Rick Santorum

Mr. SANTORUM

Mr. SANTORUM. Mr. President, I say to the Senator from New York that I think he makes a strong point that work programs are expensive to administer. They are very expensive to administer. I chaired the Republican task force last year in the House as a member of the Ways and Means Committee that drafted a bill that was different from the bill that passed the House, but it provided a substantial amount more money for work programs. In fact, I think over the 5-year period in the bill that I, in a sense, authored, we spent $12 billion more, understanding the expense of doing so. So I have some sympathy with what the Senator is saying as to the problems States are going to confront. I am telling you, from the perspective of governors who I have talked to, they feel comfortable that if we removed all of the restrictions, which in a sense in the Republican bill we do--there are some, but very minimal--if we remove the restrictions in place, they believe they can get sufficient savings to be able to run a work program in addition to the current AFDC program. I am hopeful that they can. I have my own skepticism. I hope they can. Given the budgetary realities, I think that is going to be something we are going to challenge the Governors to do. If we did nothing with the AFDC program--that program is not doubling every couple of years or so. This is not a program projected to dramatically increase, and it is not that we are not keeping up with the skyrocketing costs. I do not have the numbers in front of me--and correct me if you have them--but my understanding is that I think, in the next 7 years, AFDC was to go from $16 billion to maybe $18 billion, something like that--maybe $19 [[Page S 12697]] billion. It is an increase, but it is not like the numbers on AFDC are growing like we have seen on SSI and some other programs. In fact, we are seeing a lot of people on AFDC moving over to the SSI.

Mr. SANTORUM. If the Senator will yield----

Mr. SANTORUM. I yield the floor.

Mr. SANTORUM. I will be happy to answer that question. I would really [[Page S 12696]] defer to the Governors of the States that have come to us and have been very strongly in support of what we have been putting forward. How they are going to do it is, we are going to release them from all the Federal strings attached to the current program. What Governors will tell you is they can run a much more efficient program than we can out of Washington through the States. I happen to believe--I had a conversation just this past week with my Governor from Pennsylvania, Tom Ridge, a former Member of the House, who feels very strongly if given the opportunity to design their own program, given the existing amount of AFDC dollars coming through, existing amount of what was the Jobs Program coming through, which is what is in the Republican bill, they cannot only design a better program, put more people to work, get more people off the rolls, get people back into productive work in Pennsylvania at less money, that without the hoops they have to jump through here at the Federal level--I know the Senator from Oregon put up a chart earlier today about all the things you have to do to process someone through the system--we now provide that flexibility for them to be able to design their own system, which we hope and I believe will be a lot more efficient. It is a good question. It is one I think most Governors would say they would like the responsibility, the opportunity to design a program based on. I know the Senator from Iowa was up here just within the last couple of hours talking about what they have done in Iowa and the fact they have cut caseload, they have cut the amount of money in the program. Why? Because they got a waiver to allow them to run their own program. So we have seen, even with the limited waivers that have been allowed already, programs that have spent less money, that have put more people to work and have been better for the taxpayers and people in the system. I think we have seen a history that we can do this if the States are given the opportunity to design a program.

Mr. SANTORUM. I thank the Senator from New York. There are two additional points I wanted to make. No. 1, I stated before there would be many cities that, for potentially the foreseeable future, unfortunately, people in those cities would not be subject to the time limit under the Democratic leader's bill. I point to the cities of New York, which has an 8.7 percent unemployment rate; Los Angeles, which has a 10.6 percent unemployment rate; there is an 8.2 percent unemployment rate in Washington, DC; Detroit has a 10.8 percent rate. Those are a few cities where the unemployment rate exceeds 8 percent. As a result, under the bill put forward by Senator Daschle, none of the people living in those cities would have any of their time limit being worked off during those periods of high unemployment. So you could have, potentially, in a city like Detroit, which has historically had very high unemployment rates, no time limit for people who live in those cities. You are not talking about small or insignificant welfare populations. You are talking about New York, Los Angeles, Detroit, Washington, Miami, and many others. You are talking about a very large percentage of the caseload that will never, potentially, be time limited or will be time limited to 10 or more years. That is a big loophole in this bill, let us make no mistake about it. I believe that needs to be addressed.

Mr. SANTORUM. I will be happy to.

Mr. SANTORUM. I do not know how you can be tighter if you have a million people--let us assume we have a million people in the welfare system in Pennsylvania, which is high, but let us say we have a million people, and we say 50 percent of those people have to go to work. That is 500,000 people. Under your standard, we say 667,000 are technically under your new program because the other 333,000 are ineligible right from the start, and if you take half of 667,000, you are now down to 333,000, not 500,000. So we are going to have, in the case of a million, we are going to have 120,000-some more people working, required to work than under your bill.

Mr. SANTORUM. I said that would not be my preference. My preference would be to have no exemptions at the Federal level. We allow the States the ultimate flexibility to determine who is going to work and who is not, given the standard of half, which is a fairly generous standard where usually only around a third has a disability problem that would make them ineligible for work. We do allow, I think, a fair amount of flexibility. I just want to understand the difference, and the difference is that you would require half of two-thirds to work. We would require half of the entire caseload.

Mr. SANTORUM. My feeling is we should allow the States complete flexibility to deal with this issue instead of the overall goal of what percentage of the entire caseload should be in work. I think 50 percent is fair of the entire caseload, given the fact that we know a substantial number cannot work. It is usually around a third. That is what we found. We are even giving more of a fudge factor of another 15 percent or more of people who can work, but we are not going to require them to work or the State required to put them to work.

Mr. SANTORUM. That would be the one exemption, but there is no exemption for someone who has a disability or something like that.

Mr. SANTORUM. I yield.

Mr. SANTORUM. Right. So what you basically take is, let us say, 65 percent of the people who come into the program, and then by the year 2000, half of the 65 percent must be in some sort of work program. On the Republican side, we do not make that initial separation. What we say is that 50 percent of the entire caseload, and it would be up to the States' discretion, and I am sure they, in all likelihood, because of the expense of someone who has an incapacity of some sort, would not require them to work.

Mr. SANTORUM. Thirty. I think it is 30 in 1996, up to 50 percent in the year 2000, just according to the numbers I have here.

Mr. SANTORUM. Let me understand this. Maybe we are a little more different than I thought we were. What you are saying is you take the entire caseload of people that are on welfare, and you say a certain number of them are ineligible because of an incapacity. I think that is the term the current welfare law uses, ``incapacitation.'' We figure that that number is roughly a third. So you take them out of the mix before you apply the 50 percent standard?

Mr. SANTORUM. Yes.

Mr. SANTORUM. That is the point I was trying to make. On this issue, it seems like there is some agreement that 50 percent is a fair figure and allows for some State flexibility in considering the fact that roughly a third of the parents who are on the current AFDC caseload are disabled in one way or another. They have a disability or their children are disabled or there is some problem where they would not be a good candidate for work and, therefore, would not be required under the bill to have a work requirement. We allow the States the flexibility to determine that.

Mr. SANTORUM. And it is up to the State to determine who those people are that should be working or should not, which 50 percent. It is a State flexibility issue?

Mr. SANTORUM. That goes up to 50 percent by the year 2000.

Mr. SANTORUM. Now I ask maybe a broader question. How many people who go into the welfare program have to participate in [[Page S 12695]] this new program as designed by the leader's amendment? What is the participation--I know what it is in our bill. We eventually get up to 50 percent, but we do not have exemptions.

Mr. SANTORUM

Mr. SANTORUM. I ask unanimous consent for an additional 5 minutes.

Mr. SANTORUM. Mr. President, I rise today to introduce a bill which I hope will be a compromise on an issue that we are going to be bringing up when the farm bill hits the floor, and that is the peanut program. There are bills introduced in the Senate to eliminate the peanut program immediately. I do not believe that, frankly, is going to be fair to the farmer. What we are trying to do is put in a program that is a 5-year phaseout that gives people plenty of notice and ability for people to be able to adjust to the gradual phaseout, gradually reduce the support price, which I will get into in a moment. Our bill provides a glidepath for peanut farmers in this country to get back to a market-based system which I think is needed. In fact, we are going to talk this morning about how horribly bureaucratic and inefficient the current peanut program is. For those who are not familiar with the peanut program, let me run through it on this chart. The top half of this chart is how the peanut program works. You would think that you grow peanuts and you just give them to somebody and they sell them. In fact, the next chart I have--I will come back to this one--is for another crop that is grown underground, a potato. There is no Government program for potatoes. You just grow them, sell them to someone who will get them to the store or make potato chips, but this is it. This is the entire marketing of a potato. However, in peanuts, we have a little different story because of this program created during the Great Depression. Congress created this very complex system of contracting for peanuts and having the Government, frankly, be there to support peanut growers with a fixed price for their peanuts irrespective of what the market price is. They will be paid a fixed price. Today, the price of peanuts grown in the United States by quota peanut holders is $678 per ton. If you are not a quota peanut grower--those are called additional peanuts, you can only sell them for export on the world market. You cannot sell them in the United States. You are not allowed to. You can grow them here, but you cannot sell them here. You have to sell them overseas at the world market price which is roughly half of what the quota price is. If you want to sell your peanuts, this is how you have to go through this process. You grow peanuts. In many cases, the quota peanuts are purchased by the Government. It is called a nonrecourse loan. What does that mean? That means that the peanuts are the collateral for the loan, and if they are not worth the $678 a ton, the Government loses money, not the peanut grower. So you sell them to the Government. The Government pays you for those, and what the Government does with them, if they cannot sell them for $678, which in many cases they cannot, the Government loses money, not the peanut farmer. Only quota holders can do this. If you grow peanuts and you do not have a quota, then you have to contract with somebody, whether it is a foreign interest or whatever the case may be, and you get the world price, but if you cannot contract before the peanuts are harvested, you sell them to the Government for noncontract additionals. Now, remember, quota peanuts get $678 a ton. Noncontract additionals get $123 a ton. They are the same peanuts. They are grown right next to each other, same quality, but they get a fifth of the price because they do not have this quota. Now, you may say, what is this quota? It is a poundage that has been passed down since 1941--that was distributed back in 1941--to generation after generation of people who have the rights to grow a certain amount of peanuts in a particular State in a particular county of that State. If you have a quota to grow peanuts in Carroll County, GA, you cannot take that quota and sell it to somebody to grow peanuts in Cobb County, GA. You have to grow them in Carroll County or that quota is not worth anything. That is how the system works. It is handed down. And you would say, ``Well, that's good. We are giving people a little bit more money for their product.'' Well, that is not necessarily true. Who owns these quotas? What you will find is that most of the quotas are held by a very few people. In fact, 80 percent of the poundage that is owned in quota peanuts is owned by 6,182 quota holders. Then you have 20 percent of the poundage owned by 22,000 people. It is not surprising that there are a lot of very big interests that are concerned about keeping their quota poundage at a high level because they own a lot. Now, are these the farmers? That is the next question. The answer is no, these are not the farmers. People who live in Atlanta get $1 million from rural peanut farmers because they own the quotas there in the city. They have been passed on from generation to generation. It is just like a stock they pass on from generation to generation, and [[Page S 12380]] they get the money for people paying them rent. Now, what do they get for these quotas? Well, remember, the price of a ton of peanuts is $678 for quota peanuts. The world price is about $350. How much do they rent these quota rights for? Oh, roughly $250. So all the profit from owning the quota does not go to the people who farm the land. It goes to the people who own the quota, who are not even the farmers. In fact, of all the quota holders, only about 30 percent actually farm. The rest are owned by others who do not farm. Seventy percent of these quotas are owned by people who do not farm the land, but they just own this interest that has been passed on through generations and then they lease it out to folks who go out there and farm for basically the same income they could get growing additional peanuts. This is a feudal system. You have got a bunch of lords who sit in the castle who have these rights, who then go out and lease them out to people to go out and grow peanuts for them so they can make money. This is not a profarmer provision. This is a system that is set up to enrich people from all over the country. Peanuts are grown basically in this area of the country, right down here in the South and Southwest, obviously, Georgia being the biggest. But you can see, people from 46 States own quotas in Georgia. They do not even live in Georgia but they own quotas there. They get paid money by people who farm under their quota. In fact, if you go to the next chart you can see that it is not just people in the United States that are enriched by the quota program. There is quota rent going to foreign countries. You can see, Argentina, Great Britain, and Japan and Hong Kong and all these other countries around the world. People own these quotas from the United States. These are just for North Carolina, Georgia, Alabama, and Texas where these quota holders are from across the country and the world. You can say, well, this program is a pretty low-cost program and the support price is not really that out of line with other support prices. Well, that is not true. If you look at what has happened in the support programs, you see that the support price for rice, milk, corn, and wheat all have decreased in the last 10 years. The only price that has gone up is peanuts, and it has gone up by 21 percent. It has grown. The support price of peanuts has gone up while the world price has not, further enriching quota holders, again, not farmers. Because as the price goes up, the quota price goes up, they just charge more for their quota. Farmers still get pretty much the same with or without the quota. We have a peanut grower who is quoted in a farm magazine and says the 1995 crop could have a $200 million loss to the Government. In his words, ``It's not a pretty picture and won't win us any friends in Washington.'' Well, I will assure him of that. It will not win him any friends in Washington to cost $200 million in a program that does not go predominantly to farmers; it goes to wealthy people who own these quotas in the big cities. You have got a lot of small farmers out there basically in a feudal system growing peanuts for them. Again, I want to show you the world price in graphic terms and what that means. Remember, if you want to buy peanuts in the United States, you have to buy them at $678 a ton. If you are a candy manufacturer and you want to buy peanuts for Snickers bars, you have to pay this. If you want to produce those Snickers bars in Canada, you pay $350 a ton.

Mr. SANTORUM. I thank the Chair. And so what happens? Well, not surprisingly, what is happening is we are losing jobs. We are enriching a very few people who own the majority of these quotas who do not farm the land, with Government dollars and higher prices. You pay about 20 cents to 30 cents more for a jar of peanut butter because of these high prices. And we lose jobs. We have a company that wrote me from Pennsylvania. They are one of many small candy manufacturers in Pennsylvania. I will quote. Pennsylvania Dutch Company is the name of it: Our Katherine Beecher Candies Division located in Manchester, PA, is a primary manufacturer of sugar-coated peanuts. The product contains approximately 60 percent peanuts and 40 percent sugar by weight. We employ 40 to 50 workers at this location, and have struggled for years to keep them employed year round. As part of this effort, we established a pretty nice volume market in Canada many years ago. Then a Canadian operator began to make the identical product, and we were no longer competitive with the Canadian folks using world price sugar-- That is another story-- at $.16 a pound while we are paying about $.27 a pound here in the United States, because of another quota program here in Washington, DC--and we were paying about $.90 a pound for peanuts while the export prices were around $0.60. So, to continue to serve our customers and not lose this share of the market, we sold a technical know-how license to a friend of ours in Canada so he could supply peanuts to our former customers [in Canada] * * *. In all probability, we exported about three full time equivalent jobs. That is going on all across the country. As peanut prices stay artificially high, we are losing jobs in manufacturing to other places around the world who can buy peanuts at almost half the price. It is no wonder we lose those jobs. And we are losing jobs here, too, because of it. We have just in the last few years without reform: Shelling plants closed since 1990--these are plants that take the peanuts and shell them, take the shells off of them--Greenwood, FL, Graceville, FL, Cordele, GA, Donalsonville, GA, Sylvania, GA, Opp, AL. All those places have closed. Why? Because of the peanut program is killing domestic demand. What happens? They make their peanuts into peanut butter. When peanut butter manufacturing shifts overseas demand for U.S. peanuts falls, and we lose jobs because the product is not made here. Why? Because peanut butter is too expensive here when you are paying $670 a ton of peanuts. You just cannot produce it here anymore. Peanut butter plants that have closed since 1990: Portsmouth, VA, Cairo, GA, Birmingham, AL, Albany, GA, Wyoming, MI, Chaska, MN, Woodbury, GA, Brooklyn, NY, and Santa Fe Springs, CA. This is a widespread problem of closures of shelling and peanut butter plants. Mr. President, we have a quota price for peanuts of $678 a ton and a price for nonquota peanuts of $350 a ton. What does that mean? I was talking about peanut butter and the influx of peanut butter. Here is what we have seen over the last 5 years in the amount of peanut butter coming into this country because it is so much cheaper to take world price peanuts, turn them into peanut butter, and send them into our country. Because of NAFTA, there are Canadian imports coming into this country. Those are jobs that used to be in the United States, now in Canada. Mexico is preparing to do the same thing right now as a result of Mexico being added. We imported 40 million pounds of Canadian peanut butter in 1994. As a result, what is happening is that--in fact, I got a letter from a small candy manufacturer, a very small candy manufacturer, who sent a letter to me and an invoice from Argentina, for Argentine peanut butter. He paid 67.5 cents a pound delivered for the peanut butter. Had he bought it in the United States, he would have paid about $1 a pound, and he went on to say, ``The quality of the product is excellent.'' So we are losing jobs. This program is not helping farmers and it is costing jobs. By the year 2000, under GATT and NAFTA, we are going to have to allow the import of more than 10 percent of our peanuts for domestic use. Our borders are going to start to open. We have this artificially set price of peanuts and have more imports coming in. We are going to have to import 130,000 tons of fresh peanuts under GATT and NAFTA. I will tell you, there are a lot of growers out there who realize this is a problem coming down the road, this is a train heading right in the direction of growth. I will quote a Virginia peanut grower, who said: I am a grower from Southhampton County, VA. I am also a holder of peanut quota poundage. The peanut program has worked for many years. However, with the passage of [[Page S 12381]] GATT and NAFTA, as a result of that, our peanuts are priced too high. He underlined ``too high.'' While I am vigorously in support of the peanut price support program, we cannot grow or even sustain our market share at the level of price support we are at today. . . I realize many of my farmer friends are opposed to a cut in price support, but not to do so will put many growers out of business. Create a larger influx of imports, and eventually put us growers out of business. He is absolutely right. This is a program that needs reform. In our bill we are gradually lowering the price of peanuts back down to the world marketplace over a 5-year period. We think that is fair. We believe that the industry today will be doomed and, really, the program does not help the farmer. In fact, the next chart I want to show here is the cost of the program to the farmer--not to the quota holder, but the farmer. Here is the quota rent. About 16 percent of the cost of growing peanuts and selling peanuts is the quota rent they have to pay. Then they have another roughly 8 percent for renting the land, and the land values increase because of the quota. You have a quota that makes the value of the land that you are leasing much, much more expensive. Finally--and this is something I had not mentioned--if you want to grow peanuts in the United States, you can do it. You have to have a quota to sell them here. But you cannot get your seeds just from anywhere. The seeds for peanuts have to be quota seeds. So you have to buy your seeds from people who grow quota peanuts. So you have an additional cost that you have to buy your seeds from quota holders, which, of course, is twice the world price of peanuts. So you have to buy very expensive seeds. The peanut program comprises 28 percent of the cost of growers. I will quote from Forbes magazine of last year: Don't want to make profits the hard way? For as little as 5 times the earnings, you can buy peanut growing rights. An owner who doesn't have to be a farmer can sell or rent the rights. These are traded. It is your money--taxpayers dollars going to support these folks who play in this peanut game. What Senator Lugar, and now Senator Brown, and I are proposing is a gradual phaseout of the program. We would eventually reduce the price support level. It is a market-oriented approach. It reduces the level, as I said, over a period of 5 years. It eliminates the minimum quota immediately. The present rules set a floor on quota issued of 1.35 million tons. Domestic consumption is less than this, even without counting imports. That is why the farmer I quoted earlier projects the high cost to the Government this year. We are allowing people to grow peanuts we know they cannot sell to anyone but the Government. So we are going to just open up the market place, allow people who want to grow peanuts to do it. Given the market price, obviously they can be competitive because people grow them now at the market price. They would not be doing it if they cannot make a profit. Additionally, we get rid of this quota seed requirement, and you can plant whatever seeds you want for growing peanuts. There are other proposals under discussion for the peanut program. One set of changes has been put forward by the quota holders. Their proposal is not reform. It removes the budget impact of the program, but does not address the trade or price issues. If adopted, the quota holder's proposal would doom the industry. Consumption has declined by 15 percent since last farm bill and imports are way up. This problem would only get worse if the quota holder's proposal were to be enacted. Senators Brown and Bradley introduced a bill that would eliminate the program immediately. Given how bad this program is, immediate elimination is probably justified. However, immediate elimination would create some transition problems. In recognition of this, Senator Lugar and I propose a compromise, which Senator Brown has agreed to cosponsor. Under our bill, quota is gradually eliminated by a reduction of the price support level each year, until in the fifth year it is at the world price. In the fifth year, the quota system is eliminated. The transfer of quotas across county and State lines is allowed under our bill. The minimum level on the total of the quotas is eliminated. The artificially high prices from the program decreased domestic demand so sharply that the minimums that were viewed in 1990 just as a precaution by 1994 became a guarantee of overproduction and Government purchases. Our bill will immediately remove some of the worst inequities of the present program. Under our bill additional peanuts may be used as seed. Under our bill, the Government may buy additional peanuts for nutrition programs, defense, prison meals, and other uses, saving the taxpayers millions. We would change the rules for the loan programs, so that additional growers would not have to offset losses of quota program. After 2000, the quota system is ended. Farmers will not be left defenseless in a terrible year, because a recourse loan will be available with the loan level at 70 percent of the estimated market price. This provides a safety net, without the market distortions of the present program. Our bill is real reform. It is also market oriented. It gets the Government out of the market place and lets the farmers farm. Opponents of reform will contend that reform will destroy local economies in peanut areas. But with over half of the benefits going to quota owners who rent to others, the program mainly helps the wealthy-- at the expense of farmers, consumers, and taxpayers. Most of the economic benefits of the system leave the local area and often the State. As I mentioned earlier, for farmers who rent, quota rent is biggest single cost--16 percent--and program increases the cost of seed and land--another 12 percent. In all, 28 percent of a renter's production costs are attributable to quota. The quota is mainly held by big farmers. The small farmers receive few of the benefits. In fact, 23 percent of farmers do not use quota. Either they have no access or they do not find renting quota worth the trouble. This bill is strong medicine for an ailing program, but it will have benefits compared with current law. USDA analysis of a phase-down versus an extension of the status quo shows that by 2005/2006 under the status quo imports will be 124 million pounds but under a phase-down they will be 25 million pounds. Their analysis further shows that with the status quo, the effective price, that is the price that a quota renter would get after subtracting the quota rent would be 22.13 cents per pound, while with a phase-down it would be 26.35 cents per pound. These numbers do not include changes in seed or land costs, which make a phase-down look even more attractive. The bottom line is that phasing down quota and price supports will increase farmers income by $164 million over the next 5 years. Wealthy investors, the quota holders, are the only losers. They lose $310 million in quota rent. Mr. President, the peanut program is Government gone wrong. The main support for program is by quota owners--most of whom are not peanut farmers. For them the program creates a lucrative return on their investment. This lucrative return comes directly from the farmers, who the program was supposed to help. This program treats farmers unfairly. Some farmers own quota, and get all the benefits of the artificially high price. Most must rent quota and must pay someone else to get access to the high price. Finally, some farmers have no access to quota and are excluded from the program. Instead they must sell their peanuts for export or to be crushed. In either case, the price is much lower than the quota price. The existing program penalizes consumers. Unreformed, it would increase prices to first buyers by at least $1.5 billion over next five years. The program costs U.S. jobs and wastes Government money. In the absence of serious reform, the program may kill the goose that laid the golden egg by undermining the economics of domestic peanuts until the demand for domestic peanuts is too low to support handlers. Mr. President, the evidence is clear that the peanut program no longer benefits farmers or rural communities in the way that was originally intended. [[Page S 12382]] In fact, continuing the program without substantial changes will hurt farmers and poor, rural communities by making American peanuts uncompetitive in an increasingly global economy. If our products cannot compete, then real Americans lose jobs. If we do not change this program now, there will be no peanut industry left to save by the next farm bill. It is time to reform this terrible program. This is the bill to do it.

Mr. SANTORUM

Mr. SANTORUM. Mr. President, I ask unanimous consent that James Dunn, a congressional fellow in my office, be granted privileges of the floor during my statement in morning business.

Mr. SANTORUM

Mr. SANTORUM. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. SANTORUM. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.