Bonus Subsidy

$1.5 Billion Bonus Subsidy In Emergency Spending Bill Is Unfair, Wasteful Response To Agriculture's Increased Energy Costs

April 26, 2006

Bonus Subsidy: May 12, 2006 Analysis

Just 20 Congressional Districts Will Get Half of Controversial "Energy Assistance" To Agriculture

Vast Majority of U.S. Farmers and Ranchers Are Left Out--Again

WASHINGTON, May 12--It is billed by proponents in Congress as $1.5 billion in emergency aid to help U.S. agriculture weather skyrocketing energy prices.

But the majority of America's farmers, ranchers and rural residents will be excluded from the new subsidy, as the aid is funneled yet again to recipients of annual crop subsidies, who already collected a record $23 billion in 2005.

Over half of the proposed $1.5 billion bonus subsidy would be paid out to recipients in just 20 of the nation's 435 congressional districts, according to a new analysis by the Environmental Working Group (EWG). All of the top districts are located in regions that grow rice, cotton, corn and wheat and have been dependent on the government's farm subsidies for generations.

Dozens of heavily agricultural congressional districts in California, Florida, and other states would receive virtually nothing. Farms and ranches in those districts have felt the same squeeze of high energy prices, but will be excluded because they produce traditionally unsubsidized crops like fruits and vegetables, or raise livestock or poultry in response to market signals, not government payments.

The contrast is evident in the leadership of the House Agriculture Committee. Top committee Democrat Collin Peterson's district (MN-7){C} will rank eighth for the bonus subsidy, and stands to receive $40,521,149. {C} Republican Committee Chairman Bob Goodlatte's (VA-6)district will rank 194 for bonus subsidy payments, collecting just over $340,000.

Even within the top 20 districts for the proposed bonus subsidy a substantial number of farms and ranches will not qualify because they have not been subsidy recipients in the past. An average of 38 percent of the farms and ranches would be left out, ranging from 22 percent in Rep. Earl Pomeroy's (D) At-Large District of North Dakota, to over 82 percent in Republican Wally Herger's CA-2.

A third of the farms in Rep. Peterson's district, and over 80 percent in Rep. Goodlatte's district, will be automatically excluded from the subsidy not because energy prices have not affected them, but because they have not collected crop subsidies before.

USDA has said that 60 percent of U.S. farms and ranches would be excluded from the subsidy bonus.

"Every farmer and rancher in the country has taken a hit from high energy prices, but the vast majority of America's farmers raise their crops and livestock for the market, not the government," said Ken Cook, president of EWG. "Once again, Washington will reward their independence by writing yet another check--for $1.5 billion in 'energy assistance'--to the subsidy-dependent," Cook added. "Even worse, a substantial share of the bonus subsidy will go not to the farm operators who actually incurred the higher energy costs last year, but to those who own land registered for USDA subsidies and rent it out to working farmers." EWG estimates that at least 9 percent of the money will go to non-farming land owners, many of them absentee.

Like other crops subsidies, the bonus will be concentratedin the hands of large operations. Ten percent of the recipients would share 60 percent of the money, averaging over $8,200. The bottom 80 percent of those eligible would share 21 percent of the money, an average of $369.

Citing high energy costs in 2005, the Senate Appropriations Committee's $3.9 billion package of disaster assistance to agriculture includes a 30 percent increase in all "fixed direct payments" made to subsidized crop farmers in the 2005. This bonus subsidy will add $1.56 billion to the $5.2 billion in fixed direct payments already made to the same beneficiaries in 2005.

Federal data show that over 95 percent of America's farms and ranches - more than 2 million of them - reported expenditures for gasoline, fuels, and oil. In California in 2002, operators on 96 percent of the state's farms and ranches reported such expenditures, which amounted to $8,000 per farm on average. In Florida, 97 percent of agriculture operations reported those energy expenditures, which averaged about $3,400 per farm. In North Dakota, 84 percent of farms reported fuel expenditures at about $6,200 per farm.

The bonus was contained the Senate's version of an emergency spending bill to fund the Iraq war and Hurricane Katrina relief. The Senate added over $14 billion in spending, including $3.9 billion in disaster assistance for agriculture. President Bush has vowed to veto any measure that exceeds his $92 billion request for the Iraq war and Hurricane Katrina aid, the amount provided in the House of Representatives version of the law, plus additional funds to prepare for a potential outbreak of avian influenza. A House-Senate conference committee is working now to hash out the differences.