GAO report: More subsidy 'waste'

When Barack Obama recently reached for an example of cuts that should be made in the federal budget, the president-elect cited the latest Government Accountability Office report on "millionaire farmers" receiving subsidies.

When Barack Obama recently reached for an example of cuts that should be made in the federal budget, the president-elect cited the latest Government Accountability Office report on "millionaire farmers" receiving subsidies.

"Millionaire farmers received $49 million in crop subsidies even though they were earning more than the $2.5 million cutoff for such subsidies," Obama says, citing the GAO report.

"If it's true, it is a prime example of the kind of waste I intend to end when I am president," he says.

During the presidential campaign, Obama voted for the 2008 farm bill, which continues a wide range of farm subsidies and other direct payments. But in speeches and position papers, he made clear his preference that subsidy programs provide more benefits to small farmers and less to large ones, especially large corporate farms.

'Always a target'


The GAO report, requested by the Senate Finance Committee, found that more than 2,700 U.S. farmers received subsidies between 2003 and 2006 despite having an average of more than $2.5 million in adjusted gross income over three years, which was the eligibility cutoff then. (The new farm bill lowers that to $750,000.)

The $49 million overpayments also represent only a tiny fraction of the more than $16 billion farmers receive annually in federal farm programs for crop subsidies, conservation practices and disasters.

Rep. Collin Peterson, D-Minn., says he isn't surprised that Obama would seize on the GAO findings as an example of federal waste, but he isn't concerned that it portends a broader assault on the traditional farm safety net.

"We're always a target, and it sounds good" to criticize subsidies, he says. "But Obama can't be any worse than Bush was on this, and we survived that."

Roger Johnson, North Dakota's agriculture commissioner, says the report and Obama's comments "didn't set off any alarm bells" for him either.

"In fact, I agree with it," he says. "I've long been a strong supporter of income limits on payments, and I believe there's been for a long time a too relaxed approach" to them.

The 2008 farm bill's lowering of the adjusted gross income limit to $750,000 "is a move in the right direction," Johnson says. "I would like to see it lower. That's still a very high number."

'Nonfarmer' issue


Johnson says the 2008 farm bill also mandates direct attribution of payments, which means that every subsidy dollar paid to a farmer must go to an individual's Social Security number.

"That should make it very easy now to track those payments to individuals instead of webs of interrelationships that were used to take in millions in government payments," he says. "Now you're dealing with people who are actively engaged in agriculture. That will more clearly focus the safety net on folks who need it, the smaller and average-sized operators, and that's where it should be."

Peterson, who chairs the House Agriculture Committee, also says he would "prefer we eliminate nonfarmers from the program entirely, so people who are actually farming would get the payments, not landowners. That's what the program was intended for, to support people who are producing food, and that would force out these people who get all the bad publicity."

The GAO report singles out, but does not name, some rich nonfarmers who received big subsidies in the period covered, including a founder and former executive of an insurance company, an owner of a professional sports franchise and a top executive of a major financial service.

To qualify for the farm subsidies, the "farmers" were supposed to derive at least 75 percent of their income from farming, ranching or forestry operations.

The U.S. Department of Agriculture "does not have adequate management controls to identify potentially ineligible high-income individuals," according to the GAO report. With the income cap lowered by the 2008 farm bill, "the number of individuals whose (income) exceeds the caps will likely rise."

GAO recommends that USDA's Farm Service Agency "work with the Internal Revenue Service to develop a system for verifying the income eligibility for all recipients of farm program payments." In their response to the report, USDA officials say they agree.

Earlier investigations by the GAO found other shortcomings with direct payments to farmers, including a 2007 report that said USDA "needs to strengthen management controls to prevent improper payments to . . . deceased individuals."

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