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Food, Conservation, and Energy Act of 2008 - Conference Report

Floor Speech

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Location: Washington, DC


FOOD, CONSERVATION, AND ENERGY ACT OF 2008--CONFERENCE REPORT -- (Senate - May 14, 2008)

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Mr. GRASSLEY. Mr. President, this farm bill has been a very long process. Last fall the Senate Agriculture Committee asked the Senate Finance Committee to help make up a budget shortfall we faced, and the Finance Committee on which I serve stepped up to the plate. With eight members of the Finance Committee also being members of the Agriculture Committee, we had a real desire to make sure rural America had the best farm bill possible. So following on what Senator Conrad said about fellow Senators deserving compliments for their hard work, I am only going to single out my colleague from Iowa Senator Harkin and my colleague from Georgia Senator Chambliss, the top two members of the committee, thanking them for the countless hours and weekends they put into this bill for a long period of time; for some, over a period of a year.

This was as difficult a farm bill to write and conference as I have ever seen. My colleagues so far have given a good overview of what this bill contains and what it does for those who are hungry, those who are living in rural America, and those who are still involved in family farm operations. But I wanted to take a minute to highlight a few of the items that were most important to me and, obviously, to my home State of Iowa. I think I have some experience to talk about because I still sharecrop with my son Robin.

This isn't a blanket approval of the bill. I did have some reservations about the bill because I didn't think it went far enough in two true farm bill areas--payment limits and competition reform.

First, the ban on packer ownership that had been a part of the Senate bill when it passed the Senate failed in an amendment I offered in conference committee. This is unfortunate because the livestock industry continues to become more vertically integrated and consolidated. I think that is bad for the independent producer. The recent announcement, for instance, that JBS Swift plans to acquire Smithfield Beef Group, National Beef, and Five Rivers Feedlot should be alarming to us as legislators. I continually have to wonder if when we get down to just one single slaughterhouse, one single packinghouse, will the Department of Justice and Congress begin to raise questions about the trend we have had for consolidation? This is a trend that continues to make it more difficult for independent producers to have choice in to whom they sell their livestock and making it more difficult to get a fair price for their livestock as the cash market continues to shrink. We were able to include some reforms in the livestock title, regardless of not doing what I think should have been done.

The Senate version of the farm bill included my language which banned mandatory arbitration clauses in production contracts. I drafted this bill after hearing about problems where producers were being forced to enter into expensive arbitration proceedings, thus giving up all their rights to have disputes finally resolved through the independent judiciary. While we weren't able to have the arbitration language from my bill included, we did reform production contracts to give growers a true choice in selecting dispute resolution, ending the practice of forced mandatory arbitration in binding contracts. The farm bill conference report requires that contracts provide a clear statement of choice to producers upfront as to which track of dispute resolution they might want to use--arbitration or the court process. It also prohibits the integrators from pressuring growers to make one choice or the other. Any interference with the choice would constitute a violation of the Packers and Stockyards Act. Further, the language states that if a grower declines arbitration upfront, that grower can still choose arbitration at the time the dispute arises, if both parties consent to the use of arbitration. Together these provisions constitute significant reforms and will help level the playing field for our growers.

Secondly, I don't think the payment limitation reform goes far enough, and Senator Conrad recognized that in the final part of his remarks, that that is a concern I had. He did give me credit for pushing and pushing and pushing and bringing it to the point where it is. I believe it doesn't go far enough. Because on this Senate floor, we had 57 votes to reduce the cap on all three forms of commodity payments--direct payments, countercyclical and market loan benefits, and loan deficiency payments. But we ended up having a fight in conference just to keep those levels of current law. That is the good news. The bad news is we didn't go as far as what those 57 votes on the floor of the Senate thought we should do, a hard cap of $250,000.

So what did we do in its place? Senator Conrad explained some of this, but I wish to emphasize it because it is a lot better than if we did what the President asked us to do today, that we not pass this bill. There is indication it will be vetoed and that we ought to extend the existing farm bill for 1 year or 2 years. Well, when it comes to limitations on farm income and who can participate in the farm program and who cannot, those limitations in present law at $2.5 million are laughable and, quite frankly, aren't even being enforced at that level presently. So I come to the conclusion that what we have is better than present law, not as good as what I want but, for the first time, having something that is fairly meaningful toward reform and limits on high-income people benefiting from the farm program.

The adjusted gross income limit did come down substantially, so that is a step in the right direction. For the first time, we have a cap on farm income of $750,000. Previously, there was no cap on farm income. It will bring a $2.5 million adjusted gross income cap on nonfarm income down from that $2.5 million that I said is laughable and probably not enforced, down to a $500,000 cap on nonfarm income. But these adjusted gross income limits are still too high, frankly, as far as I am concerned. In some parts of the country, they may not be. I have to admit that even though I am a farmer, I may not understand agriculture in California, Texas, and the Southeast. But I sure understand agriculture in the States of the Plains and the Midwest. You go to almost any farmer and tell them that we put this limit of $500,000 in for nonfarm income or that we put in a $750,000 cap on farm income, they are going to kind of laugh at us and wonder if we haven't been in Washington too long.

On the other hand, negotiation around here is the art of compromise, and so I am going to vote for this bill with these caps in it. I am going to thank my colleagues who negotiated for going a lot further the last few days than I ever thought they would go. Hopefully, this keeps some people who have the ability to withstand natural disaster, to withstand sometimes politics affecting farm income, sometimes war, sometimes international trade issues affecting farm income, people at this level have the ability to withstand that. Smaller and medium-size farmers don't have that ability. That is why we have a farm program. So there is some level of income where people ought to be able to withstand things that are beyond their control and still be in the business of farming.

I am asking the people in the State of Iowa to look at these caps as being a step in the right direction, not satisfying me but still better than present law. That is why I think it is very necessary that we get this into law. Hopefully, down the road we can make things even better.

I happened to have the Government Accountability Office pull data for me on how many folks are actually getting payments over these new income limits. Honestly, there aren't a lot. The conference committee took steps, though, in other areas of reform; for instance, in the right direction by eliminating the three-entity rule and going to a system of direct attribution. In this particular instance, we do away with the legal subterfuge of where there are limits in existing law, that people could split up into three different units and each unit get the limits that are presently allowed. So that legal subterfuge is done away with. Also, in the commodity title, the administration, the House, and the Senate all recognize the importance of including revenue protection programs for farmers. All three groups, however, took different approaches. I am pleased that an average crop revenue program was included in the final bill as an option for farmers and particularly because the hard work from this comes from a lot of corn producers in my State.

Not only that, we were able to make the program a more viable option for producers and make it available to them in the next crop year, 2009. I am excited to see what type of participation we get in the program and the outcome of it, so that in the next farm bill debate, we can decide whether revenue protection works. The people who thought this up, those of us on the committee who went with the recommendations, have confidence in the people who thought it up. But there is nothing like the real world of seeing whether it works. So we have a few years to make that determination. I hope it does work.

In addition, the White House has continued to say Congress can't use timing shifts to save money and somehow they didn't count. Well, they do count because farmers are going to have to make a judgment in the way they do things to accommodate. Farm program payments will come later in the year, but they will be expected to make crop insurance payments earlier. So in fact, these do count and will pinch the cashflow of a lot of independent producers, whether the White House wants to believe it or not.

All that being said, I am pleased this farm bill is making significant investments in rural America. I would like to point out a program that I have named the Value-Added Producer Grant Program as one of those. It has had a bit of a facelift since I first worked on this. I bet it has been 6 or 7 years ago. But it is targeting funds directly to beginning farmers and to ranchers, which is critical to getting young farmers into business. I continue to hear good things about these dollars being invested right into rural communities, and so I am pleased we could get some mandatory money into the program, even though the farm bill dollars were very tight.

I have also worked to give Black farmers, African-American farmers, applying for Farm Service Agency loans who were involved in the Pigford v. USDA discrimination lawsuit a chance to have their claims heard. That is why I introduced earlier in 2007 the Pigford Claims Remedy Act. There were circumstances out of these farmers' control, and they weren't able to get their claims filed timely. The conference report provides that these claimants who have not had their cases determined on the merits may, in civil action, obtain that determination. In other words, they are going to have their day in court that they feel they did not get with the administrative process. It is time justice was done for these African-American farmers. Civil rights at the U.S. Department of Agriculture has management problems that still need to be addressed, so I want that department to know I will be watching over the administration of this Pigford program very carefully.

Last year, I called for a Government Accountability Office report on farm payments going to farmers who had already died. We even held a hearing on this issue before the Senate Finance Committee. The Farm Service Agency paying dead farmers was a classic example of waste, fraud, and abuse. It is a classic example of a department not doing its job.

Now, I am not saying there might not be legitimate reasons to keep estates of dead people open for a few years. But there was something wrong with people who did not report that the structure of the farming operation had changed, that somebody had died, and continued to get farm program payments in a dead person's name.

So the farm bill is proactive in requiring the U.S. Department of Agriculture to check payments against taxpayers' ID numbers at the Internal Revenue Service. I am cautiously optimistic, however. I requested a new Government Accountability Office report, and in preliminary briefings I have learned that the U.S. Department of Agriculture does not even enforce the current $2.5 million AGI limits. It makes me wonder how they are ever going to enforce the more complicated AGI limits we have put in place.

I should also add that based on the two Government Accountability Office reports already released, we closed a fraudulent farm loss loophole that allows operations to evade payment limits. We also were able to shut down the generic certificate abuse with new Commodity Credit Corporation 1099 reporting that I had asked the Treasury Department to do something about way back in 2001, and, quite frankly, they have done nothing.

Another issue I often hear from constituents about is the abuse of the rural broadband loans going into areas where service is either already provided by other capable entities or a high percentage of households already have service. I do not believe the Government should be in the business of subsidizing competition. We ought to be in the business of helping people who do not even have the service.

Thus, we were able to include in the new farm bill a requirement that in order to be eligible for a loan, the provider needs to be applying for an area where 25 percent of the people do not have service and where not more than three incumbent service providers are already located.

I want to shift gears a bit now from the Agriculture Committee's role to my role as a member of the Senate Finance Committee. Through that role, I was able to secure even more reforms to agricultural policy while protecting the interests of farmers and ranchers.

When the House passed this bill with a revenue offset for the extra agricultural spending, I raised a concern to the tax-writing committees. By yielding several billion dollars in new revenue for new spending, the Ways and Means Committee established, in my judgment, a very dangerous precedent.

There is always great temptation for any committees in the Congress that have a veracious appetite for new spending to view the Ways and Means Committee on the other side of the Hill or the Finance Committee in the Senate--the tax-writing committees, in other words--as some sort of a cash register. From a fiscal disciplinary standpoint, this pressure, if unchecked, will lead to larger and larger government and higher and higher taxes.

The hard-working American taxpayer is the loser because revenue offsets are diverted from the highest and best uses: tax policy and deficit reduction. The proliferation of reserve funds in budget resolutions under both parties--I want to say both parties; so my party is guilty of this as well--is very clear evidence of this pressure as well. Those reserve funds might as well be labeled as tax-and-spend funds because the committees that request them are not likely to cut any spending.

So I raised concerns early in the farm bill deliberation about a very dangerous slippery slope that Congress or the tax-writing committees might be heading for.

So I am pleased to say in the Senate process, Chairman Baucus listened to my concerns and agreed. We made it clear that we would hold the line, and we did hold the line. The Finance Committee marked up a bill that took care of agricultural priorities. But where we use Finance Committee resources, we kept the benefits and authority within the Finance Committee.

Everyone knows the Finance Committee action made it possible for the Agriculture Committee to move forward to spend more money than was in the baseline. We took some of the policy pressure, then, off of the Agriculture Committee.

The schedule and press stories bear out that basic point. We held the line between agricultural policy in the Agriculture Committee and agricultural policy in the Finance Committee when the farm bill was processed on the Senate floor. Remember, that passed, I think, with 77 votes.

Now, the conference was quite a different matter. In the end, we kept a decent but much smaller package of agricultural tax relief offsets with agricultural tax reforms. We also split the baby, from the jurisdictional point of view.

An extension of the Customs user fees, which is a tax-writing committee offset, was used to offset the $10 billion in new agricultural spending; in other words, meaning the $10 billion above baseline. About half of that, the part dealing with the new agricultural disaster relief trust fund, is in Finance Committee jurisdiction. The balance is going to pay for new agricultural spending above the budget baseline.

In my view, this was an unfortunate and troubling compromise for the tax-writing committees. We mitigated some of the damage to the institutional structure of the tax-writing committees, but we also at the same time opened the door. It is a door I was glad to keep slammed shut during the years I chaired the Finance Committee. I worry greatly about the precedent that has been set here. Pressure will be brought to bear in the future for more nontax-writing committee spending to be offset with Finance Committee resources.

I sincerely worry about the effect of this precedent on the power and resources of the two chairmen, my friends, Mr. Rangel, the chairman of the House Ways and Means Committee, and Senator Baucus, the chairman of the Senate Finance Committee. Other committees are loathe to cut their spending and to reform large programs in their jurisdictions.

So the easy street for other committees is to assign their funding problems to the tax-writing committees and to blame the tax-writing committees for any funding problems. As my friends, the two chairmen, know better than anyone else, the demands within the tax-writing committees for offsets are a big challenge just to do the work the tax-writing committees have to do.

I hope we all have learned a lesson. We should not use the tax-writing committees' resources as an easy way out for other committees that are reluctant to make the tough choices in the oversight and development of programs in their jurisdiction.

There have been also some significant benefits, though, from the Senate Finance Committee's involvement in this bill.

The farm bill also includes some customs and trade provisions that I want to address. First, it includes a compromise on expanding our existing trade preference program for Haiti.

This was a priority for the chairman of the House Ways and Means Committee. In addition to expanding Haiti's trade preferences, the compromise calls upon the President to identify any textile or apparel producers in Haiti that fail to comply with core labor standards, as defined in the legislation, or the labor laws of Haiti that relate to the core labor standards.

The statement of managers accompanying the conference report states very clearly that the Conferees recognize that the core labor standards defined in the legislation refer to the rights as listed in the 1998 International Labor Organization Declaration on Fundamental Principles and Rights at Work and its Follow Up.

We voted for the 1998 ILO Declaration. We respect, promote, and realize the labor standards stated in the 1998 ILO Declaration. Moreover, the legislation applies only with respect to labor practices in Haiti. It does not address and cannot impact our domestic labor practices in any way.

Now, the legislation further calls upon the International Labor Organization to report periodically on the compliance of individual producers in Haiti with the core labor standards and the labor laws of Haiti.

And the legislation directs that in identifying producers that fail to comply with core labor standards, the President shall consider these ILO reports. The President is free to consider any other information, and the final decision rests entirely with the President.

Nothing in the legislation forces the President to make any particular determination. It just says that the President shall consider these reports.

And if the President determines that a producer in Haiti is not in compliance and refuses to comply, the legislation directs the President to withdraw, suspend, or limit benefits to that producer under the trade preference program until the producer comes into compliance.

As I said at the outset of my remarks, I am not making a blanket endorsement of the farm bill. I have my reservations. Had I written the Haiti provisions from scratch, they would have looked very different. But this issue was part of a broader negotiation, and compromises were necessary if we were going to produce a final product.

The proponents compromised too. Originally they proposed requiring the President to withdraw trade benefits solely as a consequence of the ILO reports. That was never something I could accept. Ultimately, they dropped that demand and agreed to defer to the President's discretion.

The compromise language that is in the bill is specific to Haiti and responds to the unique economic and political situation in that country. I accepted it based on that narrow context as part of an overall compromise to conclude these negotiations.

Another issue that we addressed in the farm bill is a recent proposal by the Customs and Border Protection agency to change the way certain imports are valued for purposes of assessing duties.

The agency proposed eliminating its current practice of allowing importers to base customs value on the first price paid in a series of transactions that culminate in the importation of a product into the United States. Customs has instead proposed a mandate that importers must use the last transaction price.

This proposal has drawn significant concern from the business community and in Congress, for a number of reasons. First, it appears to counter an established practice that has been around since at least 1988. And some argue that it would lead to tariff increases of 8 to 15 percent.

Moreover, Customs doesn't collect data on the extent to which the so-called first-sale option is used. Nor does the agency have a clear sense of the economic impact of the proposed change. Yet the agency did not consult Congress or the business community before proposing this change in administrative practice.

Consequently, we included a provision that directs Customs to collect additional data for 1 year on the usage of the first-sale option. We further directed the International Trade Commission to submit a report to Congress analyzing the data to be collected by Customs.

Finally, we included a sense of Congress that Customs shall not implement any change to disallow the first-sale option prior to January 1, 2011. After that date, Customs can implement a change but only if the agency consults with the committees of jurisdiction in Congress and the business community, and also receives approval for such a change from the Treasury Department.

That is because the Treasury Department retains rulemaking authority over Customs regulations, though a portion of that authority has been delegated to the Department of Homeland Security.

I do want to say some other things the Senate Finance Committee has done. We create a new, temporary cellulosic biofuels production tax credit. This provision will encourage the development of a new cutting edge alternative biofuel industry.

Cellulosic biofuels can be produced from agricultural waste, wood chips, switchgrass, and other nonfood feedstocks. With an abundant and diverse source of feedstocks available, cellulosic biofuels hold tremendous promise as a home-grown alternative to fossil-based fuels.

With cellulosic ethanol, and with the additional feedstocks from corn stover, from wood chips, from switchgrass, and other things that have cellulose in them, we are going to be able to move beyond just grain being used to make ethanol.

Now, that is going to solve some problems. But one of the problems that it is going to solve, if people will be patient, are these demagogic statements that are going on now about the production of ethanol bringing up the high price of food.

Ethanol is being blamed for everything right now. Ethanol is being blamed for rice going up. We do not make ethanol out of rice. Bread goes up. They have riots in Cairo, and corn ethanol is being blamed for it. There is a whole conspiracy on the part of the grocery manufacturers of America, hiring a public relations firm to put on a 6-month crusade against ethanol. It is a scapegoat. It is intellectually dishonest.

In 1980, the people of this country asked Congress to put some incentives in because we ought to have renewable fuels, and ethanol was the direction to go. The farmers of America responded by growing more corn. Farmers invested, setting up ethanol plants. For 25 years, there have been incentives for ethanol production. Ethanol is becoming a major component now through renewable fuels and less dependence upon foreign sources of oil. For 25 years, everything about ethanol has been good, good, good, good--whether it was good for the farmers, good for the environment, good for jobs in rural America, or good for less dependence on foreign sources of energy.

Then, all of a sudden, corn goes up to $4 a bushel a year ago, and then everybody gets on ethanol. It is an intellectually dishonest attack that irritates the heck out of me, and I think we ought to band together as we always have done. The farmers of this country responded when the country wanted renewable fuels, and for 25 years nothing bad was said about ethanol. Then, all of a sudden, the price of food goes up, and ethanol gets blamed for it.

Ninety-five percent of the grain in the world is eaten; 95 percent of the grain is eaten. Last year the farmers of America planted more acres to corn than any year since 1944. The farmers of America produced 2.3 billion more bushels of corn last year. Only 600 million bushels of that 2.3 billion bushels of corn went into ethanol.

The other 1.7 billion bushels are available for everything else anybody wants to use them for, including if they want to eat the same corn animals eat. Yet I am hearing people complain about ethanol being the reason that rice and wheat are high priced and somehow scarce. We have to wake up the people of this country to the fact that the farmers of America responded when they wanted alternative energy, and that alternative energy is not at fault.

In fact, Iowa State University has studies showing that the price of gasoline would be 30 or 40 cents higher today if it had not been for what ethanol is producing. We have to get over it. Maybe this new program on biofuels from things other than grain will help calm that, I hope, because cellulosic biofuels is still science in the making, and scientists are telling us in 3 to 5 years it is going to be commercially viable.

This bill, then, includes a new, temporary cellulosic biofuels production tax credit for up to $1 per gallon, available through December 31, 2012, as an incentive toward cellulosic ethanol, the same way we have since 1980 on a tax incentive for ethanol from grain.

This provision is estimated to cost about $403 million over a 10-year period of years that the tax credit is available to American investors who are willing to take the risk of producing cellulosic ethanol.

The new cellulosic biofuels production tax credit will be funded in part by a 2-year extension of the tariff on ethanol and reform in the current ethanol blenders' credit, which will be reduced from 51 cents per gallon to 45 cents per gallon on January 1, 2009, the first day the cellulosic producers' credit will be available.

One other thought that came to my mind just now about an attack on ethanol. We have people who have voted for ethanol in this Senate. Twenty-two of them have sent a letter to the EPA saying that the mandate on ethanol ought to be lifted--the very same Senators who have complained because we aren't doing enough for renewable energy.

The last tax title I wish to refer to--and then, for my colleagues, I am just about done--is the Conservation Reserve Program payments. We have had this situation where the IRS has been taxing cash payments that farmers receive from Conservation Reserve Program payments--CRP payments--with the Social Security tax, the payroll tax. If you are a farmer receiving cash payments, if you rent your land and you receive cash payments, you obviously don't pay Social Security tax on that money. But the IRS ruled that if you were getting cash payments on CRP, you had to pay Social Security on it. So we take care of that problem in this bill as well. That is something we have been working on since 1999, and I am glad to have the opportunity to correct something the IRS has done that is an injustice to landowners who receive cash payments.

I understand that some of my colleagues have concerns over the extension of the ethanol tariff in the farm bill.

I would like to point out that the United States already provides significant opportunities for countries to ship ethanol into our market duty-free.

Numerous countries don't pay the U.S. ethanol tariff at all. Through our free trade agreements and trade preference programs, some 73 countries currently have duty-free access to the U.S. market for ethanol fully produced in those countries.

For all other countries, including Brazil--the world's major exporter of ethanol--the United States provides duty-free access through a carve-out in the Caribbean Basin Initiative.

So Brazilian ethanol exporters currently don't have to pay the U.S. tariff.

Under the Caribbean Basin Initiative, ethanol produced in Brazil and other countries that is merely dehydrated in a Caribbean country can enter the United States duty-free up to 7 percent of the U.S. ethanol market. That is very generous access.

Moreover, this duty-free access--as it captures 7 percent of U.S. ethanol consumption--grows every year.

Yet Brazil and other countries have never come close to hitting this 7 percent cap. In fact, as of Monday, the 7 percent cap was filled only 23 percent for the year. So we are almost halfway into 2008, and foreign ethanol exporters haven't even filled by one-quarter the generous duty-free access that we give them.

And it isn't that the Caribbean Basin Initiative countries don't have the capacity to dehydrate more Brazilian ethanol. They do. Current dehydration capacity in the Caribbean Basin Initiative countries is 580 million gallons, well above the over 452 million gallon duty-free allotment for 2008.

Brazil isn't taking full advantage of the duty-free treatment currently available to it. I don't know why we should bend over backwards to provide yet more duty-free access for Brazil.

This is especially the case given Brazil's stance in the Doha Round negotiations of the World Trade Organization. Brazil is resisting efforts to further open its market to imports of U.S. industrial goods and services.

We shouldn't even discuss reducing or lifting the tariff until Brazil takes full advantage of its current ability to ship ethanol duty-free to the U.S. market.

Finally, the ethanol tariff is a revenue-raiser for the farm bill. The cost of the new cellulosic biofuels production tax credit will be offset, in part, by an extension of this tariff. In this way, the ethanol tariff will help us move toward the development of a new cutting edge alternative biofuel industry that will produce fuels from agricultural waste, woodchips, switchgrass, and other nonfood feedstocks.

Mr. President, I yield the floor.

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