Nick Smith

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Madam Speaker, I yield myself such time as I may consume.

Mr. SMITH of Michigan. Madam Speaker, I would like to correct the gentleman from Arkansas when he states that this proposal limits the participation of retired farmers or retired farmers' spouses or widows of retired farmers. The Senate proposal provides exemptions. For example, retired farmers and widows of farmers can have their labor and management requirements met by a relative. If you have additional sons or relatives on the farm, if they are actively participating, they are also eligible for the $150,000. I think we should remind everybody that up until the last 2 years, the limit on LDPs and marketing loans was $75,000. The year before last, because prices were so low, we upped that to $150,000. We are facing a situation now where when we passed this bill through the House, unfortunately, in the bill we passed through the House it was stated that there were limits on commodity loan payments, marketing loan payments. Technically that is true, but it is not totally honest, as I pointed out, because there was a loophole, and the loophole was the ability of farmers to use certificates and forfeitures. So they went and got a non-recourse loan. They were given the lending money. They gave title of that commodity to the government. Then, if they wanted the same benefits as a loan deficiency payment or a marketing loan, they simply kept the money and told the government to keep the commodity. Moreover, this bill fails to address the use of generic commodity certificates that I think are so important, and that is why we are suggesting to this body that we look very closely at closing this loophole and not hoodwinking the individuals and people that might think there is some kind of a limit simply because there is a limit on part of that price support payment. Farmers are going broke. We need help to the smaller family-sized farms. When I say smaller family-sized farms, maybe it is 1,000, 2,000, 5,000, 10,000 acres; but it is not the 80,000 acres, it is not the 100,000 acres, where land bearers have these lands, they have tenants, where they can divide up this money. That is why we have these press reports of these enormous amounts of millions of dollars that some of these farmers and farm operations were receiving, is because of that particular loophole. Madam Speaker, in closing let me say that we often hear that farmers and ranchers are too independent to agree on anything, but on this issue there is remarkable agreement. We have a list of 32 farm and rural-related organizations that have endorsed this effort to instruct conferees, and we are proceeding with a ``Dear Colleague'' tonight. We will hand it out tomorrow when we vote. We have to start asking ourself, when is enough enough? How long will the American public put up with programs that send out billions of dollars to the biggest farm entities? All this does is damage our ability to help people we originally intended to help, the small, average, medium-size farms, and even now the larger family-size operations. Look back at the intent of our first farm bills. We have never intended to subsidize every single acre of every single bushel. We need to move back closer to having the marketplace be part of that decision on how much of what crop a producer produces. So to say to these giant farm operations that we are going to subsidize you at a level that is going to protect however many bushels or pounds that you produce of whatever commodity, then we encourage that additional production. I say one of the effects of this kind of limitation is to have that big farmer think twice and look at the marketplace, look at the demand, and put some effort into expanding our international markets, expanding our ability to sell our products in foreign lands. So I would ask, Madam Speaker, that we support this effort to have some kind of a limit on payments. I am so convinced, spending my life in agriculture and as a farmer, that if we continue to have this bad publicity of these huge million-dollar payments, I think we are going to, if you will, jeopardize the future of farm programs. This bill also says let us make a greater effort in conservation and in agricultural research that can help all farmers. Madam Speaker, I include the following for the Record. The following table, prepared at your request, shows the number acres it would take to reach $150,000 if LDPs were made based upon actual past marketing loan prices and season average farm prices.

Mr. SMITH of Michigan. Madam Speaker, I yield myself such time as I may consume. Just to review from where we were an hour ago, I think it should be made clear to all of our colleagues and the American public that the purpose of subsidies since the beginning, since back in the 1930s when we tried to make sure that the agricultural industry was going to survive, the purpose has been to protect family farmers. Unfortunately, over the years, we have had programs that made it tough for any farmer to survive, because part of the farm policy in this country has been to encourage a little more production than what we need. The effect of that increased production a little over and above the current market demand meant that prices tended to stay down. So there was an attempt, of course, to keep those prices somewhat low for consumers and what happened in the evolution and the pressures that were put on farms in the United States over these years was that the small farmer was backed up against the wall, the medium-sized farmer felt like if he added a few more acres, then he might be able to send his kids to the same music lessons and schools and have the same benefits as their country cousins, so that medium-sized farmer said, ``Look, well, I'll buy some more land, I'll spend a couple of hours extra a day and try to make it.'' What we have done is had programs that encouraged larger and larger farms. That is part of the reason that we have this motion to instruct today, is to give a little greater relative advantage to the smaller farms by, in effect, saying all of your production is going to be eligible for the price support payments that we have in farm programs. Where the big, larger farms, the very big farms, we are saying, there is going to be a limit to how much of your commodity that you produce that is going to be eligible for this price protection. Therefore, it is going to have the effect on these larger farmers to think twice about what the market price is going to be if there is no support subsidy price. The gentleman from Arkansas (Mr. Berry) and I, we both want to have a situation where we expand markets, where we have better farm prices and hopefully the kind of farm prices that the support payments that are guaranteed in this farm bill will not even be applicable because that is what we are looking at, is better farm commodity prices to keep more farmers in business. Unfortunately, today about 82 percent of all of our farm subsidies go to just 17 percent of the farms. By providing unlimited subsidies, we have encouraged huge corporate farm operations to get bigger and bigger, squeezing out family farmers. With this we have encouraged excess production that has tended to reduce prices paid to farmers. That is why I think it is so important that we have some kind of price limit, that somehow, someway, someplace, whether it is a limit of $275,000 as suggested by the Senate or maybe a half a million, but it is bad for farmers, it is bad for the support they get from the American people to have these exorbitant millions of dollars given to some of these megafarm operations. Madam Speaker, I reserve the balance of my time.

Mr. SMITH of Michigan. Point of order, Madam Speaker.

Mr. SMITH of Michigan. Madam Speaker, I ask unanimous consent that the time of the gentleman from Michigan (Mr. Bonior) be returned to my time to be yielded to the gentleman from New York (Mr. Hinchey) upon his arrival.

Mr. SMITH of Michigan. Madam Speaker, on that I demand the yeas and nays.

Mr. SMITH of Michigan. Madam Speaker, I yield myself such time as I may consume. Let me just say that a Senate that quite often is partisan in trying to come to agreement overwhelmingly supported this idea of some kind of a payment limitation. The gentleman from the other side of the aisle suggests that this kind of a limitation hurts a lot of the hard-working family farmers. Let me just report to you the following information that comes from the Congressional Research Service, prepared by Jasper Womach, Agricultural Policy Specialist. The report calculates how many acres of the different commodity crops would have to have been grown to reach the $150,000 limit that we put in this suggestion of instructing conferees. Allow me to go down through them. Wheat based on the price of wheat last year, you would have to exceed 60,000 acres of wheat. Corn, it would take over 27,000 acres of corn to get close to the $150,000 limit. Soybeans, it would take over 5,000 acres of soybeans to get close to the $150,000 limit. Cotton, it would take 11,000 acres of cotton to reach the $150,000 limit. Rice, it would take over 2,600 acres of rice to reach the $150,000 limit. Let me stress this: whether it is 27,000 acres of corn or whether it is 2,600 acres of rice, we are dealing with an average commercial farm operation in the United States of 460 acres. So I think suggesting that this measure has a limit or cap on anyone except the very, very large farmer is not being fair in terms of communicating what this legislation does. Let me just suggest that you may have heard from some of the big international commodity traders or farm groups in opposition to this idea; but make no mistake about it, they do not speak for the majority of farmers and ranchers in the United States. Here is how I would back up that statement. Last year, 27 of the Nation's land grant colleges from all of the Nation's regions came together to poll their farmers and ranchers on their opinion of the farm bill. On the issue of farm payment caps there was enormous consensus, and that was, nationwide, 81 percent of the farmers and ranchers agreed that farm income support payments should be limited and targeted more to the small farms. With that, Madam Speaker, I will reserve the balance of my time for a comment or reaction from the gentleman from Arkansas.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I would like to welcome to our Chamber Senator Grassley. He is the sponsor of the Grassley-Dorgan amendment. Mr. Speaker, I ask unanimous consent that his statement be inserted into the Record at this point in the testimony.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, this afternoon I will introduce a motion to instruct conferees on the agricultural bill that suggests that we need to incorporate payment limitations. Payment limitations now in effect are not binding simply because there is a loophole in the law which allows many farmers to receive $1 million-plus in farm benefit payments. One reason I feel so strongly that it is reasonable to have some kind of payment limits is that the public thinks that farmers are just being given a great deal of money, regardless of their need, regardless of their size. If we are going to have farm program policy in the United States, then I and many others suggest that we focus our efforts on those farmers that need that kind of help. We talk about the family farm, and, of course, we can get in arguments about what is a family farm or how big is a family farm. But I think most of us can agree that if someone has 40,000, 50,000 or 60,000 acres and is taking in millions of dollars of farm program payments, then probably this is not the mainstream type of family farm that most of us think of. I would like to read some quotes from the Senate debate when this language was put into the Senate version of the bill. What this shows is that there is tremendous bipartisan support for some kind of a limit on these farm payments. Senator Grassley, Republican from Iowa, said, ``When is enough enough? How long will the American public put up with these programs that send out billions of dollars to the biggest farm entities?'' Byron Dorgan, Senator from North Dakota, a Democrat, said, ``Many of the benefits provided through the current ag programs are being funneled to large, non-family agricultural corporations while family farmers are being shortchanged. That is just plain wrong.'' Senator John Kerry, Democrat of Massachusetts: ``This amendment ensures that farm aid will target the people who need it the most, the small family farmers that actually work the land and are the lifeblood of our rural communities. It is a pleasure to support this amendment.'' Senator Chuck Hagel, Republican: ``The amendment would remove the loopholes that allow a handful of large farmers to receive unlimited payments. Without real payment-limitation reform, we will continue to weaken the same farmers we claim to want to help.'' I want to just mention what that loophole is. There are price-support benefit limits on a couple ways a farmer can derive those benefits, specifically the loan deficiency payment and the marketing loans. But what is left out of that payment limit, which tends to hoodwink a lot of people when we brag there are some kind of payment limits in the House bill, is non-recourse loans. You can do an end-run and farmers can have a non-recourse loan that they can forfeit, or the government will give you the certificate that results in the same kind of subsidy benefit payments for price supports as do the loan deficiency payments in marketing loans. It gets rather complicated, Mr. Speaker; but the fact is that we are calling for, and we are going to have, a debate in this House tomorrow on the reasonableness of having some kind of price limitations. I am a farmer from Michigan. I served as deputy administrator of Farm Programs in the USDA in the early seventies. Currently 82 percent of the farm program payments go to 17 percent of the largest farm operations. If we do not control this, if we do not have some kind of a cap, some kind of a limit, we are going to lose the good will of the people of this Chamber, of the people in the Senate, of the people in the United States that really want to help those farmers. So payment limitations of $275,000 per farmer per year is reasonable as structured in the Senate version. I hope we can do that. A couple more quotes, with your permission, Mr. Speaker. Senator Richard Lugar said, ``This is a modest amendment. I stress `modest.' There were 98,835 recipients of farm subsidies in Indiana during 1996 to 2000. Only six of that 98,000 would be affected by this amendment.'' Senator Tom Daschle says, ``I am pleased we were able to pass this important payment limitation amendment.'' The President of the United States says we need to help those small and medium-sized farmers that need it the most. Mr. Speaker, I hope my colleagues will support me on this payment limitation that the gentleman from Michigan (Mr. Bonior) and I are offering tomorrow.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, this legislation is very important to farmers. I have been working on it for the last 6 years, trying to make Chapter 12 permanent so farmers are not put in the predicament of kind of an on-and-off situation, and also the bankruptcy courts holding pending some of those farm applications. I am glad that we are bringing it up to date and extending the Chapter 12 provisions until June 1, 2002. Chapter 12 was originally enacted in 1986. We had a lot of farm bankruptcies. There was a problem. The other chapters were putting farmers at a disadvantage, making them sell their equipment which made it impossible for them to reorganize and start developing the kind of farm operation that could pay back some of those loans. I appreciate that this is important legislation. It is an important piece of bankruptcy law. I am hopeful that we can make Chapter 12 permanent as the chairman's bankruptcy bill provides for. There are more than 12,000 farmers that have filed for Chapter 12 bankruptcy since it went into effect in 1986, and they have been able to restructure their debts without having to liquidate property. The continued low commodity prices, the financial stresses facing farmers further exacerbate the importance of extending Chapter 12. Mr. Speaker, I have introduced several bills. I would have preferred that we were going ahead with my bill, but I appreciate the chairman helping to make sure that this law is current for those farmers desperately needing bankruptcy protection. Why is Chapter 12 so important to farmers--especially small, family farmers? Chapter 12 contains special provisions that allows farmers to use bankruptcy laws in the manner that is available to others seeking bankruptcy. Under the bankruptcy laws, debtors must only have a certain level of debt to reorganize rather than liquidate. Many farmers have too many assets to do this, primarily because of the value of their farm equipment--their tractors, plows, combines, and tools. Obviously, this equipment is essential to the farm operation. If this equipment were used to pay off debts, how would the farmer then be able to operate the farm and reconstruct the business? Chapter 12 recognizes this fact of farm life and lets these farmers reorganize their debts rather than liquidate their property. Extending this provision is especially critical today. There are many farmers who have filed for bankruptcy since the last Chapter 12 extension expired last fall. The courts are waiting for Congress to act and change the law to allow these farmers to re-file under Chapter 12. These farmers need the options available under Chapter 12 now. I have introduced legislation that would make Chapter 12 protection permanent, and working with the Gentle Lady from Wisconsin, Tammy Baldwin, I have offered many bills extending these protections, most recently H.R. 2914. Like many other Members, I am hoping that we can free the logjam that is holding up permanent Chapter 12 protections for farmers. I understand that the House and Senate conferees will be meeting soon on H.R. 3333, the bankruptcy reform bill. Let's hope that an agreement can be reached soon so that we do not have to come to the floor of the House to extend once again a provision that should be a permanent fixture in law. I would like to express my support for the Gentleman for Wisconsin, Mr. Sensenbrenner, the Chairman of the Judiciary Committee, not only for this bill, but also for his efforts to get the other body moving on a bankruptcy reform compromise that will make Chapter 12 permanent. Mr. Speaker, Chapter 12 is critically important if we are to help family farmers maintain farms that, for many, have been in their families for generations. I urge my colleagues to support this very important piece of legislation.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, pursuant to clause 7(c) of rule XXII, I hereby announce my intention to offer a motion to instruct conferees on H.R. 2646 tomorrow. The form of the motion is as follows: Mr. SMITH of Michigan moves that the managers on the part of the House at the conference on the disagreeing votes of the two Houses on the Senate amendment to the bill H.R. 2646 (an Act to provide for the continuation of agricultural programs through fiscal year 2011) be instructed: (1) to agree to the provisions contained in section 169(a) of the Senate amendment, relating to payment limitations for commodity programs; and (2) to insist upon an increase in funding for: (A) conservation programs, in effect as of January 1, 2002, that are extended by title II of the House bill or title II of the Senate amendment; and (B) research programs that are amended or established by title VII of the House bill or title VII of the Senate amendment.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, sometimes I am not too good on politics, but I like to think that I am good on policy. I think both sides have decided it is good policy to have this kind of bankruptcy provision for American agriculture. Just briefly, let me explain what it does. It says to farmers that instead of going into a separate chapter, we are going to have a provision where they do not have to sell their tractor, plow, and tools in order to try to come back and try to resolve their indebtedness problems, but we are going to give farmers a little leeway so they do not have to sell their equipment, which is the only way they are going to be able to survive and reconstruct their business. The concept of this direction to conferees is good. It is something that needs to be done. I am going to vote for it. I think the politics might be that it is an extra, for lack of a better word, inspiration for the conferees on the bankruptcy bill to move ahead with that bill. But American agriculture right now has real problems. There are individuals who have filed bankruptcy. The bankruptcy courts are waiting in hopes that this will be changed into law so that they can refile and allow these farmers to refile under Chapter 12 provisions. Chapter 12 allows some of the farmers who are hard pressed, and it is mostly the smaller farmers who have been forced through government programs and low commodity prices to give up farms which have been in their family for generations. I hope my colleagues will support this instruction, because I think it is important that we move ahead with this legislation. Mr. Speaker, the gentlewoman from Wisconsin (Ms. Baldwin) and I have introduced three bills. Two of them have been passed. One is in the wings, waiting now to at least have a temporary continuation of the Chapter 12 provision for farmers.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, this week we are taking up the budget. We are going to increase the limit on how deep this government can go into debt. Every year we spend more tax dollars and we add more government services, and my concern is that too many Americans are becoming too dependent on government. By the next election, this fall, a majority of Americans will be dependent on Federal Government for their health, their education, their income, or their retirement benefits. Some suggest that as many as 60 percent of households receive more than $10,000 a year from government in the form of retirement, health care, welfare or other benefits. At the same time, Mr. Speaker, the number of taxpayers paying for these benefits is rapidly shrinking. The question is, how well can any free nation survive when a majority of its citizens heavily dependent on government services no longer have the incentive to restrain the growth of government? As we all know, over the last 50 years, American attitudes have been shifting from cherishing self-sufficiency and personal responsibility to wanting a little more security from the Federal Government to assure them of a certain number of benefits. Government benefits, once concentrated on the needy, now extend into the middle and upper-middle class households, even as more and more Americans see their income tax liabilities decrease. Today, the majority of Americans can vote themselves more generous government benefits at little or no cost to themselves. As a result, they have really little incentive to restrain the continued growth of big government and the benefits big government dangles before them. Fifty percent of Americans now pay less than 4 percent of the total individual income taxes, while the top 5 percent pay nearly 55 percent of the individual income taxes. At the same time, the folks who are paying the least for government are receiving the most benefits. Americans who receive nearly half of the Federal Government benefits pay only, listen to this, Mr. Speaker, pay only 1 percent of the individual income taxes. Many of these beneficiaries are poor, but an increasing number are middle-class retirees who enjoy extra income and health care through Social Security and Medicare. This is help we say from government, but it is from the other taxpayers of this country. Our founders created a system where taxes are the price for government benefits and services. The idea is that voters would restrain the growth and expansion of government because of the personal costs to themselves in taxes. Our founders built into the original Constitution a provision that prohibited taxes based on income because they wanted people to achieve. That was the motivation. This provision, however, was amended by the 16th amendment. As a result, a near majority of voters now pay little or no income taxes while they receive an increasing number of government benefits. The extreme progressiveness of our Tax Code has reduced, and in some cases eliminated, any cost of government for a growing number of voters. At the same time, many of these voters are dependent on government for much of their income, their health care, and other government services. It is like handing someone a menu at a restaurant and saying this bill is already paid for, and then asking them to make an order. I think it is a difficult offer to refuse, and it is the same way with government. Limited government is ultimately essential to our economy's strength and freedom. The success of the United States is built on the free enterprise motivation that those who learn, work hard, and save are better off than those who do not. As that becomes less true with bigger and more intrusive government, we not only diminish that motivation, we lose more of our personal liberty and freedom. This is a growing threat to our way of life, and we can no longer ignore the kind of influence that it generates.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, following the presentation from the Blue Dogs, let me just say from our side of the aisle that the Blue Dogs have come up with some good, thoughtful ideas in terms of fiscal responsibility. I think we have to be careful about not passing blame, and I would hope that as one of the three separate entities of government that our Founding Fathers set up, that we as a Congress would also take on some responsibility and not expect just that it is up to the administration to present us a plan of what is good for the future of this country. We also have that responsibility. It seems to me, I say to the gentleman from Texas (Mr. Stenholm), that if we are going to be honest with the American people, if we think that our problems today are so important that we have to borrow money that is in a sense a mortgage that our kids and our grandkids are going to have to pay back, then we should not do it by borrowing. If we think what we are spending money on today is so important, then we should increase taxes and not try to hoodwink the American people into thinking the size of this government is less costly than it really is by sort of off on the side borrowing more money, where it is not quite as visible as quickly in terms of the obligation that people have to eventually spend to cover what we think is more important today maybe than what our kids and grandkids are going to be facing 20 and 30 years from now. I would just like to call on the gentleman from Texas (Mr. Stenholm) as we get into the Social Security debate, because he has been one of the leaders. Before I do that, Mr. Speaker, I want to remind everybody what we did in 1998. At that time, we promised that there was going to be a balanced budget by 2002, and we did that predicated on an estimate that revenues in 2002 would be $1.4 trillion. Now, what happens to revenues, just in the most recent projections this year and 2002, are that revenues are going to be almost $2 trillion, so $600 billion more than we anticipated in 1998 when we promised to have a balanced budget. Even if we take $40 billion out for the tax cuts and another $30 billion out for the war on terrorism, there is still $530 billion that was increased spending rather than lost revenues. So part of the danger that we need to face up to is the propensity for Members of Congress and the administration to start new programs, to spend more money, because it tends to make us a little more popular. If we take the pork barrel projects home, we would probably get on television cutting the ribbons, et cetera. I think the challenge is huge. I think we have to face up to both Social Security and Medicare. But tonight I want to concentrate on a discussion of what the problem is in Social Security, where we might go, and the cost of doing nothing. Mr. Speaker, I yield to the gentleman from Texas (Mr. Stenholm), who has been a leader in terms of trying to come up with a bipartisan effort to solve the Social Security problems. I would ask him to give us his best guess of what we should do to get both sides of the aisle together to help solve this problem.

Mr. SMITH of Michigan. Reclaiming my time, Mr. Speaker, from the gentleman from Texas, do I understand correctly that between us we have 12 grandchildren? I have 10.

Mr. SMITH of Michigan. Mr. Speaker, I have heard the gentleman say many times that, look, 40 years from now or 50 years from now or however long we might live, to have those kids come to us and say, look at the increased tax burden that you have put on us because you did not do anything back in 2002 and 2003, that should make every Member here feel a little bit more conscious of the obligations that we are passing on to those kids if we do not stand up to some of the tough decisions and correct the problems now. I think that it is an easy issue to demagogue. Republicans say, well, maybe that Democrat would be vulnerable because there are so many seniors that are so dependent on Social Security, so if we can suggest that the gentleman from Texas (Mr. Stenholm) is bad and might mess up the program because he is looking for a solution. And, of course, vice versa, Democrats could demagogue and say, well, Republicans are going to ruin our Social Security benefits. And with seniors, so many of our seniors that are so dependent on Social Security, we can understand their emotional concern even at the suggestion. I do not know quite how we are going to stop the demagoguery. It will probably go on at least one more election. But somehow, the key is a better effort of informing the American people of what the situation really is.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker are we going to have a vote of ``yea'' or ``nay'' on limits for farm payments? I would first offer a quote by the President from last August, ``There's a lot of medium-sized farmers that need help, and one of the things that we're going to make sure of as we restructure the farm program next year is that the money goes to the people it's meant to help.'' The following is a dear Colleague sent out yesterday and signed by Representatives Nick Smith, Marcy Kapture, John Hostettler, Earl Pomeroy, Earl Blumenauer, Dan Miller, Doug Bereuter, and Tammy Baldwin, and I quote, As the farm bill conferees begin deliberations, I ask for your help in bringing about meaningful federal farm policy with limits on how much money a farm can receive. As President Bush has said, we should work to send him a bill that directs support to those it was meant to help, namely small and mainstream family farms. In response to the Dear Colleague letter dated February 27, 2001 from Representatives Chambliss and Berry, one thing should be made clear: there are no effective limits for price support payments farmers may receive in current law, or in the House-passed farm bill. When the $150,000 limit is reached, any producer can continue to receive unlimited price support benefits through loan forfeitures and certificates. According to the Environmental Working Group's website (www.ewg.org) the top 5 recipients from 1996-2000 were: Riceland Foods, Inc. $49 million; Farmers Rice Corporation, $38.2 million; Harvest States Coop, $23.8 million; Tyler Farms, $28.2 million; Producers Rice Mill, Inc., $19.8 million. Do we really want federal farm policy that gives unlimited support to huge farm operations? Last October, the Smith payment limitation amendment was brought before the House under the 5-minute debate rule. Despite the time limit on debate and organized opposition, the amendment fell just 26 votes short of passage. However, payment limitations successfully moved in the Senate farm bill by a vote of 66-31. Now we must resist the efforts of those who seek to thwart our efforts to cap farm subsidies. Unlike what has been suggested, most states do not have a single farmer who would be affected by the limitations we are trying to establish. If you have any questions or would like to sign on to the letter of Representatives Pomeroy and Bereuter requesting payment limitations, contact Representative Pomeroy's office, Representative Bereuter's Office, or Representative Smith's office.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Just to emphasize the point, we talk about the magic of compound interest. I paid my grandson to come in and paint the fence. And I said, Look, will you put this $36 in a Roth IRA? He said, Geez, Grandpa, I want to put this in an account and buy a car with it when I am old enough. So I explained to him, Look, if you put this $36 in an IRA it doubles almost every 8 years. So I figured it out and projected it out so at age 65 he had $70,000 that that money would be worth because of the magic of compound interest; and if he waited another 7 years to age 72, then it would be worth $140,000. He said, Gosh, Grandpa, that is good; but could I just put most of it towards the car and a little bit towards the Roth IRA? So the magic of compound interest is what can make today's workers that are modest or median income retire as rich people. That is what we are trying to do is having something more than just Social Security but promise the Social Security, but then have the opportunity with the magic of compound interest to have retirees gain even more in their retirement years.

Mr. SMITH of Michigan. Mr. Speaker, I thank the gentleman for yielding to me, and I thank him for doing this Special Order. If we can convey one message, it is that Social Security has real problems. I think the temptation in a political election year is for anyone that comes up with suggestions on how to solve Social Security, how to keep it solvent, to criticize them, to maybe win some points from seniors by scaring seniors that their retirement benefits might be in jeopardy with any change. Mr. Speaker, I have a couple of charts. This chart represents the complications of the increased cost of Medicaid, Medicare, and Social Security. So as we see, the percentage of the total gross economy of the country, which is now around 7 percent, is going to go to about 15 percent in terms of the cost of these particular programs. Trillions of dollars does not have a great deal of meaning for most Americans, and probably not for most Members of Congress; but the unfunded liability of Social Security right now in today's dollars is $9 trillion. That means we would have to take $9 trillion, put it in a bank account with a return of approximately 4 percent to accommodate the money that we are going to need over and above the FICA tax, the money coming in, the Social Security tax, to pay Social Security taxes in the future. That is if we do nothing. So if there is one message that the gentleman has been so successful in conveying, and many of us have tried to pitch in, it is the fact that the cost of doing nothing is so much greater than trying to reform the program and get a better return on some of those dollars. This just represents the portion of Social Security as it consumes the current budget. So it is one of the biggest expenditures; 21 percent of everything that government spends is now spent on Social Security. Here is the danger. The danger is not doing anything, and we will wait until the last minute and then increase taxes and reduce benefits. That is what this country has done several times since 1934, because this Congress, in very emotional, vulnerable areas such as Social Security, waits until the last minute. They wait until it is almost a catastrophe, running out of money, and then they do something. Here is the something that they have been doing is raising taxes. On this chart you see in 1940 the rate was 2 percent on the first $3,000; and the maximum tax was, of course, $60 a year. By 1960 they raised the rate again to 6 percent on the first $4,800. In 1980 they raised it to 10.16 percent on the first $25,900; and in 2000 it is 12.4 percent. In 2000 it was on a base rate of 76,200. Today it is 86,000. So it is 12.4 percent of the 86,000. So as the number of workers has declined in relation or in the ratio to the number of seniors, then you charge those existing workers more and more. So we have got that kind of demography facing this country. In 1940 there were about 40 workers for every one retiree. Today there are three workers for every one retiree. And they expect in the next 25 to 30 years it will be two workers for every one retiree. The tremendous burden on those two workers. And what we are suggesting now, nobody is suggesting privatization, privatization is a word that the demagoguers use to try to scare people. Every plan that I have seen by every Republican, including some of those that are joined in by Democrats, have a Social Security program that gives the protection of benefits to current and future retirees. The challenge is can we get a little better return than no return at all on the money. Right now, with a little extra surplus coming from the Social Security tax, it is put into government bonds; and when interest accrues, another IOU is written but there is no real money. So in 2016 when the revenues coming in from Social Security tax are less than what is sent out to pay benefits, look, everybody needs to know there is no account with your individual name on it as an American worker that gives you any entitlement to Social Security benefits; and that should be obvious over the past years when we have simply increased taxes and reduced benefits. If we can get some of that in individual workers' names and limit it to certain kinds of indexed accounts, that is what the gentleman from South Carolina (Mr. DeMint) does in his bill, that is what I do in my bill, then you own it. If you die before you are 65, then it goes into your estate because it is your money. Right now if you die before you are 65, you get $225-or-something death benefits. Can we get a better return on the money? And how dangerous is it to keep putting this bill off? I chaired the bipartisan Social Security Task Force last session, and I introduced four Social Security bills since I came here in 1993 that were to keep Social Security solvent. Every term, every session over the last 9 years that I have introduced a bill, it had to be a little more drastic. And if we continue putting this off, then it is going to be that much more drastic later on. It is going to cost a lot of money to pay benefits. We are going to pay benefits. The question is can we save almost 20 percent of the cost by changing the programs now and getting some real return on that investment.

Mr. SMITH of Michigan. Mr. Speaker, will the gentleman yield?

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, the agricultural industry in the United States over the last 100 years has contributed a great deal. As we develop this year's farm bill, we are now trying to decide, number one, how much should we pay in terms of tax subsidies to farmers, tax dollars going into subsidies to farmers, to make sure that the agricultural industry in the United States survives. Farmers are facing record low prices compared to the last 20 years. In fact, in terms of what a bushel of wheat would buy, the wheat price today is much lower than it was 50 years ago. What kind of policy do we want in the United States? We are now in a subsidy war, if you will, with other countries. Other countries have decided they are going to do anything necessary to keep their farmers operating, so they are subsidizing their farmers in these other countries substantially. Their extra production from Europe, from these other countries, go into what would otherwise be our markets, so the resulting overproduction from all over the world results in low commodity prices, and the low commodity prices today would not keep most farmers in business. Subsidies in the United States represent about 17 percent of the gross income of the average farm. The average net income of an average farm is around 6 percent. So, again, without the subsidy payments, most farms in the United States would lose money every year. Now, the irony is that farmers do not like to have this subsidy check coming from the government. They would much rather have a real marketplace, where there was real competition throughout the world, where they could compete and make good money farming. And make no mistake, our farmers in the United States can compete, if you will, excuse the expression, on a level playing field, with any other agricultural producers in the world in most commodities. Our challenge right now is the Senate has passed one farm bill, and the House has passed another farm bill, substantially different in the concepts of where they want agriculture to go and what they want in the farm bill. That includes rural development, that includes the environment in rural areas, that includes the WIC program for food for infants and pregnant mothers, that includes the Food Stamp program. Just as a footnote here, let me say how we have changed the U.S. Department of Agriculture over the last 50 years. USDA, that part of USDA that is involved in production agriculture, with farmers, now represents only about 25 percent of the total budget of the U.S. Department of Agriculture. I am here tonight to talk about payment limitations to some of the huge mega-farmers in the United States. The Senate in their bill had provisions that incorporated a level of payment limitations in the hope that some of the large mega-farms would have some kind of a cap, some kind of limit on the payments they received, so there would be more money for what I would call the average mainstream farmer in the United States and some of the other programs in the agricultural bill. We passed an agriculture bill back in 1996 that pretty much everybody supported. All of the farm organizations thought it was a good idea. What that was is the Freedom to Farm, and it was a phase-out of government subsidy programs. So over 7 years, the subsidy payments to farmers went down and down, and then in the eighth year farmers were supposed to produce strictly for the market. What happened is the economy in Asia was tremendously disrupted and their purchases went down, and we had a glut of extra farm production; so prices went down, and even with the one subsidy phase-out payment, farmers were going broke, going out of business, going bankrupt. Now we are developing this new farm legislation, and the question before us is should we have payment limitations on how much money any one farm operation can receive in payments from the Federal Government. Let me give you one statistic. Right now, the top largest 5 percent of the farms receive 49 percent of the payments. Five percent almost receive half of all the payments. Some have suggested, look, we do have limits on payments. The fact is that we do not have real limits of any kind on price support payments. Let me just spend a minute on price supports. In our farm programs, what we have is we say to a farmer that to cover at least their fixed costs, that we will guarantee a certain price, and if the market is less than that particular price, government will make up the difference between the current market price and what the Congress has thought to be a price that will at least cover most of the fixed expenses of that particular farm producing that particular crop. Just for the record, let me throw in those price support payments. The national average now on rice is $6.50 a hundred weight; cotton is $52.9 cents a pound; wheat is $2.58 cents a bushel; soybeans are $5.26 a bushel; and corn is $1.89 a bushel. So for example, on corn, at $1.89 a bushel, if the current market price is $1.79 in that particular county, then the government will come up with an extra 10 cents per bushel for those farmers. In terms of my interest in this area, I am a farmer from Michigan. I was born and raised on a family farm. I was on the United States Department of Agriculture State Committee in Michigan as its chairman. I came to Washington when Earl Butz asked me to come to Washington to help phase out some of the complicated farm programs in 1970, and we went from a stack about 10 feet high of program regulations for farmers down to maybe a stack a foot high of those regulations for farmers, and sold a lot of the storage bins that the Federal Government had that tended to depress prices for farmers even more. We did not have problems with the kind of payment limitations in those years because the price of the commodity was higher than the support price. We had crazy programs for diversions and set-asides; and ever since 1934 when we first started farm programs, it has tended to be farm programs that had more benefit for the big, richer, larger farm operations. So a big, larger farm operation has a lower per unit cost of production; and, therefore, the difference in price to make it up was a little more beneficial to them in terms of adding to their profit than a small family farm that had a larger unit cost of production. So what happened from 1934 through the 1960s and into the 1970s is the very small farms went out of business, and the medium-sized farms thought, well, if I buy that small farm and I work maybe another couple of hours a day, I can make a little more money for my family so that my kids have some of the same advantages as my city cousins. Well, it tended to be progressive; and, pretty soon, what was considered a large farm was considered a small farm and the larger farms bought out those smaller farms. Now, over the last 60 years, we have gone from an average of about 40 acres, 50 acres per farm to 460 acres per farm. Let me just give my colleagues a report from the Environmental Working Group that went to the U.S. Department of Agriculture and got all of the payments to all of the farmers and the farm operations in the United States. As my colleagues will recall, I mentioned earlier that 5 percent of the farms are now receiving 49 percent, almost 50 percent of farm payments that go out. If we were to have the kind of payment limitations that are in the Senate bill, it would save between $2 billion and $3 billion. I am going to move away from the mike and just write these numbers in. According to the Environmental Working Group, these are the top recipients of farm program payments between the years 1996 and 2000. I think everybody that is watching might be able to see that. They are Riceland Foods, $49 million; Farmers Rice Corporation, $38.2 million; Harvest States Co-op, $28.1 million; Tyler Farms, $23.8 million; Producers Rice Mill, $19 million. These are the mega farm operations. These are the huge landowners. These are not the 400 or the 500 or the 1,000 or the 2,000 or the 3,000 or the 4,000 acre farms. These are the 40,000, 50,000, 60,000, 70,000, 80,000 acre farms. What I am suggesting in this short debate this evening is that my colleagues work to have a farm program that is more fair to the mainstream farmers of our country and to limit the kind of payments as we have a limit in the Senate bill. Some of the pressures, of course, come from the big operations that are getting these large payments. Bear with me a minute and let me just go through a scenario of why there is no cap or limits on farm payments, and that has disturbed me quite a lot over the years, because we sort of fool people into saying there is a limit on price support payments. Because, in the law, it says there is going to be a limit on price support payments of $150,000 per farmer. That is what the law says. So a lot of organizations have tended to say, well, we have payment limits on price support. Here is what happens. It is a little complicated. But once we hit the $150,000 limit, then we have another program that is called a Nonrecourse Loan Program. So any farmer can take his rice, corn, wheat, cotton, soybeans in and give the government the title to that crop. The government will give him a loan that is equal to the price support payment, and then that farmer has the option of forfeiting on that loan and keeping the money, which gives that farmer exactly the same benefit as the price support payment in the first place. So it is sort of one can do an end run and still collect millions of dollars in price support payments. I would just urge my colleagues and I would urge the conferees from the Senate and the House to look at the kind of payment limitations that still can be fair to farmers, that still offer some loan provisions to those farmers so that we do not have to glut the market at harvest time. I spent 5 years as a deputy administrator for farm programs with Earl Butz, and then went back home to the farm. Anyone that thinks that it is not tough, making money on a farm, has not spent a lot of time on the farm. Farmers put in those 14- and 15-hour days. They work very hard. They are desperate to try to have the kind of provisions and services and piano lessons and the ability to send their kids to college. They are trying hard in working those extra hours to try to accommodate their family in the same kind of living as their city cousins. It has been very tough. So we are losing a lot of our farmers, and we continue the trend of farmers and farms getting bigger and bigger. I want to make it clear that the limitation amendment will only affect the very largest of recipients. For instance, the average acreage that would have to be taken in the last 2 crop years to reach the limit that the payment limitation sets was over 6,000 acres of corn. So, again, the average farm is 460 acres, but to reach the payment limitation in relation to the price over the last 2 years was 6,000 acres of corn, almost 5,800 acres of soybeans, almost 2,000 acres of cotton and 13,000 acres of wheat, 17,000 acres of rice. I would note that the average farm size again is 450 acres. So these are very large farms to reach that limit. Mr. Speaker, I would ask all Americans to work with us in terms of supporting American farmers. I have suggested that, number one, we want to try to talk these other countries into reducing their subsidies, because subsidies tend to encourage overproduction that has a chain reaction of extra supply, lowering the price, and so farmers end up receiving that much lower price from the markets. So we need to work together cooperatively with other countries. But I think it is very important that we keep our agriculture industry, we keep and we do what is necessary in these farm programs that we are going to develop over the next several weeks to make sure we have a strong agricultural industry that can continue to provide the highest quality food in the world at the lowest percentage of take-home pay of anyplace in the world. Again, we produce the highest quality of food at the lowest percentage of take-home pay of anyplace in the world. That efficient production in agriculture has allowed so many people that used to work on the farm producing food to try to survive to go into industry and manufacturing and now into the new information technology. So the agricultural industry that has been the most efficient of any industry; if we take the automobile industry or computers or anything else, the increase in productivity of American agriculture has surpassed almost every other industry. In conclusion, I would say, Mr. Speaker, that I ask all of my colleagues to join with me when they talk to conferees and encourage them to come up with a payment limitation that is fair to all farmers, but not to give in to some of the pressure groups and the large, huge mega farm operations that are trying to put pressure on our conferees to continue unlimited payments without restrictions. Of course, let me add to that the grain marketers who tend to make a certain profit per unit of production also gain from having large volumes produced. So those industries, the grain industries, the cotton, rice, et cetera, those industries do not want the kind of payment limitations that is going to result in fewer bushels or pounds being produced because that is where they have their margin and markup on profits. Mr. Speaker, it is going to be a challenge. I hope we can overcome that challenge, and I hope we can have the kind of payment limitations that helps make sure that we do not have a nation of huge mega farms.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I move that the House do now adjourn.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, the conferees on the agricultural bill in both the House and the Senate are now meeting to come to an agreement on what should the agricultural policy be for the United States for the next 5 yrs. The Senate put in provisions in their bill that there should be payment limitations that limit how much money a farmer can get from price supports. The House, when we brought up my amendment, failed by 28 votes to pass such a payment limitation amendment. I urge my colleagues to join us and call my office or the office of the gentleman from Nebraska (Mr. Bereuter) or the office of the gentleman from North Dakota (Mr. Pomeroy), sending a letter to those conferees to encourage that we have some payment limitations. There are huge farm operations receiving 15, 20, 25, 30, $35 million from 1998 until 2001. There is logic to having a farm policy that helps most of our farmers, the traditional family farms instead giving an extra $2 to $3 billion to the huge mega farms. I would ask my colleagues to join in this effort to have a good farm policy bill with some payment limitations.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I would like to make some comments on Social Security, a very important program. A couple speakers ago, the minority leader suggested that the President and Republicans come up with their Social Security proposal, I suspect so that it could be criticized. I would hope that the minority leader and the Democrats would come up with their solution for Social Security. To pretend that there is no problem and nothing needs to be changed is not facing up to the fact that the Social Security system is going to run out of money. Social Security started in 1934. It was predicated on the fact that there would be an increasing number of workers paying their taxes into Social Security that is used to pay benefits for existing retirees. I think that point needs to be stressed, that it is now and always has been a system where existing workers pay their taxes and that tax money goes out to existing retirees. Back in 1940, there were 38 workers paying in their Social Security tax for every one retiree. Today, there are three workers paying in their Social Security tax for every retiree. The suggestion by the actuaries is that by 2025 there will only be two workers paying in their Social Security tax for every retiree. It will be very expensive for those workers. So what Congress and the President have done in the past, every time that we are short of money we have increased the taxes on workers and reduced benefits. Let us not put ourselves in that predicament again. One way to do it is not to suggest that this is just up to the President of the United States. This is the Congress. This is the House of Representatives. We should be working together on both sides of the aisle to look at the problem with a program that has been so successful and so important since it was instigated in 1934. The way we accomplish something to solve this problem is facing up to the fact that it is insolvent; the fact that there is an unfunded liability, according to the actuaries, of $9 trillion right now; that the money in the trust fund right now, money that the government has borrowed from the surplus coming in from Social Security and spent on other programs or other responsibilities of the General fund, is now $1.2 trillion, again compared to the $9 trillion unfunded liability. We would have to come up with $9 trillion today and invest it to accommodate what we are going to be short over the next 75 years in terms of meeting current-day promises on Social Security payments. The average retiree today is receiving a return of 1.7 percent interest on the money they and their employer put into Social Security. We can do better than that. Nobody is talking about privatizing Social Security. None of the proposals suggest that government is not going to be ultimately responsible for paying those Social Security benefits. But the way to accomplish this, the way to move ahead, is not by demagoguery. I know it is tempting in an election year to try to put down and scold and scare seniors that one party is better than the other. Mr. Speaker, in conclusion, let me say that I would hope both the Democrats, the minority leader and the majority party in this House and the same with the Senate work together to come up with proposals to solve the problem, rather than demagoguing it.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, we are going to increase the debt limit of the United States in the next several days. Already, the debt limit of the United States, set at $5.95 trillion, is being apparently violated by having a debt greater than the debt limit set by the United States. I think we need a thorough discussion in this Chamber and in the Senate and certainly in the White House of how do we want to treat debt in the United States; how deep do we want to go in debt; how much, if you will, mortgage do we want to leave to our children and our grandchildren. It seems that it is reasonable to live within our means, not to say that our spending today is so important that it justifies leaving a larger debt or a larger mortgage to our kids and our grandkids. If we want to spend money, then it is reasonable to say to the American people and be up-front with them that we are going to increase taxes and use those revenues for existing spending rather than, I suggest, hoodwinking the American people by increasing our borrowing. The borrowing is not as obvious as tax increases. Therefore, over the last 30 years, we have said we are going to borrow more and more as government gets larger and larger and, sadly, a lot of that borrowing has come from the trust funds. Since 1983 when we last changed the Social Security system, and we changed it by increasing taxes and reducing benefits, we have had more revenue coming in from the Social Security tax, the so-called FICA tax, than was needed to pay out Social Security benefits. Just a footnote here to mention that Social Security is a system that is, and always has been, designed to tax current workers and use that money to pay current retirees. As the number of workers per retiree has diminished since we started the program in 1934, we have developed an obvious insolvency in the Social Security system. I have heard some of my colleagues from the other side of the aisle criticize some things the Republicans are doing. It is easy to demagogue this kind of program that so many seniors find so valuable. We now have over 50 percent of our seniors that depend on the money coming in from Social Security. So it scares the heck out of seniors when anybody suggests, that somebody is going to change Social Security. Here are the facts: Social Security is going broke. Fifty years ago we had 40 workers for every one retiree. Today, there are three workers paying in their tax for every one retiree. The actuaries estimate that by 2025 there will be two workers paying in for every retiree. And by 2040 there will be one worker for each retiree. Can you imagine the taxes and the burden on that one worker, paying in Social Security, enough taxes to cover the Social Security benefits of one retiree? There is going to be a huge unfunded cost and the burdon should not be placed on future taxpayers. Look. Nobody is going to suggest that we stop our commitment of paying Social Security benefits. So this trust fund is only a booking record of the mandate to come up with the money, starting in 2014 or 2015 or 2016. The only way to come up with the money is to either increase taxes or reduce benefits or increase borrowing. Increasing borrowing is the most politically likely to put our kids even further in debt. It is going to cost a lot of money; there is now an unfunded liability of $9 trillion in today's dollars of the benefits that are needed to pay Social Security benefits over the next 75 years over and above what is going to come in from the FICA tax. We need to deal with it but it depends on how we deal with it. Do you do nothing? And if you do nothing, the cost is going to be substantially greater than doing something and getting a better return on some of that money paid into Social Security. In conclusion, Mr. Speaker, let me just say that the average retiree is going to get a 1.7 percent return on the money that they and their employer invested in Social Security. We can do better than that. There needs to be a transition to earn more for the program rather than demagoguing. Let us come up with ideas and suggestions rather than playing poltics, because it is a program that is worth saving.