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A Word From the Speaker

Author: Sebastian Mallaby, Paul A. Volcker Senior Fellow for International Economics
July 9, 2007
Washington Post

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In leading the House Democrats to victory last year, Rep. Nancy Pelosi demonstrated political effectiveness. She perfected the art of saying nyet, stomping on President Bush’s attempt to reform entitlements. The question she left open was whether she could be a constructive speaker of the House. That will involve saying nyet to two Democratic committee chairs who discredit their own party.

This month’s energy debate provides the first test for Pelosi. The speaker says she supports bold measures against carbon emissions, and she has done much to raise expectations. But the House has produced an energy bill that not only omits the policies that could have a real impact — a cap-and-trade policy or a carbon tax — but also lacks the toughened fuel-economy standards included in the Senate version. Those standards ought to be a no-brainer. The automakers’ stiff-neck resistance to change is driving them straight into bankruptcy.

The speaker faces an obstacle in the form of Rep. John Dingell, the chairman of the energy committee who misguidedly believes he knows how to defend his carmaker constituents. Dingell initially supported a measure that was even worse, and Pelosi forced him to improve it. But the resulting “compromise” is still a disgrace, and Pelosi needs to fix it. If she can stand up to George W. Bush, she ought to be able to stand up to an old bull from Detroit whose environmental views are out of step with the party and the country.

The next challenge is farm policy. Again, Pelosi faces an entrenched committee chair, this time Rep. Collin Peterson of Minnesota. A decade ago, Peterson came to prominence by co-founding the "Blue Dog" Democrats to support budget discipline. Now he wants to spray taxpayers' money at farmers, even though farm country is already high on ethanol.

The ethanol effect is staggering. Congress passed an ethanol mandate in 2005, and this central-plan edict has encouraged distilleries to sprout all over the Midwest: a Moscow on the Mississippi. Helped along by high gas prices, corn prices have roughly doubled in two years, boosting producers' incomes and land values. Fields that once grew other crops such as soybeans or wheat have been switched over to corn, adding an area twice the size of Maryland to the ethanol-industrial complex. The result is that soybeans and wheat are relatively scarce, driving up their value and generating a further windfall for farmers.

The Agriculture Department just released numbers for farm income in 2004. These show that, even before the ethanol boom, the average income for a farm household stood at $82,000 and the average net worth was $740,000. In other words, these people are no more deserving of federal aid than are lawyers. But Peterson's committee is about to mark up a bill that would preserve the existing system of subsidies. Half of these subsidies go to around 20 congressional districts -- including, you'll be surprised to hear, Peterson's.

The form of these payments is straightforwardly outrageous. In 2004, "very large" family farms, with an average income of $273,000, received one-third of the booty, according to the Agriculture Department. The marvelous database created by the Environmental Working Groupshows that the beneficiaries in the top 1 percent each pocket $125,000 in subsidies per year. Wait: 125,000 smackers from Uncle Sam per year. The average gross income in the Zip codes of those same top recipients was $45,853.

Moreover, a large chunk of this largess takes the form of "transition" payments. Transition from what? Well, in 1996 Congress abolished production-linked subsidies on the grounds that they encourage excess planting. As a temporary measure, Congress provided farmers with transitional "direct payments" -- money they would get without having to produce anything. Then, in a stroke of genius, Congress resurrected the production-linked payments while not killing the direct ones. Now Peterson wants to stretch the definition of transition by a further five years, even though the ethanol boom has made subsidies to farm fat cats more obscene than ever.

There are plenty of better things to spend tax money on, and most House Democrats know this. In the last farm debate, five years ago, a reformist amendment written by Rep. Ron Kind attracted 200 votes, including Pelosi's. But the question is whether Pelosi will give Peterson the Sister Souljah treatment he deserves or will bury Kind's latest reform proposal to please the porkers on the ag committee.

The job of House speaker is admittedly not an enviable one. The absurdly short two-year election cycle encourages the Beltway disease of putting special interests ahead of the national interest. But climate and agriculture are two issues on which Democrats want to move in the right direction. The question is whether Pelosi will lead them there.

This article appears in full on CFR.org by permission of its original publisher. It was originally available here.

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