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.