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USDA Secretary Tom Vilsack Discusses FY11 and FY12 Budgets

posted on April 21, 2011

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Food, fiber and fuel. Iowa's Tom Vilsack now administrating United States policies enabling feeding, clothing and augmenting energy demands for this nation and the world. A conversation with former Iowa governor, now U.S. Secretary of Agriculture Tom Vilsack on this edition of Iowa Press.

Borg: Change is in the air and it's more than Iowa moving from winter to early spring. Unprecedented changes, food and fuel demands straining America's production capacity, especially for corn this year. Prices are spiking. Corn and cotton costs, for example, generating consumer concern. But Tom Vilsack's Secretary of Agriculture responsibilities go well beyond corn and cotton. He is administering such things as food assistance programs and the National Forest Service. But there's a common denominator and that's politics. He is serving in the Obama administration where the President is now actively campaigning for re-election. And he is working with a deficit conscious, cost-cutting Congress. And more politics within the Vilsack family just this week, Secretary Vilsack and his wife Christie confirming that they are moving their Iowa residence to Ames with Christie exploring a run for Congress in the new fourth district. Secretary Vilsack, nice to have you back on Iowa Press.

Vilsack: Dean, it's nice to be back.

Borg: And a lot to talk about.

Vilsack: Absolutely.

Borg: Across the Iowa Press table, Associated Press Senior Political Writer Mike Glover and Radio Iowa News Director Kay Henderson.

Glover: Mr. Secretary, we have a lot of farm policy questions we'd like to talk to you about. But first we'd like to talk about some family issues you've got going on. Your wife announced plans to move to Ames, as Dean mentioned, to consider a run for Congress in the fourth district. What went into the making of that decision?

Vilsack: Mike, I'm here as the Secretary of Agriculture and as a result of that I have to draw a very bright line in terms of what I can talk about and what I can't talk about and I'm really not at liberty to talk about politics in terms of Christie's race. I'm happy to talk about general politics, happy to talk about the President's re-elect effort, things of that nature but I think I need to steer clear of that topic.

Glover: Let's talk about the President's re-election effort if we could. He is running for a second term. What are his prospects for a second term? And what role do you expect to play in that campaign?

Vilsack: Well, obviously the economy is improving. We've seen 13 consecutive months of private job growth which I think is important. We just recently in Iowa saw increased job growth. I think part of that has to do with what we're doing at USDA and what we're doing in the Obama administration. I saw statistics recently in terms of Iowa investments, USDA has put to work through grants and loan guarantees nearly a billion dollars in over a thousand business and industry efforts, 5,000 home loans, several hundred communities have benefited from investments that USDA is making in wastewater treatment facilities and things of that nature and we've made a very concerted effort in conservation. So, I think those resources are getting to work, putting people to work and that obviously is going to bear, I think, fruit for the President for when he goes back to the electorate in November of 2012.

Glover: What role would you expect to play in that re-election campaign beyond just being an administrator of the Department of Agriculture?

Vilsack: Well, right now that's the only role that I have and it is the only role that I've been told to do and I'm going to try to do the very best job I can as the Secretary of Agriculture.

Henderson: Last time you were on the program in December you talked briefly about the judicial retention election in Iowa and Iowa's process whereby judges go on the ballot for a retention vote. One of the judges, justices rather, that you appointed to the Iowa Supreme Court is on the ballot in 2012. Last week on this program Terry Branstad said David Wiggins, that is the name of the justice, would face a tough re-election battle, retention vote. What are your thoughts on that?

Vilsack: Well, I was actually surprised the Governor weighed in on that. I think it's very important that we keep separate the executive branch and the judicial branch. I know Justice Wiggins, he is a very, very sharp legal mind. I think what he did during the course of interviews was to probe, which I think you need to do. Certainly when I questioned potential candidates for office and for judgeships when I was governor we had probing questions that you needed to ask to get a sense of the candidates. And I think the reality is that Justice Wiggins isn't the only justice on the ballot and I'm not sure that folks are actually going to be able to distinguish between those that were appointed by the Vilsack or Culver administration or those that were appointed by the Branstad administration. And I think it's better for the state if we separate the two branches.

Henderson: For the benefit of viewers, the three justices who were just sworn in to serve who were appointed by Governor Branstad will be on the ballot in 2012.

Vilsack: That's correct and so it's conceivable that it's not just Justice Wiggins that faces an issue, it's all of those justices. And I think, again, I think we need to get back to a place where the judiciary and the executive branch are separate.

Glover: Let's talk about your role again. You played a role in the last retention election. Do you plan to play a role in the next retention election?

Vilsack: I'm not going to respond to that, Mike, because I don't know what's going to take place. I don't know what my situation will be back in November of 2012. I'm just going to focus on my job and maybe we should talk about my job here today.

Borg: We will get to that in just a second but I want, before we leave politics, Secretary Vilsack you are a student of long experience in Iowa politics serving the Iowa legislature, two terms as governor. How has the Iowa political climate changed to where it is right now over the time that you were spending as an Iowa office holder?

Vilsack: Well, I think the views are sharper and expressed more sharply. It's still, I think, a very robust political climate. Iowans are very politically sophisticated because of the caucus process, they are very engaged which is a good thing and I just hope that we continue to focus on the future of Iowa. We lost a member of Congress in part because our growth wasn't what it needed to be and that takes me back to the need for us to focus on economic development and my particular area is in rural development. I think there are tremendous opportunities in rural America and rural Iowa. I think the refinery opportunities, the renewable fuel industry is a tremendous opportunity, I think expansion of broadband, I think conservation can play a big role in improving the economy and so I think we really ought to be focusing on that instead of the philosophical differences that folks seem to want to focus on.

Borg: Let me take you into agriculture then. Just within the past few days, Iowa State University released a research report that soil conservation is worse than, not as successful as we hoped and we're losing a lot more soil to erosion than had been previously thought. Is it time, you're grimacing that that.

Vilsack: Well, only because we also have done an assessment at USDA in terms of soil erosion. We are investing a substantial amount of money in the Upper Mississippi River Basin. We have a special project over four years, we're going to invest $320 million in conservation. What we have found is that in 32% of the land it is actually making a difference in terms of preventing or eliminating or reducing soil erosion and reducing the amount of nutrients and pesticides that are getting into the water. There's still work to be done and that's why we're going to continue an aggressive effort notwithstanding budget constraints.

Henderson: Dean, at the beginning of the program, mentioned corn in particular and corn stocks aren't that flush and the growing season sort of has to be perfect for farmers to raise enough corn to meet demand. What role might the USDA play in that issue? And will it further complicate soil conservation efforts because farmers will be inclined to maybe plow up a stretch of grass and plant valuable corn on that acreage?

Vilsack: Not necessarily. Corn acreage is up across the country, we'll see roughly 92 million acres planted but that is in part because other crop acreage is down a bit. We've actually seen continued interest in our CRP program in Iowa and across the Midwest. I'm confident in American agriculture, I'm confident in American farmers to be able to produce enough corn to meet all of the needs. With increased acres, increased seeds per acre being planted by many farmers with any kind of decent weather we'll see yields greater than we saw last year. It was a very tough year last year.

Borg: I want to go back to water quality. You wanted to talk about that. There is a report also on impaired waterways and you said we're making headway in cleaning up the waterways?

Vilsack: We are based on our assessment. There's modeling done at USDA suggested that phosphorous going into the rivers is being reduced as a result of our efforts, nitrogen is still an issue. We still have work to do. I don't want to leave the impression that we've got this thing solved but I do think we're making headway in part because 92% of the acres in Iowa are already adopting conservation practices. But what we need, Dean, are focused and comprehensive. It's not just one particular aspect of conservation, it's got to be nutrient management programs, it's got to be conservation, it's got to be decisions made by farmers in concert in order to get this job done the way it needs to be done.

Glover: A lot of these programs are what I would call incentive-based programs, give farmers incentives to act in the way that you want them to act. There are some indications that's not working in all cases, the impaired waterways are up, there is soil runoff, you say it may be improving. At what point does the government's efforts have to become more of a mandate or stepping in and saying you need to do this?

Vilsack: Mike, again, I think we are seeing great acceptance by the farmers of these stewardship responsibilities and it's not just agricultural land that has to be engaged in this conversation, a lot of what we do in urban and suburban areas impacts waterways. Having said that, we had a very interesting conversation in Iowa this week with the EPA administrator Lisa Jackson. I think there is a great possibility for us to do two things with conservation. One is to engage the private sector more in investment. If we can establish, as we are trying to do at USDA, measurable results that are verifiable we can actually create private markets that will invest in conservation. If we do that we also can work with the EPA to provide what we refer to as regulatory certainty. If a farmer does certain practices then they will receive assurances from the EPA that their operation will not be interfered with. Those two additional incentives could go a long way to getting even greater acceptance of conservation. It's something that we're very, very focused on. Water quality is something that this administration has put a lot of time and effort into.

Glover: So your answer is these incentive programs are working?

Vilsack: I believe they are based on our assessment. We actually did an assessment here in the Upper Mississippi River Basin, we also did one in the Chesapeake Bay area and clearly farmers are adopting these practices. The challenge would be for us to be comprehensive, to apply conservation practices with nutrient management plan, the combination of those two things will, I think, impact and affect things in a positive way.

Borg: And do we have the money to pay them to do this?

Vilsack: Well, that's why it is important to try to create verifiable and measurable results that we can engage the private sector. If government doesn't have as much as it used to have to be able to invest in this then we've got to figure out a way -- conservation needs aren't going to go away so we've got to figure out a way to encourage private investment and we're seeing examples of this across the country. In Ohio instead of building a wastewater treatment facility, municipalities are paying farmers to take certain conservation practices and avoid the necessity of having that wastewater treatment facility being purchased. In Oregon we're seeing power companies basically providing shade credits. This is an exciting new opportunity for rural America and I think will lead to a significant investment, more investment in conservation and therefore more jobs and opportunities for farmers.

Henderson: You characterized the visit of yourself and EPA Administrator Lisa Jackson as sort of a myth busting tour. What are the myths? And what are farmers most concerned about?

Vilsack: Well, the first myth was the cow tax, that somehow EPA was going to administer some kind of tax on emissions from cows. Not true. Another myth was the spilled milk rule that somehow because of rules that they were dealing with, with oil that spilled milk would result in the EPA coming out to a farm and a dairy operation and basically regulating it. Not true. There is the issue with dust. The EPA is not interested in regulating dust, if you will, on a farm. They realize that is part of farming. What they are concerned about is soot because soot can create health hazards and can result in premature death. That is something we all should be concerned about. So, there are a series of issues that sometimes circulate in a countryside and what Lisa Jackson is attempting to do by her visits to the countryside, by visiting the farmers is to break down those myths, develop a better line of communication. We facilitated that at USDA by encouraging her to meet with commodity groups, livestock groups so that there can be a better line of communication.

Glover: And to what extent do you face what I would call a public relations challenge. It seems to be an anti-government fervor at least in some portions of the electorate, perhaps those represented by the Tea Party. The government is just being seen by many people as bad, the enemy. How do you deal with that?

Vilsack: Well, we continue ...

Glover: Because you're a regulatory type of an agency.

Vilsack: We continue to do the work that we're doing at USDA to the extent that we make credit available to farmers. When commercial banks basically began to squeeze credit, USDA stepped up and provided farm loans to a substantially greater number of farmers than we ever have before. When folks needed a home ownership opportunity in rural America and their commercial bank was not willing to lend then we came in with loan guarantees. That's why 5,000 Iowans are living in homes today that they wouldn't have been living in those homes were it not for USDA involvement. It's the reason why we work with communities to clean up the water and why we work with smaller communities to create economic opportunity. There are indeed over 1,000 investments that we have made just in the state of Iowa from the USDA. So, we obviously have to do a better job, Mike, of communicating to folks what we're doing and the impact that that is having, the positive impact that that has on people's lives.

Henderson: Speaking of a communications challenge, there are many Americans who don't understand and are opposed to the concept of farm subsidies. Will farm subsidies be on the table in this whole budget cutting deal that is going to happen in Washington, D.C.? And what should Iowa farmers expect in terms of their crop support?

Vilsack: Well, first of all it's important to define what we mean by ag subsidies. Everyone has a different definition. I think what most people are referring to in the use of the word ag subsidies are the direct payments made to commodity producers. I think there's no question that that is going to be looked at and we have proposed and suggested that 30,000 farmers who are currently receiving payments ought not to receive payments given the fact that they may be making as much as $750,000 of adjusted gross income from their farming income and a half a million dollars from non-farm income and they're still getting a check from the government. In tight budget times a lot of folks don't understand that. So, I think there's going to be an adjustment. Having said that, it's important to point out that there is a need for a safety net. There are about 900,000 folks who produce most of our food, six hundred of those 900,000 even in the second best year we've had in 30 years in agriculture will barely make enough to break even in their farming operation. So, the safety net is important for keeping folks on the farm.

Glover: Talk to Iowa farmers. How will they feel these cuts if there are cuts in subsidies? Will it just be a reduced check they'll get in the mail? Will farm service operations be closed? How will they feel it?

Vilsack: We don't anticipate closing any farm service operations. It may very well be that the amount of support that they receive in terms of direct payments may be impacted but on the other hand there may be greater opportunities in terms of crop insurance or other risk management tools that we can make available. The key question was put very well at the Farm Bureau convention in Atlanta several months ago, Bob Stallman, when he said, do we want a system, a safety net system that provides farmers a payment every year regardless of how great the year is or how bad the year is or do we want a system that provides a lot of help when you absolutely need it? I think that is the fundamental question and as we enter the 2012 farm bill discussion that is the question. I don't think there's any question that there are people both conservative and progressives who want to take a look at the direct payment issue and I think it will be looked at. The President has made his position on the matter very clearly.

Borg: Where will you draw a line -- you said it needs to be looked at, that's a term you've used and indicated that probably those subsidies to a certain extent are going to be changed and in jeopardy. But where will you draw the line?

Vilsack: Dean, part of the challenge with the farm bill is defining precisely how much you have to play with, if you will, in the farm bill, what is referred to as the baseline. Part of the problem there is that the energy title in the farm bill which I think is a fairly significant investment in rural America and in farming was not fully funded in the 2008 farm bill therefore it's not in the baseline. So, as we begin discussions of the 2012 farm bill the first thing we have to decide is what is the baseline and what items that were outside the baseline need to be included in that baseline. So, until we know what those answers are it's difficult to say where you draw the line or how you draw the line. I do think what's going to happen is that we're going to be focusing more on risk management tools which, when I talk to farmers they recognize that they have got to be part of a shared sacrifice, shared opportunity environment and that's what we're living in. Everyone has got to give a little bit and we also have to do it in a way that doesn't harm our capacity not just to cut our way out of a deficit but to grow our way out of a deficit as well.

Henderson: You mentioned public mindset about farm subsidies and a broad definition of that. One of the farm subsidies people are upset about is the ethanol subsidy for ethanol producers as well as those who make biodiesel which is a soybean based fuel. Will those go away?

Vilsack: I think over time they may and frankly I think they probably should, but over time. I think the critical debate here is whether we create a cliff for these incentives or whether we provide a glide path. A cliff basically will result in production capacity being reduced and jobs being lost at a time when we're trying to encourage people to get back to work. How do I know that? Well, when we didn't allow the biodiesel tax credit to continue we lost 50% of our production capacity and 12,000 jobs. We have over 400,000 people whose lives are impacted and affected by ethanol production, $13 billion annually added to the farmer's bottom line and it allows us to continue to reduce our reliance on foreign oil. When the President came into office we were importing 60% of our oil, today it's 52%. One of the reasons, not the only reason, but one of other reasons is that we've seen an increase in biofuel production.

Glover: In the previous question you said that in terms of producers that everybody is going to have to share a little bit of the pain as you go through these tough budget times. Does that include consumers? Are consumers going to have to share a little bit of this pain by paying a little bit more for their foodstuffs?

Vilsack: Well, we're projecting that there's going to be food inflation this year, somewhere between four and a half to five percent. But the reason why there's food inflation I think may not be fully understood by folks. I think they are suggesting that biofuels in some way is driving up food costs. Really, first of all, you have to realize that farmers only get 16 cents of every food dollar. Somebody else gets the other 84 cents. Now, who are those folks? Well, they're people who shelve it, refrigerate it, truck it, process it, package it. A lot of that has, is driven by energy costs. So, as oil goes up, food costs are going to go up. We did a study in 2008 when ethanol and food costs were an issue and what we found is that one-tenth of the food price increase was directly related to ethanol production, the other nine-tenths was related to energy costs.

Henderson: The Obama administration earlier this spring or maybe it was late winter announced that they want to invest in new biorefineries and make ethanol out of cellulosic rather than corn. Is that where the industry is headed? Is Iowa in the wrong position here because the ethanol that is being produced here is made from the commodity of corn rather than the whole stalk?

Vilsack: No, not at all. We have a challenge as a country to get to 36 billion gallons of biofuel. Currently we are producing 13 billion most of which is coming from corn. It is capped in this renewable fuels standard at 15 billion gallons. So, Iowa can continue to do what it does but the other 21 billion has to be produced from other, some other source and what we really want to see is this industry not necessarily located or regionalized in the Midwest, we want to see it in all parts of the country so woody biomass, algae, opportunities to use landfill waste, perennial grasses, all of those things are currently being looked at in a pilot stage. What we are now going to do is to take some of those pilots and make them into commercial sized operations. Again, the key here is rural development. $100 billion of capital investment when we get to 36 billion gallons, a million new jobs in rural America and a substantial reduction in our reliance on foreign oil.

Glover: At one point America was viewed as the country that fed the world. We grew all the food that was produced or the bulk of it around the world. How are we doing in the increasingly competitive international marketplace? We can see a lot of places like Brazil, we're seeing some serious competition.

Vilsack: Our exports this year will be the highest they have ever been. We will sell $135 billion worth of agricultural products and commodities, $20 billion more than last year and last year was a record year, this is going to put people to work and it's obviously going to improve bottom lines for farmers and when we improve the free trade agreements in Korea, Columbia and Panama that recently have been negotiated by the administration we're going to see an ever increasing commitment to exports, strong export opportunities and that's really important for large scale agriculture that we continue exports.

Glover: Is there anything you can do other than those trading limits to increase exports?

Vilsack: Well, there are a number of things that we are currently doing. We have a foreign ag service as part of USDA, we are in 90 offices around the world. We are engaged in trade shows, we are involved in taking people to foreign countries, I travel from time to time to foreign countries as part of trade missions. There is a wide variety of ways in which we are selling the American brand of agricultural products and we're also reducing barriers that exist in many countries to our products. We're negotiating right now with China and with Japan and Mexico to reopen beef markets that have been closed for some time. So, there's a great deal of work that we do in that export area and one of the reasons we've seen an increase in exports is because our work is being successful. Having said that, we also have a humanitarian responsibility and our responsibility is a partnership that we have with the state department and U.S. AID and what we call a Feed the Future initiative and that is designed to move away from just simply providing part of our surplus to the rest of the world and encouraging the rest of the world to embrace agricultural production techniques and technologies that will allow them to be more productive as well.

Borg: We're told that corn stalk reserves right now are really tight and that we need almost perfect weather, growing season in order to meet the corn demands for food, cornflakes, fuel, ethanol and exports and for livestock feed. Is there anything like a strategic oil reserve that we have, petroleum reserve, is there anything where USDA would step in in the case that we do have a drought this summer and we don't produce the corn that is necessary, where USDA steps in and triages where that corn supply is going to be used?

Vilsack: Dean, I've got to be very careful how I answer that question because markets are pretty sensitive. But let me first of all, let me say number one we're going to see a record number of acres planted. Number two, early indications in terms of weather, there was concern about the Dakotas and whether or not there would be flooding and that might impact and affect their yields, we're not seeing the flooding that we thought we would see earlier which is good. We know that there are going to be more seeds per acre planted and so our expectation is the yields are going to be better. They were not very good last year in part because of weather. What we can say is that I'm confident that we're able to meet these needs. Why am I confident? Because when you produce ethanol you don't just produce ethanol, a third of that crop actually results in livestock feed supplements that make livestock more efficient in terms of production. We're going to be able to meet this need. I am not one of these individuals that is trying to put limits on American agriculture. It's very surprising to me that there's so many people in the market today that somehow think American producers are not up to the challenge. They have always been up to the challenge. We're continuing to see them embracing new technologies. We have not yet reached the top in terms of corn yields. Just to give you a sense in my lifetime, since it's around your birthday we'll talk about lifetimes here, in my lifetime corn product in is up 334%, bean production up 200%, wheat production 200%, it is a remarkable story that often times doesn’t' get fully appreciated by the consumer. To Mike's point, consumers are currently only spending about 7% of their paycheck for food in this country and I'll tell you, that is a luxury that no other group of people on the Earth enjoys.

Glover: Just a few seconds left, if there is an Obama second term will Tom Vilsack be Agriculture Secretary in that term?

Vilsack: I have a very large certificate that President Obama and Secretary Clinton signed that said I serve at the pleasure of the President. I think that's his call not mine.

Borg: Thank you, Secretary Vilsack, for coming back to Iowa and spending time with us.

Vilsack: You bet.

Borg: We'll be back next weekend at the usual Iowa Press times, 7:30 Friday night, as you know, and 11:30 Sunday morning. For today I'm Dean Borg. Thanks for joining us today.

Tags: agriculture budgets Environmental Protection Agency government Iowa politics Tom Vilsack U.S. Secretary of Agriculture USDA