Double Dippers

How Big Ag Taps Into Taxpayers' Pockets - Twice

August 3, 2005

Double Dippers: Failed Attempts at Reform

The production of surplus crops with subsidized water adds to the glut of farm[s] up federal expenditures for USDA commodity programs and place[s] farmers in other areas of the country, who do not receive subsidized water, at a competitive disadvantage in the agricultural marketplace.

— Rep. Sam Gejdenson, Remarks to House of Representatives. May 17, 1989

Policy makers recognized decades ago that the Bureau of Reclamation's water subsidy programs and the USDA's crop subsidy programs worked at cross purposes with each other. Between 1982 and 2003, Congress considered eleven different bills to eliminate double subsidy payments. None made it to the president's desk to be signed into law.

The first attempt came in 1982 when Rep. Berkley Bedell of Iowa proposed an amendment to the Reclamation Reform Act prohibiting the delivery of irrigation water to surplus crops. [13] Although the House passed the amendment, it was severely watered down by a House-Senate conference committee. In the end, the Secretary of Agriculture was required only to conduct a study examining the production of surplus crops on lands served by federally subsidized irrigation water.

The study was published in 1984. It estimated that 45 percent of cropland receiving subsidized water was being planted with surplus crops that received price supports. [14] The study concluded that top-to-bottom reform was needed to harmonize the conflicting goals of the government's water and crop subsidies. [5] Congress paid little heed. In 1986 Bedell tried to get language outlawing double subsidies into legislation authorizing North Dakota's Garrison irrigation project, but his amendment was narrowly defeated in the House, losing by just four votes. [14]

The following year Rep. Sam Gejdenson of Connecticut proposed sweeping legislation that would have required the Bureau of Reclamation to charge full price for water delivered to crops already subsidized by USDA price support programs. [15] Gejdenson's bill attracted 111 co-sponsors but was nonetheless killed in committee. In 1989 Gejdenson reintroduced this legislation in the House, with a Senate companion bill from Sen. John Heinz of Pennsylvania, but neither bills came close to becoming law. [16,17] Subsequent legislation introduced in 1990, 1995, 1997, 1999 and 2003 met with a similar fate. [18,19,20,21,22,23]

Meanwhile, a number of federal agencies have repeatedly called for the end of double subsidies. In 1990, the Interior Department Inspector General conducted an audit to evaluate the "reasonableness of providing subsidized irrigation water from Bureau of Reclamation projects to those individuals whose lands produce surplus crops and who benefit from Department of Agriculture crop subsidy programs." [1] Interior concluded that "the practice of providing dual subsidies should be discontinued expeditiously," and recommended that the Bureau work with USDA to develop policies to stop it. [1]

The Bureau's own data showed that about four times more subsidized water was being used for subsidized crops than the Inspector General's report estimated. But the Bureau never followed Interior's recommendation. [5] The Bureau said it would be unproductive to take any action before potential legislative requirements became clear. After 15 years of Congressional inaction, the Bureau still seems to be waiting to be told how to fix a system that is clearly broken.

The Government Accountability Office (GAO) has been hammering away on the issues of water and crop subsidies for more than a decade. In a 1991 report GAO highlighted double dipping as one of the problems with the existing federal water contracts and identified it as one of the policy changes needed before these contracts were renewed. [5] The Bureau has also flagrantly ignored this recommendation and is now in the midst of signing hundreds of new 25-to-50 year irrigation water contracts for the CVP, none of which include any language addressing the double subsidy issue.

In 1992 the GAO again spotlighted double dipping in a report on natural resources management issues produced for the Speaker of the House and Senate Majority Leader. [24] Since then the GAO has called for the end of double subsidies in reports and testimony on the federal budget in 1993, 1994, 1995, 2000 and 2003. [25,26,27,28,29,30] The response from Congress, the White House, the Bureau of Reclamation and USDA has been the same: Nothing.

It would never make sense to let farmers collect double subsidies. But it's looking worse all the time:

  • As of 2002, CVP farmers had paid back only 11 percent of their share of the Project. [3] Should they continue receiving hundreds of millions of dollars a year in federal farm subsidies while showing no signs of making a serious attempt to repay their interest-free debt?
  • The federal crop subsidy program has become massively bloated, costing taxpayers $144 billion over the last decade. For the money taxpayers have provided in commodity and disaster subsidies alone over this period, we could have bought outright 25 percent of the farms in 341 counties — land, barns, farmhouses and all. [4] Should the recipients of this windfall also be eligible for more than a hundred million dollars in water subsidies a year in California alone?
  • Neither crop nor water subsidies are accomplishing their original purpose of supporting family farms. Two-thirds of the nation's farmers get no subsidy payments whatsoever. Of those that do, the vast majority get chicken feed: Eighty percent of the recipients between 1995 and 2004 received, on average, $7,211 for the entire period. That comes to $721 a year, just over $60 a month. [4] Meanwhile half of the farm payments went to the top 4 percent of the recipients, with these farms receiving a total average subsidy of $569,755 from 1995 to 2004. The top 1 percent of recipients raked in almost a quarter of the total, for an average subsidy worth more than $1 million apiece. It's well documented that many of these subsidy millionaires are using their swollen assets to buy out smaller farms, putting more family farmers out of work. Should we continue to help big farms squeeze out smaller ones?
  • In March 2005, the Congressional Budget Office projected that the budget deficit would reach $365 billion this year, not including supplemental appropriations for the war in Iraq and Afghanistan that bring the figure to $398 billion. [31] With no end in sight to the war on terror, can we afford to give farmers in arid Western states hundreds of millions of dollars a year in water subsidies that are used to grow surplus crops that cost additional hundreds of millions in price supports?

In light of the documented waste and inequities in the water and crop subsidy programs and the nation's fiscal crisis, eliminating double dipping would seem to be a no-brainer. Instead, it's become a non-starter — a sacred cow with so much political clout that most elected officials and bureaucrats are afraid to touch it.