Letter Opposing the "Food Energy and Security Act of 2007"

November 2, 2007

TO THE MEMBERS OF THE UNITED STATES SENATE:

The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, urges you to oppose the "Food Energy and Security Act of 2007 (Farm Bill)," because it fails to achieve meaningful reform of the nation's outdated agricultural policy, distorts international trade, and raises taxes in order to pay for the programs it authorizes. The Chamber also strongly opposes any amendment, including one that may be offered by Sen. Casey, which would bar the government's use of eminent domain to create "national interest" transmission corridors.

The Farm Bill perpetuates an agriculture subsidy system that is patently inequitable and benefits only a handful of Americans, with more than 70 percent of all subsidies going to just six percent of farms. The Congressional Budget Office estimates that the Farm Bill will cost American taxpayers an astounding $283 billion, yet it will only benefit a small fraction of U.S. citizens. Likewise, the bill, in its current form, will continue to hamper the nation's ability to gain greater access to international markets because of the trade distorting agricultural programs.

While certain provisions in the Farm Bill have the potential to foster real economic growth—such as those that increase broadband deployment to unserved and underserved areas of the country—the bill overall is unfair. Examples of the more egregious provisions are those that increase sugar price supports; mandate country of origin labeling; and nullify pre-dispute binding arbitration provisions.

Most egregiously, however, is that billions of dollars in funding for Farm Bill programs will reportedly come from the revenue raising provisions of S. 2242, the "Heartland, Habitat, Harvest, and Horticulture Act of 2007," which was reported by the Committee on Finance on October 4. This agricultural tax package, which is expected to be offered on the Senate floor during consideration of the Farm Bill, codifies and clarifies the judicially-developed "economic substance doctrine"—transforming the doctrine in such a way that previously legitimate business transactions could be deemed abusive. S. 2242 also contains a retroactive provision to further tighten rules for sale-in, lease-out (SILO) arrangements with foreign entities. The provision would result in significant new tax liabilities on U.S. taxpayers and significant adverse financial statement consequences caused by recalculations for those affected U.S. companies that are publicly listed. Additionally, the bill would disallow businesses from deducting certain fines, penalties, and other amounts as ordinary expenses. Under current law, a business cannot deduct from income "any fine or similar penalty paid to a government for the violation of any law." S. 2242 significantly extends this provision to the non-penalty portion of settlement payments, eliminating deductions for otherwise allowable ordinary and necessary business expenses. This would deny deductions for the routine efforts of many businesses to comply with laws applicable to their industries, regardless of whether there was a violation of law resulting in an admission of guilt or liability.

The Casey amendment was defeated in the Committee on Agriculture, Nutrition, and Forestry because adoption of the amendment would make it difficult, if not impossible, to move renewable power from the farm to market. At a time when the United States should be maximizing all of its available energy resources, such an amendment is simply counterproductive: it recklessly favors state and local NIMBY (Not In My Back Yard) concerns over much-needed transmission facilities at a time when the United States needs to maximize all of its available energy resources in order to meet growing demand. An amendment to roll back provisions of the 2005 Energy Policy Act and remove the government's eminent domain
authority to site projects in federal transmission corridors would put at risk major interstate transmission projects urgently needed to maintain electric reliability, support competitive wholesale electricity markets, and access renewable, nuclear and clean coal energy resources.

As an alternative to the Farm Bill, the Chamber strongly supports the farm program reforms advocated by Sens. Lugar and Lautenberg in S. 2228, the "Farm, Ranch, Equity, Stewardship, and Health Act of 2007 (FRESH Act)," which would end depression-era farm crop subsidies, create voluntary Risk Management Accounts, increase farm exports, and expand crop insurance while reducing administrative reimbursements. Moreover, the expanded crop insurance reforms would eliminate the need for loan deficiency and marketing loan programs and the current price-based counter-cyclical program. The reforms included in the FRESH Act are a good first step in transforming the nation's antiquated approach to agriculture into a sensible national policy.

With farmers enjoying record crop prices, this year's Farm Bill was an opportunity to modernize the U.S. farm policies, wean farmers from market-distorting subsides, and immunize the United States from potential World Trade Organizations challenges. Unfortunately, this bill does none of those things; therefore, the Chamber urges you to oppose passage of the Farm Bill.

Sincerely,
R. Bruce Josten