now reportedly very unhappy. So is the Specialty Crop Farm Bill Alliance, who've been counting on Cardoza to deliver in the committee so they can avoid the awkward choice of fighting against their agri-brethren on the House floor.

A fight the produce aisle can't win, by the way, unless they align with some configuration of the reform crowd--conservation, nutrition, taxpayer, anti-poverty, and organic agriculture interests. You won't be seeing campaign buttons on the House floor at the end of the month that say "Cut Direct Payments To Fund A Major Increase for Fruit and Vegetable Research Block Grants--Now!"

It's especially awkward for Mr. Cardoza because he's been the very public champion of fruit and vegetable growers in the farm bill. And he's done a tactful job making the case in a firm but respectful way in the committee process.

It didn't pay off.

Now Chairman Cardoza's caught between his pledges to the fruit and vegetable world and his ambitions on their behalf (embodied in his EAT Healthy America marker bill), and being a good soldier for the committee's traditional wagon circling exercise around the subsidy status quo.

Except the subsidized class wants him to fight broader reform efforts from outside the wagon circle.

It's not like they wouldn't like to buy him his own wagon. They just can't afford it, what with all those commodity payments being maintained or increased and such.

Jerry Hagstrom reported in Congress Daily yesterday that Mr. Cardoza "favors shifting money away from subsidizing traditional commodities, such as cotton and wheat." He quoted Mr. Cardoza as saying "The bill does not need a total overhaul, but it could use a different direction."

Stay tuned. A different direction is in the works.

UPDATE: The Ruminant chews this same cud today. And yes, he is that photogenic.

The Farm Policy Analysis Database broke the million search mark today.

A million searches since June 12th.

Wow.

For the second farm bill in a row, wheat producers look as if they'll be treated as second-class members of the subsidy fraternity. And yet they'll be expected to add their wagon to the circle 'round the status quo--the better to help cotton and rice come away with billions, it would seem.

The National Association of Wheat Growers started off this farm bill cycle with an impassioned demand for 'balance' in 2007 and ambitious goals for reform.

All that passion and ambition seem to have given way to acquiescence.

Here's a picture of their core complaint (courtesy of CRS):

NAWG wanted their fixed direct payment more than doubled, from 52 cents a bushel to $1.15. The Peterson draft gives them nada penny more.

They also wanted their target price raised from $3.92 to $5.29. The Peterson mark gives them $4.15.

To me, the wheat growers have the most compelling case among commodity crops for special consideration in this farm bill. They've been hammered more than anyone by drought (a major reason why EWG supported weather-related disaster aid legislation over the past two years--though not the 30 percent energy cost 'bonus' to direct payments). In big parts of wheat country, growers are not able to participate directly in the ethanol boom because it's just too dry to grow corn.

But as Capital Press reporter Scott Yates pointed out a few weeks back:

It hasn't been a particularly auspicious farm bill debate for the National Association of Wheat Growers so far.

First, they were told their $5.29-per-bushel target price idea coupled with a $1.19 direct payment (base acres/historic yield) was dead on arrival. They protested the numbers that were analyzed by the Food and Agriculture Policy Research Institute of the University of Missouri and Iowa State University. The lobbyists and congressional aides said it didn't matter, and it didn't.

Now the one thing wheat growers have come to depend on in terms of government support - the one leg of the three-legged 2002 Farm Bill stool that actually worked - is under attack. The preliminary discussion draft for the commodity title of the 2007 Farm Bill puts direct payments squarely in the crosshairs for reduction. Under the 2002 Farm Bill wheat growers received a direct payment of 52 cents a bushel a year.

A letter NAWG President John Thaemert wrote Rep. Collin Peterson, D-Minn., expressed his concern over the effort to reduce the decoupled payment to provide increases in target prices and loan rates.

So the wheat DP did stay the same in the Chairman's mark, but the target price increase is minimal--and too far below the market to trigger countercyclicals anytime soon in all likelihood. Which is why that target price increase doesn't cost much. It's not worth much.

The wonder is that this offer is enough to get the wheat growers behind a bill that brings home a multi-billion dollar subsidy harvest for everyone else.

The next three weeks are the crucial period in the 2007 farm bill cycle, the best chance for the public to make a difference. We've been extremely busy with farm policy matters here at EWG, but our posting will pick up again now. We'll do our best to keep you up to date on key developments, and opportunities to weigh in.

The House agriculture committee is scheduled to begin its markup a week from tomorrow (July 17) and take its bill to the House floor the very next week, with an eye to completing action before the August recess. Chairman Harkin indicated last week that the Senate committee might start its markup this month.

Over the weekend, the content of House Chairman Peterson's "two bill" approach was posted on the committee's website. Bill #1, the one assuming no extra money is made available through the $20 billion "reserve fund" for agriculture, is set forth title by title, with accompanying fact sheets. Bill #2 imagines that reserve fund does money become available; its provisions are found in the "En Bloc Amendment."

Translated from the French, "En bloc" literally means "Powerball".

The House agriculture committee's 46 members (of 435 in the House) represent congressional districts that accounted for fully 42.4 percent of crop subsidy payments between 2003 and 2005 (program years)--$14.7 billion out of $34.75 billion spent by taxpayers over that period. We break it down here.

Six committee members represent districts that collected over $1 billion in crop subsidies in just three years; nine collected over $700 million, including Chairman Peterson, whose Minnesota district brought in more than $873 million. To state the obvious, these are large districts in area (two are at-large, encompassing entire states) and they are major producers of the five crops that account for over 90 percent of the Title I subsidies (corn, wheat, cotton, rice and soybeans).

But within the committee, some members may have a much bigger stake in perpetuating the current distribution of funding than others.

Only 24 of the committee’s members, all of whom represent districts that received more than $124 million over the three years, accounted for 40 percent ($13.9 billion) of total commodity subsidies between 2003 and 2005.

Many of the other members might well wonder what’s in it for their constituents if the full committee simply rubber stamps an extension of current crop subsidy programs, a position the subcommittee with jurisdiction over those programs approved just last month.

Fourteen (14) members--a third of the full committee--saw $30 million or less come into their districts through crop subsidies, less than $10 million per year on average.

That group's farm and ranch constituents might well fare better under reform scenarios that invest more money in fruit and vegetable programs, and conservation. Among its members is ranking Republican Bob Goodlatte of Virginia (who comes in 42nd among committee members for crop subsidies over that period).

Title I in both versions would extend the fixed direct payments, made regardless of prices or incomes, to the tune of $5.2 billion per year for five years. The mark also increases target prices for a number of crops, of most consequence for wheat, barley and soybeans.

If this doesn't fire you up for farm bill reform I don't know what will.

From the must-read story in today's NYT by Marian Burros:

According to the subsidy data from the Environmental Working Group, one giant cotton farm collected $2.95 million through crop subsidies in 2005, nearly as much money as the federal government spent on its primary research program for organic agriculture last year — $3 million.

That would be the top farm on this list, by the way.

I credit the Organic Farming Research Foundation's policy honcho, Mark Lipson, the top expert on organic farming research in the country, for a breakdown on research funding that inspired this little compare and contrast. The $3 million program in question is the Organic Agriculture Research and Extension Initiative (OREI) authorized in the 2002 Farm Bill, which OFRF describes as "the only program dedicated to the specific scientific and outreach needs of organic agriculture."

Bad enough that we spent a measly three-mil on this important program in FY '06 (it is authorized at $5 mil/year but we got gypped by appropriators, as usual).

Worse that a single cotton farm got that much in subsidies in just one year.

Let's fix that, shall we?