We expect the House to vote on the Farm Bill conference report today. The President will veto this bill. Here is the President’s statement on the bill.

The final legislative language for the conference report was released Tuesday morning.

Hint: If you want to find the really bad stuff in a big bill, always start at the end of the bill’s Table of Contents.

A few of us have been debating the question “Which is the most important reason for the President’s veto of this bill?” Candidates include:

  • Too much spending: The bill increases spending by almost $20 billion over the next ten years, at a time when net farm income is at an all-time high. Much of this additional spending is disguised by budget gimmicks that take advantage of formal scoring rules to hide real spending increases.
  • New sugar program: The bill would make the government buy sugar for 2X the world price, store it, then resell it at about an 80% loss to the taxpayer. Sugar sells for about 11 cents/lb on the world market. The U.S. government would have to buy sugar for about 22 cents/lb, store it, and then auction off the excess to ethanol plants. We estimate that such an auction would net the government about 4 cents/lb. In addition, this new provision would require the government to guarantee that domestic sugar producers get 85 percent of the domestic sugar market.
  • Subsidies for rich farmers: Farmers would be eligible for government subsidy payments if their incomes were as high as $1.5 million if married, and up to $750,000 if single. We had a big fight with Congress last year over whether families with income of 3 times the poverty level should receive taxpayer-subsidized health insurance. This bill would subsidize a married farming couple with income more than 107 times the poverty level (which is $14,000 for a couple). Put another way, such a couple would be in the top 0.2% of the income distribution. You would be subsidizing their business with your income taxes.
  • Getting the best of both worlds: “Beneficial interest” is a provision of current law which allows you to lock in a government subsidy payment when the market price for your good is low, and then hold the actual good and sell it when the market price is high. You thus get the best of both worlds – subsidy payments as if crop prices were low, but profits from selling your good at a higher price. The President proposed a “pick-your-price” reform, in which you lock in the subsidy at the same time that you lock in the sale price, so you can’t play timing games. The conference report does not include this reform, and continues the practice of current law.
  • Using food aid $ inefficiently: Under current law, U.S. food assistance for hungry people around the world must be spent purchasing U.S. crops. The President proposed to allow up to 25 percent of U.S. global food assistance to be spent purchasing food from local farmers (in the country where the people are starving). This allows U.S. dollars to be spent purchasing food, rather than paying transportation costs. It also encourages the development of farming infrastructure in these countries. Congress failed to include this forward-looking policy that will help save lives overseas. This means fewer starving people will get food, and these countries’ farming infrastructures will be less well developed.
  • Earmarks:
    • $500 M to purchase a 400,000 acre property from the Plum Creek Timber Company in Montana (Sec. 8401)
    • $175 million to provide water to Nevada desert terminal lakes (Sec. 2807)
    • $170 M for commercial and recreational members of some West Coast salmon fishing communities. (Sec. 12034) Note that the salmon fishing is a classic example of a “conference earmark.” It was in neither the House-passed nor the Senate-passed bill.
    • Trail to Nowhere: Section 8303 “authorizes the Secretary [of Interior] to sell or exchange a few specific parcels in the Green Mountain National Forest designated on the map entitled ‘Proposed Bromley [Ski Resort] Land Sale or Exchange’ dated April 7, 2004. Funds from the sale of this land are to be used to relocate small portions of the Appalachian Trail or purchase additional land within the boundary of the Green Mountain National Forest.” Environmentally responsible drilling on federal lands in Alaska when gasoline is $3.72 per gallon is forbidden, but now skiing on Federal lands in Vermont will be OK. (A weekend lift ticket at Bromley is $63.) One person has labeled this provision the “Trail to Nowhere.”
  • Permanent disaster assistance: Farmers can now buy crop insurance to protect themselves from low prices or crop failures. This bill also establishes a “permanent disaster assistance fund.” We fear that this would not replace emergency supplemental requests for more money when disaster strikes, but instead supplement such requests. There would be tremendous pressure to label even minor price or weather fluctuations as disasters, when there is sufficient funding available in this new pot.

We have, however, discovered a new problem with the bill. It has to do with trade, international labor standards, and Haiti.

There is a new Subtitle D to the conference report, titled “Trade Provisions.” It’s the last title in the bill. Section 15401 labels this as the “Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008.” This title provides enhanced trade preferences for textile imports from Haiti. This title was in neither the House-passed nor the Senate-passed bill. It’s about trade, not farming.

The bill effectively directs Haiti to establish a new program, called the TAICNAR Program: Technical Assistance Improvement and Compliance Needs Assessment and Remediation Program. This TAICNAR Program will be operated by the International Labor Organization (ILO), a U.N. agency that deals with labor issues. The TAICNAR, operated by the ILO, will write reports about whether Haiti is meeting its requirements on “core” internationally recognized labor rights, standards established by the ILO.

The bill then states that the President “shall consider” these reports as he makes his decision about whether a Haitian textile producer “has failed to comply with core labor standards and with the labor laws of Haiti that directly relate to and are consistent with core labor standards.” If he finds that the producer has failed to comply, he “shall withdraw, suspend, or limit” the trade preference for that producer.

This bill would subordinate the President’s decision-making on U.S. trade preferences to an international labor agency. It would mandate that he consider the ILO determinations on Haitian producers in granting or denying trade benefits.

We anticipate that, if a Haitian firm did not comply with an ILO standard, the new TAICNAR Program, run by the ILO, would report this to the President as a violation of its core labor standard, using the U.N./ILO criteria. If the President were to “consider” that report, and then decide not to withdraw, suspend, or limit the trade preference for that producer, the U.S. Government would be subject to endless petitions by mischief-makers, thereby forcing the President to undertake never-ending reviews to prove that he “considered” (and rejected) this U.N./ILO standard.

Q: Why should the President of the United States be required to consider determinations made by a U.N. agency as he makes a decision about a U.S. trade preference?

We’re still trying to understand the full ramifications of this provision (it’s 18 pages long). It appears that the International Labor Organization will effectively be telling the President what to do. At a minimum, it limits the President’s decision-making authority by requiring him to take certain factors into account in his decision, when the determinations underpinning those factors were not made by U.S. policymakers.

Statement by the President (13 May 2008)

If this bill makes it to my desk, I will veto it.