[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
RISING FOOD PRICES: BUDGET CHALLENGES
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
HEARING HELD IN WASHINGTON, DC, JULY 30, 2008
__________
Serial No. 110-38
__________
Printed for the use of the Committee on the Budget
Available on the Internet:
http://www.gpoaccess.gov/congress/house/budget/index.html
U.S. GOVERNMENT PRINTING OFFICE
44-038 PDF WASHINGTON DC: 2009
---------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001
COMMITTEE ON THE BUDGET
JOHN M. SPRATT, Jr., South Carolina, Chairman
ROSA L. DeLAURO, Connecticut, PAUL RYAN, Wisconsin,
CHET EDWARDS, Texas Ranking Minority Member
JIM COOPER, Tennessee J. GRESHAM BARRETT, South Carolina
THOMAS H. ALLEN, Maine JO BONNER, Alabama
ALLYSON Y. SCHWARTZ, Pennsylvania SCOTT GARRETT, New Jersey
MARCY KAPTUR, Ohio MARIO DIAZ-BALART, Florida
XAVIER BECERRA, California JEB HENSARLING, Texas
LLOYD DOGGETT, Texas DANIEL E. LUNGREN, California
EARL BLUMENAUER, Oregon MICHAEL K. SIMPSON, Idaho
MARION BERRY, Arkansas PATRICK T. McHENRY, North Carolina
ALLEN BOYD, Florida CONNIE MACK, Florida
JAMES P. McGOVERN, Massachusetts K. MICHAEL CONAWAY, Texas
NIKI TSONGAS, Massachusetts JOHN CAMPBELL, California
ROBERT E. ANDREWS, New Jersey PATRICK J. TIBERI, Ohio
ROBERT C. ``BOBBY'' SCOTT, Virginia JON C. PORTER, Nevada
BOB ETHERIDGE, North Carolina RODNEY ALEXANDER, Louisiana
DARLENE HOOLEY, Oregon ADRIAN SMITH, Nebraska
BRIAN BAIRD, Washington JIM JORDAN, Ohio
DENNIS MOORE, Kansas
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
Professional Staff
Thomas S. Kahn, Staff Director and Chief Counsel
Austin Smythe, Minority Staff Director
C O N T E N T S
Page
Hearing held in Washington, DC, July 30, 2008.................... 1
Statement of:
Hon. John M. Spratt, Jr., Chairman, House Committee on the
Budget..................................................... 1
Prepared statement of.................................... 2
Hon. Paul Ryan, ranking minority member, House Committee on
the Budget................................................. 3
Hon. Adrian Smith, a Representative in Congress from the
State of Nebraska, prepared statement of................... 14
Jared Bernstein, senior economist, Economic Policy Institute. 15
Prepared statement of.................................... 19
Josette Sheeran, executive director, United Nations World
Food Programme............................................. 22
Prepared statement of.................................... 26
Susan Berkowitz, director, South Carolina Appleseed Legal
Justice Center............................................. 30
Prepared statement of.................................... 32
Steve H. Hanke, professor, Johns Hopkins University; senior
fellow, Cato Institute..................................... 39
Prepared statement of.................................... 43
Hon. James P. McGovern, a Representative in Congress from the
State of Massachusetts, submissions for the record:
Statement of Vicki Escarra, president and CEO, America's
Second Harvest......................................... 4
Statement of the International Dairy Foods Association... 7
Article: ``Pricey Meat to Boost Food Prices 4-5 Percent
in '09,'' dated July 23, 2008.......................... 75
Article: ``Schools Feel Crunch on Lunch Programs--Food
Costs Hit Budgets Hard,'' dated July 16, 2008.......... 75
Hon. Rosa L. DeLauro, a Representative in Congress from the
State of Connecticut, questions submitted for the record:
Ms. Berkowitz............................................ 76
Mr. Bernstein............................................ 77
Ms. Sheeran.............................................. 77
Responses to questions received.......................... 77
RISING FOOD PRICES: BUDGET CHALLENGES
----------
WEDNESDAY, JULY 30, 2008
House of Representatives,
Committee on the Budget,
Washington, DC.
The Committee met, pursuant to call, at 2:00 p.m., in room
210, Cannon House Office Building, Hon. John M. Spratt
presiding.
Present: Representatives Spratt, Doggett, Berry, McGovern,
Etheridge, Moore of Wisconsin, Ryan, Garrett, Porter, Smith,
and Jordan.
Chairman Spratt. Well, good afternoon and welcome to our
hearing on rising food prices and their impact on family
budgets and the federal budget as well. I want to thank our
colleague, Congressman Jim McGovern, for proposing this hearing
and for all his efforts to make sure that this Committee, and
for that matter this Congress, are aware of the challenge of
hunger in a land of plenty.
The United States and other countries around the world are
witnessing the biggest spike in food prices in eighteen years.
In two years, world food prices of major commodities have risen
more than 60 percent. The increases are due to a combination of
factors: elevated demand for food that comes with rising
incomes in the developing world, adverse weather, and diversion
of grain to products like biofuel.
In the United States a combination of stagnant wages and
rising fuel and food costs is squeezing families and driving
some who have never sought assistance before to seek
assistance. The government will have to deal with the budgetary
consequences of higher food costs. Some program adjust
automatically but others will require additional funding simply
to maintain current caseloads.
The challenge will be even greater because many of the
programs that assist low and middle income families were
already stressed by years of underfunding. Deteriorating
economic conditions may also require Congress to consider a
second economic stimulus. And there are economists who are
suggesting that increasing food aid would be an effective way
to stimulate the economy as well as help people who desperately
need it.
Internationally rising food costs are having even worse
impacts than here at home. According to the World Bank and to
the United Nations, more than 100 million people are now being
pushed into poverty for this reason alone. Many experts say
that meeting these needs will require emergency funding in the
short term and long term agricultural development.
[The statement of John Spratt follows:]
Prepared Statement of Hon. John M. Spratt, Jr., Chairman, House
Committee on the Budget
Good afternoon and welcome to this Budget Committee hearing on
rising food prices and the impact they have on family budgets and our
federal budget. I want to thank Congressman Jim McGovern for suggesting
this important hearing topic and for his tireless efforts to make sure
our Committee and this Congress are confronting the challenge of
hunger.
The United States and other countries around the world are
experiencing the biggest spike in food prices in 18 years. In just the
last two years, world market prices for major food commodities such as
grains and vegetable oils have risen more than 60 percent. The
increases are due to a combination of factors, including the elevated
food demand that accompanies rising incomes in the developing world,
adverse climatic events like droughts, and the diversion of grains like
corn to biofuel production.
In the United States, a combination of stagnant wages and very high
costs for food and other necessities is squeezing our working families.
This is driving some families that have never before sought government
assistance to ask for help. Just like families around the country, the
federal government will need to make difficult tradeoffs and adjust its
budget because of the much higher cost of food. Some programs adjust
automatically but others will have to be adjusted by Congress just to
maintain their current caseloads. This is a challenge that our
colleagues at the authorizing committees and the Appropriations
Committee are already grappling with.
Our challenge will be even greater because many of the programs
that assist low- and middle-income families were already stressed by
seven years of budget cuts. Deteriorating economic conditions may also
require Congress to consider a second economic stimulus package. Many
economists have suggested that increasing domestic food aid programs
would be among the most effective ways to stimulate the economy because
recipients tend to need to spend these dollars as soon as they are
received.
Internationally, rising food prices are having even worse impacts--
including civil unrest--in more than 33 developing countries. Most of
these countries are in Sub-Saharan Africa. According to World Bank and
United Nations estimates, more than 100 million people have been pushed
into poverty. Experts suggest that meeting these needs will require
emergency funding in the short term and progress on trade policy and
agricultural development in the long term. This Congress has already
provided emergency funding to address this crisis.
We have a distinguished panel of witnesses, and because the budget
implications of rising food costs are so broad, we've asked them to
cover a lot of territory. I would like to welcome them.
Josette Sheeran is the Director of the United Nations World Food
Programme, the world's largest humanitarian agency, which will provide
food and other assistance to 90 million people this year.
Dr. Jared Bernstein is the Director of the Living Standards Program
at the Economic Policy Institute and the author of Crunch: Why Do I
Feel So Squeezed (And Other Unanswered Economic Questions)?''
Dr. Steve Hanke is Co-Director of the Institute for Applied
Economics and the Study of Business Enterprise at The Johns Hopkins
University in Baltimore and a Senior Fellow at the Cato Institute.
And finally, I'd like to extend a special welcome to Susan
Berkowitz, who is the Executive Director of South Carolina Appleseed
Legal Justice Center, which serves a wide range of needs for low-income
families in my home state of South Carolina and has played a critical
role in improving the quality of life for families in need.
Chairman Spratt. We have a distinguished panel of witnesses
today and I would like to welcome each one of them. First of
all, Josette Sheeran is stuck in traffic. She was to be our
first witness but she is on the way and she has telephoned
ahead. So we will start without her. Dr. Jared Bernstein is the
Director of the Living Standards Program at the Economic Policy
Institute, and author of ``Crunch: Why Do I Feel So Squeezed?
(And Other Unanswered Economic Questions).'' Sounds a little
bit like therapy. Dr. Steve Hanke is Co-Director of the
Institute for Applied Economics and Study of Business
Enterprise at Johns Hopkins University, and Senior Fellow at
the Cato Institute. And we are glad to have you today. Finally,
I would like to send an especially warm welcome to Susan
Berkowitz who is the Executive Director of the South Carolina
Appleseed Legal Justice Center. They do work, good work, for
people who really need it just across the board, but
particularly in the case of feeding the hungry. And we are glad
to have you here again. Thank you for coming.
And there is one special person who is coming to be in the
audience today who has a major interest in this, a professional
interest in it. Her name is Dr. Susana Sanchez from The World
Bank. She happens to be the wife of our Staff Director, Tom
Kahn. And by far his better half. She too is stuck in traffic--
--
Mr. Ryan. She just arrived.
Chairman Spratt. Oh, she just arrived? Where is Susie?
Mr. Ryan. And let me echo that sentiment as well, the far
better half.
Chairman Spratt. Come on up here and have a seat. For
goodness' sake, we are not going to make you stand up. Can you
not get your wife a seat, Tom?
Mr. Ryan. She is really embarrassed.
Chairman Spratt. Susie, we are glad to have you. Thank you
for coming. Now I want to recognize the Ranking Member Mr. Ryan
for any statement that he may wish to make.
Mr. Ryan. Thank you, Chairman. Thank you for organizing
this hearing and Congressman McGovern, thank you as well for
your idea to put this important hearing together. I think all
of us are concerned about the problem of rising food prices.
The sharp increases in basic staples like wheat, corn, and rice
are causing significant pain both here and abroad, and
especially in third world nations. But unfortunately, large
price increases are not limited to agricultural commodities and
food. Over the past year we have also seen oil prices double
and gasoline prices surge well past $4 a gallon. The problem
also extends beyond fuels to other basic inputs like metals and
chemicals. In fact, when we look around we see that rising food
prices are simply just one manifestation of a broader, more
serious inflation problem in our economy. So therefore, I think
it is important that we take a step back from any one issue,
like food or energy, and look at the root causes of the general
inflation problem. And clearly, one key factor behind rising
prices has been the recent actions of the Federal Reserve.
Now, I will be the first to admit that the Fed is in a real
bind. The economy has just faced serious challenges stemming
largely from the housing downturn and the associated turmoil in
the financial and credit markets. And the Fed has slashed
interest rates in order to soften the blow. But at the same
time, these aggressive actions by our Federal Reserve have
stoked fraud based inflationary pressures. The warning bells
are starting to become much, much louder. The Consumer Price
Index just hit a seventeen year high of 5.0 percent. Sharply
lower interest rates have undermined the value of the dollar,
sending the price of key dollar denominated commodities like
oil much higher. Ominously, I have been hearing more stories
about businesses passing along their higher input costs to
consumers in the form of much higher retail prices.
Consumers are certainly bracing for more pain. Surveys show
that their near term inflation expectations are at their
highest level in over twenty-five years. My fear is once this
inflationary cycle is allowed to settle into our economy it is
going to be extremely difficult to wring this out and it will
damage our future growth prospects. And since the Fed controls
monetary policy it is the only institution that can guarantee
long run price stability and prevent his vicious cycle from
occurring.
These are certainly challenging times for policy makers
whether they be monetary or fiscal policy makers. And we all
have a stake in good policy. And achieving good policy means we
look not only at the effects of the inflation problem, which is
what we are largely doing here today, but its root cause, and
then make the necessary changes to ensure price stability now
and in the future. Thank you, Chairman.
Chairman Spratt. Thank you, Mr. Ryan. Now Mr. McGovern,
would you like to make an opening statement?
Mr. McGovern. Thank you, Mr. Chairman. First of all, thank
you and the Ranking Member for agreeing to do this hearing. I
think this is an incredibly important issue. I would say that
it is not just a budgetary issue, it is a moral issue. And even
before the recent spike in food prices, we had a food
insecurity and hunger problem in the United States and around
the world. This is not a new problem. It has just been
exacerbated by the spike in food prices. And we need to
understand that there is a cost to inaction. There is a cost to
doing nothing. Hunger costs a lot of money. So part of what I
hope will happen is that there is a consensus in this Congress
that we need to do more domestically and around the world. And
we need to understand that there is a short term challenge that
we have. That people are facing difficult times right now. And
then there is the long term challenge, about how we deal with
global hunger issues and how we deal with the domestic issues
of food insecurity and hunger here in the United States.
So this is a timely hearing. It is an important hearing. I
believe that hunger is a political condition. I think that if
we have the political will this is something that we can
conquer and solve, and I hope that that is what happens. And
Mr. Chairman, I would like to ask unanimous consent that we
include in the record for this hearing written statements
submitted by America's Second Harvest and the International
Dairy Foods Association.
Chairman Spratt. Without objection.
[The statement of America's Second Harvest follows:]
Prepared Statement of Vicki Escarra, President and CEO, America's
Second Harvest--the Nation's Food Bank Network
Thank you Mr. Chairman and Members of the Committee for the
opportunity to submit testimony regarding the challenges faced by
millions of Americans who are struggling to feed themselves and their
families. I am Vicki Escarra, President and CEO of America's Second
Harvest--the Nation's Food Bank Network.
America's Second Harvest consists of 205 Food Banks serving all 50
States, Puerto Rico and the District of Columbia. Each year, our
network of food banks distributes more than 2 billion pounds of food
and grocery products to 63,000 charitable agencies, including soup
kitchens, food pantries, and emergency shelters. They in turn provide
food to more than 25 million low-income Americans annually.
INTRODUCTION
This hearing couldn't come at a more important time. While my
testimony is focused on the challenges at home, we are most sympathetic
and supportive of efforts to help hungry people throughout the world.
In the United States, rising food prices, coupled with massive
increases in fuel and utility costs, more unemployment, and the
subprime mortgage crisis have conspired to create a major increase in
the demand for emergency food assistance throughout our nation.
CURRENT STATE OF FOOD BANKS
In late April and May 2008, America's Second Harvest conducted a
survey of 180 member food banks.
99 percent of respondents reported an increase in the
number of people being served compared to one year ago.
The average increase in demand was between 15 and 20
percent.
More than 90 percent of the respondents cited increasing
food and fuel prices as primary factors driving the increases in need.
Other factors included inadequate food stamp benefits, unemployment,
underemployment, and rent or mortgage costs.
More than 80 percent of the food banks surveyed indicated
an inability to adequately meet the demands of hungry people without
having to reduce the amount of food or their operations.
Nearly 55 percent of food banks surveyed reported that
their agencies, including soup kitchens and food pantries, have reduced
or are considering reducing the amount of food offered to clients.
Approximately 50 percent of food banks have or are
considering reducing the variety of food made available to agencies due
to diminished supplies.
Nearly 44 percent of food banks reported that they have or
are considering cutting back the amount of food made available to their
agencies.
Because of high farm prices, the annual value of USDA surplus food
provided to food banks and other emergency food providers declined by
nearly $200 million in recent years. While additional funding made
available through the Farm Bill will help restock food bank
inventories, it is not nearly enough to meet the unprecedented levels
of demand our food banks are now facing.
More than 45 percent of food banks surveyed reported that
they have or are considering diverting funds from other areas to
purchase food in order to feed people in their community. This
diversion of funds means eating into budgets already struggling with
high transportation costs as well as spending more money for less food.
Attached to my statement is a one page summary of our survey
results.
SKYROCKETING COST OF FOOD TRANSPORTATION
The costs of transporting food have also increased dramatically. In
2002, America's Second Harvest was able to move approximately 100
pounds of food for each dollar spent on transportation. Our most recent
official data shows that last year we were able to move only 56 pounds
with that same dollar. Our most recent preliminary data shows that we
are now moving fewer than 50 pounds for each dollar spent on
transportation.
In the last year alone, the cost of diesel fuel rose by roughly
66%. We estimate that our Network will spend $10 to $13 million more
this year compared to last year ago on fuel for its collective fleet of
trucks. Further, this estimate only captures a part of the problem
since it does not include the fuel cost to thousands of charities that
pick up food from their local food bank and other sources.
FORECAST
The worsening economy affects everyone. However, it is the poor and
the near poor who are least able to cope with the multiple challenges
of unemployment or underemployment, massive increases in energy costs,
and food price inflation levels not seen in decades.
In a recent New York Times article titled, ``Uncomfortable Answers
to Questions on the Economy'' the author says ``Economic slowdowns
always mean job losses. Unemployment has already risen, and almost
certainly will increase more.'' In the same article, Goldman Sachs is
quoted predicting a rise in the unemployment rate from the current 5.5%
to 6.5% by the end of 2009.
As food, fuel, rent, utilities and other basic expenses continue to
escalate, at-risk families are not able to cut back other expenses to
purchase food. The average food stamp benefit per household is $215 per
month, or roughly $50 per week. Food stamp clients have seen a
significant decline in the purchasing power of food stamp benefits. The
cost of the foods used to establish food stamp benefits are now 7.5 %
higher than they were when the current benefit levels were set last
June. This rapid food price inflation has significantly reduced the
purchasing power of food stamp benefits, and will continue to force
many food stamp clients to seek emergency food assistance from food
pantries and soup kitchens or simply do without.
HOW CONGRESS CAN HELP
First and foremost, as the Congress works on new Economic Recovery
Legislation to help stimulate our weakening economy, the needs of
families and individuals struggling to put food on the table must be
addressed. For our food banks and the 63,000 agencies that they support
to remain viable and responsive, it is critically important that
several proposals are included in this legislation.
$45 million for TEFAP storage and distribution.
Skyrocketing transportation costs and tight state and local budgets
make this a critical necessity. Beginning in Fiscal Year 2008, the Farm
Bill raised the authorization for The Emergency Food Assistance Program
(TEFAP) storage and distributions costs to $100 million. Food banks are
desperately in need of this funding to offset costs of operations and
transporting food to people in need and to prepare for the continued
influx in the number of people requesting food assistance projected in
the coming months.
$15 million for transportation and infrastructure grants.
Recognizing the challenges food banks in rural areas are facing in
delivering food to hungry people in sparsely populated communities,
Congress authorized $15 million for transportation and infrastructure
grants in the Farm Bill. Although the Farm Bill authorization begins in
FY 2008, no funding has been provided for this critical initiative that
will be especially helpful to food banks delivering food to hungry
people in rural communities.
$100 million to USDA for the purchase of additional TEFAP
commodities . Additional federal commodity support is vital to food
banks if they are to keep up with major increases in demand in the
months ahead.
Additional Resources for other important Federal nutrition
programs. Congress must also include resources for other programs to
assist Americans in need of food. Improvements in food stamp benefits
and increased food stamp outreach to eligible people who are not
currently participating is critical. Other programs that are part of
the nutrition safety net, such as WIC, Child Nutrition and Commodity
based programs such as the Commodity Supplemental Food Program (CSFP)
must be sustained.
CONCLUSION
Mr. Chairman and distinguished Members of the Committee let me
conclude by again thanking you for holding this very important and
timely hearing and for including my statement. This is a critical time
for our country and our leaders to set the stage for a robust economic
recovery. Making sure that all Americans have enough to eat is a
critical foundation for future economic growth as well as a statement
of our compassion.
Attachment--Summary of Local Impact Survey
During April and May, 2008, America's Second Harvest surveyed 180
food banks nationwide to determine the impact of food and fuel prices
on their clients, agencies, and operations. Our food banks reported
that they are encountering a 15-20% increase on average in the number
of people turning to them for food assistance compared to one year ago.
Ninety-nine percent of food bank respondents stated that they have
experience an increase in the number of clients served within the past
year.
Among the various economic factors stated as contributing to this
increased need, two factors emerged as primary factors; the rising cost
of food and fuel.
The following are factors cited as contributing to the increased
need:
91.67% the rising cost of food
92.78% the rising cost of fuel
43.33% rising unemployment
42.22% rising underemployment
46.11% mortgage or rent issues
31.11% the inadequacy of food stamps
As a result of these factors, the manner in which food banks and
their agencies normally operate is changing. Among food bank
respondents:
81.11% of surveyed food banks have indicated that they are
currently unable to adequately meet the demand without having to reduce
the amount of food or their operations.
43.84% of these food banks stated that they already have
or are considering reducing the amount of food offered to agencies in
order to meet demand.
54.79% stated that their agencies already have or are
considering reducing the amount of food offered to clients.
48.63% of these food banks already have or are considering
reducing the variety of food offered to agencies.
27.4% of these food banks responded that some of their
agencies already have or are considering reducing the number of new
households they will serve.
13.7% of these food banks responded that they already have
or are considering reducing or suspending programs and services
offered.
45.21% of these food banks responded that they already
have or are considering diverting budgeted funds from other areas to
purchase food.
[The statement of the International Dairy Foods Association
follows:]
Mr. McGovern. And thank you very much.
Chairman Spratt. And let me also say that unless there is
objection all members will be allowed to submit an opening
statement for the record at this point in the record. Without
objection, so ordered.
[The statement of Mr. Smith of Nebraska follows:]
Prepared Statement of Hon. Adrian Smith, a Representative in Congress
From the State of Nebraska
Good afternoon and thank you, Mr. Chairman. I am pleased that we
are holding this hearing today, and I look forward to hearing the
testimony of our witnesses.
With the high price of energy, escalating food costs, and the
housing crunch, Nebraskans are feeling the squeeze as they try to
stretch a shrinking dollar across a widening household budget gap.
Rising food costs have captured the attention of Nebraskans, the
nation, and the world; but identifying and dealing with the root cause
of this food price inflation is, unfortunately, not an easy task.
We must do more than just provide a funding increase for nutrition
programs. To address food insecurity problems around the United States
and the world, our goal should be to stabilize prices through sound
monetary policy, low taxes, and restraint of federal government
spending. Altering our energy policy to allow more development of
domestic energy resources will also help to lower food prices, as 44
percent of the cost of food is attributed to fuel, transportation, and
energy inputs.
I hope our witnesses today will be able to shed light on how we can
help hungry families by pumping value back into the dollar and allowing
taxpayers to keep more of their hard earned income in their own
pocketbooks.
I want to thank our witnesses for coming here today to provide
testimony for the Committee. I appreciate the Committee holding this
hearing. Mr. Chairman, I look forward to continuing to work with you,
and I thank you for your time.
Chairman Spratt. Let me say as well to our witnesses that
we have your prepared and filed testimony. They will be made
part of the record and you can summarize them as we see fit.
Dr. Bernstein, let us begin with you if that is agreeable.
STATEMENTS OF JOSETTE SHEERAN, EXECUTIVE DIRECTOR, UNITED
NATIONS WORLD FOOD PROGRAMME; JARED BERNSTEIN, DIRECTOR OF THE
LIVING STANDARDS PROGRAM, ECONOMIC POLICY INSTITUTE; SUSAN
BERKOWITZ, EXECUTIVE DIRECTOR, SOUTH CAROLINA APPLESEED LEGAL
JUSTICE CENTER; AND STEVE H. HANKE, PROFESSOR, JOHNS HOPKINS
UNIVERSITY, SENIOR FELLOW, CATO INSTITUTE
STATEMENT OF JARED BERNSTEIN
Mr. Bernstein. Chairman Spratt, Ranking Member Ryan, I
thank you for this opportunity to testify and I commend this
Committee for targeting this critical issue of rising food
prices and the resulting budget constraints facing families
both here and abroad. My testimony today will focus on one
aspect of the rising food prices: the challenge this poses to
low income families in this country.
Overall inflation is, as mentioned, rising more quickly now
than in recent years, up 5 percent over the past year, driven
largely by food and energy costs. Food purchase for home
consumption is rising even more quickly, up 6.1 percent. A year
ago, these inflation rates were 2.7 for overall prices and 4.6
for food at home.
With these price accelerations in mind my testimony makes
these few points. First, when considering the economic squeeze
that food price increases are having on low and middle income
families, we need to recognize their economic context. In part,
due to the weak and highly unequal recovery of the 2000's,
poverty is actually higher now than it was in 2000 and median
family income adjusted for inflation is lower.
Second, current labor market conditions are leading to
broad based losses in real earnings. Measured on a year over
year basis, Bureau of Labor statistics data show that real
earnings are down every month since last October.
Third, higher food prices create a disproportionate burden
on low income families because these families spend more of
their family budgets on food.
Fourth, there is evidence that the poor pay higher food
prices and that they face faster food price inflation. Over the
past year, while the average consumer price index for food at
home was up 6.1 percent the USDA's low cost food budget for a
family of four with two children rose 9.6 percent.
The combination of these factors is giving rise to steep
increases in the food stamp rolls, which in April hit their
second highest level on record, 28.1 million, a 1.8 million
increase over last April. Even with this increase, the Food and
Research Action Center points out that one out of three
eligible persons fails to access the food stamp rolls.
Taking these facts and trends into account I recommend that
Congress consider investing increased resources in the Food
Stamp Program, a step that was proposed, though not taken, in
the first stimulus package that passed earlier this year.
Including a food stamp expansion in a second stimulus would
fulfill two purposes. First, it would help to alleviate some of
the budget constraints I document in my testimony. And second,
it would act as an effective stimulus as an increase of food
stamp grants has been found to create the biggest bang for the
buck in terms of its economic multiplier effects.
I will use the rest of my time to briefly elaborate these
points. When it comes to food, the budget constraints facing
low income families can be summarized as follows. Such families
spend a larger share of their budgets on food. And while prices
overall have accelerated sharply over the past year the prices
of food are rising faster than average prices and the prices of
the food budget of lowest income families are rising faster
still. Now these inflation results along with the ongoing
weakness in the job market are leading to persistent real wage
losses which in turn further constrain family budgets.
I have a set of figures in my testimony. I see that they
are up there on the wall. If I put my glasses on I can probably
see them myself. The first figure there shows the rate of price
growth for food at home and all items in the CPI, the overall
average CPI. In the last three and a half years the pattern has
been clear. Food prices have jumped significantly ahead of
overall prices.
The next figure shows the variation of the average budget
share for all food and for food at home. The lowest income
families spend 10.5 percent of their expenditures on groceries
compared to 5.5 percent for families in the top fifth.
The next figure plots the prices of two low cost food
budgets, that is those two lines at the top that are kind of
right on top of each other, the two low cost food budgets
against the overall CPI. Over this period between 2000 and 2008
the low income budgets are up 36 percent compared to 27 percent
for the CPI at home, of food at home.
The next slide reveals the consistent negative trends in
real, hourly, and weekly earnings as I have discussed. Note
that weekly earnings, which is the second bar in each one of
those months, are falling more quickly than hourly and that is
due to the declining weekly hours of work in a softening labor
market.
And finally, the last table there compares the wages of low
wage workers to commodity prices over the past five years. If
you take the wages of low wage workers in 2003 and 2008 and you
examine just how much gas, milk, apples, flour, those
commodities, the staples that the wage can buy, you see the
significant decline in gallons of milk, of course gallons of
gas, of apples. The hourly wage of low wage workers used to buy
a lot more flour, rice, bread, than it currently does.
Typically various programs that have been considered in the
context of fiscal stimulus, among those programs food stamp
benefits, as I noted, create the largest bang for the buck.
According to a study by Moody's Economy.com, for every dollar
spent on the program, real GDP grows by $1.73. Of the thirteen
tax cuts or spending increases considered, food stamps had the
largest multiplier effect of all the thirteen different
stimulus components considered in this study.
Now, typically implementation of a food stamp expansion is
discussed in terms of ratcheting up the benefits of food stamp
recipients as opposed to expanding eligibility guidelines, or
covering more persons. But given the point regarding missing
eligibles from the program, Congress might consider some
combination of the two approaches. Both raising the benefit
level and devoting some resources to boosting states'
administrative and outreach capacity with the goal of
identifying and signing up more eligible families that are
currently not on the program.
Thank you.
[The statement of Jared Bernstein follows:]
Prepared Statement of Jared Bernstein, Senior Economist, Economic
Policy Institute
Chairman Spratt, Ranking member Ryan, I thank you for the
opportunity to testify, and I commend the committee for targeting this
critical issue of rising food prices and the resulting budget
constraints facing families both here and abroad. While there are many
dimensions to this issue, including international shortages and the
underlying causes of rising global food prices, my testimony will focus
on one aspect of the rise in these costs: the food challenge facing
low-income families in this country.
Of course, many Americans are facing steep economic challenges.
Prices are rising quickly across the board, with inflation, driven
largely by food and energy costs, rising at 5% over the past year, and
6.1% for groceries (food purchased specifically for at-home
consumption). A year ago, those inflation rates were 2.7% and 4.6%.
While even families with significant resources tell pollsters they
are experiencing financial stress, a number of factors render the
current period particularly challenging for low-income families. First,
in part due to the weak and highly unequal recovery of the 2000s,
poverty is actually higher now than it was in 2000 and median family
incomes, adjusting for inflation, are lower.\1\ Second, as discussed
below, current labor market conditions are leading to broad losses in
real earnings. Measured on a year-over-year basis, Bureau of Labor
Statistics data show that real earnings are down every month since last
October. And of course, home values are declining, lowering the net
worth of homeowners, millions of whom face defaults on their mortgage
loans and even foreclosure.
These factors are all germane to the topic of today's testimony. As
noted, food prices are rising faster than overall inflation, and as I
stress below, low-income families spent a larger share of their income
on food. Second, there is evidence that the poor pay higher food
prices, and that they face slightly faster food price inflation. United
States Department of Agriculture data on food budgets facing low-income
families show even faster price increases. Over the past year, their
low-cost budget for a family of four with two children rose 9.6%.
The combination of these factors is giving rise to steep increases
in the food stamp rolls, which in April (most recent data) hit their
second highest level on record, 28.1 million, a 1.8 million increase
over last April. Even with this increase, the Food and Research Action
Council (FRAC) points out that one out of three eligible persons fails
to access the food stamp rolls.
Taking these facts and trends into account, I recommend that
Congress consider investing increased resources in the food stamp
program, a step that was proposed, though not taken, in the first
stimulus package that passed earlier this year. As I stress in my
conclusion, including a food stamp expansion in a second stimulus would
fulfill two purposes. First, it would help to alleviate some of the
budget constraints documented below. Second, it would act as an
effective stimulus, as an increase of food stamp grants has been found
to create the ``biggest bang for the buck'' in terms of its multiplier
effects.
FOOD PRICES AND FAMILY BUDGETS
The United States Department of Agriculture website section on food
prices begins with this assertion:
``In 2008, the Consumer Price Index (CPI) for all food is forecast
to increase 4.5 to 5.5 percent, as retailers continue to pass on higher
commodity and energy costs to consumers in the form of higher retail
prices. The CPI for food increased 4.0 percent in 2007, the highest
annual increase since 1990.'' \2\
The food category includes both food purchased for home consumption
and food away from home. The analysis in this paper focuses on both of
these, with an emphasis on the latter, because groceries--food at
home--is the significantly larger budget category for low-income
families, and because, unlike food away from home, it is non-
discretionary.
Consumer Expenditure Data reveal that groceries comprise a
significantly larger share of the food budget for low-income families.
In 2006, for families in the bottom income fifth, food in total
comprised 15.6% of spending, while food at home was 10.5%, or \2/3\ of
food expenditures. For families in the highest fifth, food at home was
50% of food spending (the relevant shares were 10.9% overall and 5.5%
for food at home).
Figure 1 shows the rate of price growth for food at home and all
items in the CPI since 2000. The two measures grew at different rates
over these years, with food prices behind overall prices in some years
and ahead in others. But in the last three and a half years, the
pattern has been clear: food prices have jumped significantly ahead of
overall prices. Thus far this year grocery prices are up 5.6% compared
to 4.2% of overall prices.
Of course, the other key consumer good that has been speeding ahead
of overall inflation in recent months is energy. In fact, once we take
gas and food prices out of the overall index--which leaves the so-
called core price index, often cited by the Federal Reserve--inflation
was up only 2.4% this year (annualized). Clearly, these two commodities
are currently driving prices up much faster than the other items in the
consumer market basket.
These values are averages, of course, and the focus of my testimony
is on lower-income families whose budgets are more stressed by higher
prices. By dint of their lower incomes, and often, their lack of assets
and borrowing constraints, these families have less ``wiggle room'' in
their budgets and have to shift from one category to another to make
ends meet when an inelastically demanded good like food or gas rises in
price. Also, as I stress in a later section, the weakening economy is
eroding the wages and incomes of many families right now, right when
these commodity prices are spiking.
Figure 2 shows the variation around the average budget share for
all food and for food at home. Each bar represents the share of
expenditures on food for families ranked by their income. The lowest
income families spend 10.5% (15.6%) of their expenditures on groceries
(all food), compared to about 8% (13.5%) for middle-income families and
5.5% (10.9%) for families in the top fifth. This expenditure pattern is
characteristic for necessities, since families tend to purchase
relatively similar amounts on these types of items compared to ``luxury
goods.'' Note, for example, that the ratio of food at home expenditures
of the top to the bottom fifth was 2.4 in 2006, while the same ratio
for overall spending (including all expenditures, not just food) was
4.6.
Thus far, we have established that low income families spend more
of their budgets on food, and that food prices are rising faster than
average, implying a greater consumption burden on these families
relative to higher income families. But we have only looked at average
food prices. Do the poor face higher food prices relative to those
faced by higher income families? And do they rise more quickly?
Throughout the years, researchers have found this to be the case.
Part of this stems from simple exploitation of vulnerable populations.
For example, there is evidence from the recent meltdown in housing
markets suggesting the poorer households were steered into more
expensive loans. Part also stems from reduced mobility of poorer
persons such that they do not have the same mobility to avoid
relatively bad deals.
Most recently, Matt Fellowes finds the following:
``About 4.2 million lower-income homeowners paid higher than
average prices for their mortgages in 2004. About 4.5 million lower-
income households paid higher than average rates for auto loans. And
countless more paid higher prices for other necessities like basic
financial services, food and insurance than did their wealthier
neighbors.'' \3\
By comparing trends in the USDA thrifty (lowest cost) and low-cost
food plans to those in the CPI, we can get a sense of how the food
prices faced by low-income families are trending in recent years.\4\
Figure 3 plots the prices of the two low cost food budgets (four-person
family with two young children) against that of the CPI food-at-home
index using data from June in each year. Over the full period, the low-
income budgets grow about 36% each compared to about 27% for the CPI
food-at-home index. Much of the gap between the two series evolved over
the past two years. Between 2007 and 2008, for example, the thrifty
budget rose 8.4%, the low-cost budget was up 9.6%, while CPI food-at-
home was up 6.1%.
WAGES AND FOOD
Though the economy is not officially in recession, key aspects of
current economic conditions are clearly recessionary. The job market in
particular has notably weakened, with net employment down about 440,000
jobs, and unemployment up about a point compared to one year ago, to
5.5%. The underemployment rate, a more comprehensive measure of
diminished job opportunities, was 9.9% in June.
The slowing job market has meant diminished wage pressure and fewer
hours of work. At the same time, prices, driven by energy and food,
have spiked. The result, as shown in Figure 4, is a consistent negative
trend in real wages. The figure plots the annual changes in the average
hourly and weekly earnings of the 80% of the workforce in blue-collar
or non-managerial jobs. As of late 2007, both series were falling in
real terms. Note that weekly earnings--the second bar for each year--
are falling more quickly than hourly earnings, due to declining weekly
hours worked.
These wage dynamics are, of course, a stressor on family budgets.
In order to simply quantify the issue for low-wage workers, I took \1/
2\ of the average production, non-managerial wage and divided this by
the price of a gallon of unleaded gas and five consumer food staples,
as shown in the table. Half the production worker wage is a good proxy
for low wages, as it tends to be at a level between the 10th and 20th
percentile wage and it moves consistently with these measures. We use
it here because since it is released monthly, it allows for up-to-date
analysis.
Table 1 looks at the change in wages and commodity prices over the
past five years. Back in the second quarter of 2003, this hourly wage
could buy just under five gallons of gas, 2.9 gallons of milk, 7.8
pounds of apples, etc. Of course, gas is much less affordable, and
given the price and wage movements, the low-wage workers can get only
2.4 gallons in the most recent quarter, half a gallon less than five
years ago. An hour of work yields seven fewer pounds of flour, five
fewer pounds, and about one pound less of bread.
CONCLUSION
All Americans are facing rising prices right now, led by energy and
food. But a few factors make this challenge particularly acute for low-
income families. First, food prices are rising faster than overall
inflation, and low-income families spent a larger share of their income
on food. Second, there is evidence that the poor pay higher food
prices, and that they face slightly faster food price inflation. Third,
the downturn in the job market has led to fewer job opportunities and
slower wage growth.
How should Congress consider responding to these stressors? One
useful policy response would be to increase food stamp benefits as part
of a second stimulus package.
The rationale for a second stimulus package is beyond my scope for
this testimony.\5\ I will only note that most analysts believe the
first stimulus package will raise the economy's growth rate in the
middle of this year, but that real GDP growth will then slow to well
below trend, barring further government intervention. In this regard,
Congress has begun discussing the utility of a second stimulus package.
Though an increase in food stamp benefits was proposed in the first
stimulus debate, it was ultimately left out of the first stimulus,
which largely emphasized checks to households and tax cuts to
businesses. There are two reasons to include a food stamp expansion in
the next package, if there is one.
First, increasing food stamp benefits would offset some of the
budgetary constraints stressed in my analysis. Of course, food stamp
eligibility--generally, family income must be below 1.3 times the
poverty threshold to get the benefits--will preclude some who need food
assistance from the program. But among those who do get food stamps, an
extension of benefits is needed.
As the Food Research Action Council documents, food stamp rolls
stand at historically high levels. Most recent data, from April, show
28.1 million recipients, the second highest monthly number in the
history of the program, and 1.8 million above last year's level. Even
so, FRAC stresses that only 2 out of 3 eligible persons access the
program.\6\
Second, research suggests that among the various programs typically
considered in the context of fiscal stimulus, food stamp benefits
provide the biggest ``bang for the buck.'' According to a study by
Moody's economy.com, for every extra dollar spent on the program, real
GDP grows by $1.73. Of the thirteen tax cuts or spending increases
considered, food stamps had the largest so-called multiplier impact.
The Congressional Budget Office agrees with the thrust of this
analysis, stating that ``the vast majority of Food Stamp benefits are
spent extremely rapidly. And because Food Stamp recipients have low
income and few assets, most of any additional benefits would probably
be spent quickly.'' \7\
Typically, implementation of a food stamp expansion is discussed in
terms of ratcheting up the benefits of food stamp recipients, as
opposed to expanding eligibility guidelines and covering more persons.
Given the FRAC point regarding missing eligibles from the program,
Congress might consider some combination of the two approaches: both
raising the benefit level and devoting some resources to boosting
states' administrative and outreach capacity with the goal of
identifying and signing up eligible families that are currently not on
the program.
ENDNOTES
\1\ The poverty rate was 11.3% in 2000 and 12.3% in 2008. My
forecast is that poverty fell to 12.1% last year.
\2\ http://www.ers.usda.gov/Briefing/cpifoodandexpenditures/
consumerpriceindex.htm
\3\ http://www.brookings.edu/opinions/2006/0807metropolitanpolicy--
fellowes.aspx
\4\ http://www.cnpp.usda.gov/USDAFoodCost-Home.htm
\5\ See this testimony for a discussion of the rationale for a
second package: http://www.epi.org/content.cfm/webfeatures--
viewpoints--testmony--bernstein--squeeze
\6\ http://www.frac.org/html/news/fsp/2008.04--FSP.htm
\7\ http://www.cbo.gov/ftpdocs/89xx/doc8916/01-15-Econ--
Stimulus.pdf
Chairman Spratt. Thank you very much. Ms. Sheeran, we are
glad to have you. Sorry you are late and got held up in some
traffic, but we will be prepared and pleased to receive your
testimony at this point in time. And we thank you very much for
coming.
STATEMENT OF JOSETTE SHEERAN
Ms. Sheeran. Thank you, Mr. Chairman. They have shut down
the highway but I am glad I made it here.
I want to thank you and the distinguished members of this
Committee. It is a pleasure and an honor to testify before you
today. Before I begin I want to acknowledge this Committee's
role and leadership in the cause of fighting hunger and
malnutrition at home and around the world. I thank Committee
members that have been longstanding leaders in the fight
against hunger. I see Jim McGovern here and others who have
really championed this cause. And there is no time that it is
needed more than today.
All of your work is one reason WFP can provide lifesaving
food and assistance to 90 million people this year, 80 percent
of whom are women and children. That includes 3 million people
in Darfur alone who depend on WFP for their daily sustenance.
Your role, however, has never been more important than today as
we need a bold new approach to food assistance in the face of
the global food crisis. And it is important that members of
this Committee hear what I hear from all over the world, in
refugee camps, villages, HIV/AIDS clinics, schools, orphanages
that I visit: ``Thank you, America.'' The American people
provide food for more than half of the hungry in the world who
receive food assistance. This is a noble legacy, carried on
since the Marshall Plan, and supported by Congress and every
President from Eisenhower, to Kennedy, to today, who launched
Food for Peace, Kennedy and Eisenhower.
Today, WFP and the world's hungry face the biggest
challenge in a generation with the world food crisis. Mr.
Chairman, two weeks ago the U.S. Department of Agriculture
reported that some 130 million additional people have joined
the ranks of the hungry due to the global food crisis. This is
a silent tsunami targeting the most vulnerable. It knows no
borders. Without unified global action the world's bottom
billion could become the world's bottom 2 billion virtually
overnight as their purchasing power is cut in half from soaring
food and fuel prices.
Of course, we are all consumers when it comes to food. Food
is so basic to human survival that its denial is a denial of
life itself. Some say there are only seven meals between
civilization and anarchy. On the seventh meal lost, all begins
to fall apart as people are reduced to fending for their
families' survival. Ensuring access to adequate, affordable
food and nutrition is certainly one of the most fundamental
roles of government and indeed of civilization itself.
Today the global food supply system is groaning under the
strain of skyrocketing demand; crop loss due to drought,
floods, and severe weather; and increasing demand on the use of
food for energy and other supplies. This no doubt presents a
huge opportunity for many farmers and I am a long term optimist
on this issue. But this is hitting poor consumers hard.
Last June, I warned we were facing a perfect storm for the
world's most vulnerable. Today, I believe we are in the eye of
that storm. News reports and images from the deadly riots in
Haiti, triggering the collapse of the government, and elsewhere
around the globe, are stark reminders that food insecurity
threatens not only the hungry but peace and stability itself.
Much of the global reaction, panic buying, hoarding,
speculation, price controls, and export restrictions, are
exacerbating the problem. In fact, thirty countries have
imposed new food export restrictions making it difficult for
WFP to access vital supplies.
Since mid-2007 we have seen the most aggressive pattern
ever of global price increases for basic food commodities. In
the past five years, from 2002 to 2007, we at WFP faced a 50
percent increase in the cost of procuring food for our
programs. Then, in only nine short months, between June of 2007
and February of 2008, we saw another 50 percent increase. And
these increases are not a thing of the past. On March 3rd WFP
was buying rice in Asia at $430 a metric ton. Five weeks later
it was $780 a metric ton. Two weeks after that $1,000 a metric
ton.
As you all know well, this is pinching consumers hard even
here in America, as we have just heard. But imagine the more
than 1 billion people in the world living on less than $1 a
day, already spending most of their income on food, up to 80
percent, trying to keep up. Imagine poor import dependent
nations, such as Haiti, Liberia, or Afghanistan. Not even the
best governance on earth can overcome such odds. Stock and cash
reserves in these nations are being drawn down to all time lows
and just when the world needed WFP most we were able to reach
fewer people than ever.
Let me illustrate the impact the soaring prices have had on
WFP. WFP reaches up to 20 million children a year with
lifesaving meals at school, thanks in large measure to the
wonderful McGovern-Dole School Feeding Program. Thousands
receive a cup like this, which belonged to a girl names Lillian
from Rwanda, filled with nutritious porridge. For those of you
who have visited our school feeding programs you know that for
many of the children, this is their most precious possession as
it is the only cup of food they can rely on each day. But by
January of this past year, simply due to soaring food prices,
we had 40 percent less food in this cup.
That nutritional chasm will have long term consequences for
those children, as we know. And now research demonstrates that
the nutritional blow to children under two years old forced to
survive on mudcakes in Haiti, or moldy cassava in Burundi, will
devastate them for a lifetime. WFP has worked closely with the
Secretary General of the United Nations Task Force on the Food
Crisis and with the World Bank to offer a coherent global
approach to help those nations hit hardest.
Mr. Chairman, together these challenges have culminated in
a global crisis that requires U.S. leadership. As you know
better than anyone, that leadership begins here in these
committees, and in this Committee, as you set the priorities
for all the work of the U.S. government here and abroad. Mr.
Chairman, I am asking you and this Committee to pause and
understand that I am not here to ask for a one time handout at
this difficult moment. I am asking the Committee to consider
making global food assistance a higher priority so that we
might be able to get ahead of the hunger curve.
The cost of feeding the hungry has doubled in the past year
due to these soaring prices. WFP's workload has doubled. The
World Bank predicts these high prices will be with us until
2012. If so, the humanitarian crisis will continue. I recognize
this is no small request. I have made this request throughout
the world, not only to the European parliaments but to Saudi
Arabia and other who can help at this time.
Just briefly to give some background, the World Food
Program, as you know, was created by you and the nations of the
world as the world's urgent hunger institution. When all else
fails, you turn to us to prevent life threatening food and
nutrition vulnerability. Today we manage a global lifeline that
can reach any corner of the world in 48 hours, as we did during
the war in Lebanon and after the cyclones in Bangladesh and
Myanmar. WFP deploys thousands of planes, ships, helicopters,
barges, and when needed, donkeys, camels and elephants. Our
motto is, ``Nothing gets between WFP and a hungry child.'' We
are 100 percent voluntarily funded, receiving no core or
assessed funds from any source. In this way we are unique in
the UN system. We are as efficient as we are effective, using
only 7 percent of each dollar you give us on overhead, and
deploying state of the art monitoring ensuring food delivery.
WFP provides concrete help on the ground in often dangerous
and difficult conditions in a way that few other institutions
in the world can or do. And it is often dangerous work. So far
this year in Darfur alone 83 of our trucks have been
highjacked, and 41 of our drivers are still missing in action.
Globally this year 13 people have lost their lives in service
to WFP. Ships carrying our food are attacked by pirates off the
coast of Somalia. And unless we have naval protection from
nations we cannot get that lifesaving food into Somalia. We
call on all nations to provide these escorts, which have proven
an essential and effective deterrent.
This is the daily reality we are dealing with at WFP. But
there is no alternative. We must provide humanitarian food
assistance to those who are in need. This is one of the oldest,
most basic humanitarian instincts the world has. If someone
does not have enough food, we reach out and help those in need.
We have seen that hunger can be defeated and local food
security can be restored and achieved. The world knows how to
do this. But we are facing perhaps our biggest challenge yet.
The world and America has been generous in helping us to
address these challenges. During the past three months we have
gone through an unprecedented resource mobilization effort to
cover the soaring cost of food, and to ensure that cups like
this remain full. Since March we have received $1 billion in
new contributions, including a historic $500 million donation
from the Kingdom of Saudi Arabia. That money is being used to
purchase and distribute food in 60 nations.
On June 30th President Bush signed a supplemental
appropriation bill sent to him from Congress, thank you, that
included a greatly needed $850 million to address new emergency
needs. By mid-July, working with our strong partners at the
Department of Agriculture, USAID, and Food for Peace, that
assistance was already streaming out the door to meet urgent
needs in 17 countries, much of it headed to the people of
Darfur, Somalia, Ethiopia, Afghanistan, and Zimbabwe. By the
middle of August, a second traunch will be on its way.
Mr. Chairman, as much as we have done we must do more. Your
Committee is critical here because we are at a juncture where
we can no longer handle urgent food needs on an ad hoc basis.
Rather, we must understand that as we cope with these high food
prices we pose a greater threat of civil unrest and a threat to
fragile democracies around the world. Getting ahead of this
hunger curve will require your help. We have made much progress
in the past four decades, actually bringing the overall
percentage of the world's hungry down to 17 percent from 37
percent in the 1960's. But make no mistake, unless we want to
see these important gains reversed we can no longer continue to
do business as usual.
So I would like to sum up in two specific requests. We need
the U.S. to continue as the global leader in the fight against
hunger. The world looks to the U.S. to provide this leadership.
Specifically, we need our food aid budgets to be bolstered and
we need to ensure that we have the flexibility to deliver that
food quickly. And second, in that flexibility we need to be
able to, the markets are so dangerously tight now, we need, as
we did in the supplemental, to provide some cash to be able for
us to meet emergency needs to cover the gap as we wait for
vitally needed food to arrive.
Chairman Spratt. Ms. Sheeran, would you mind if I asked you
to stop right there? We will come right back----
Ms. Sheeran. Okay.
Chairman Spratt [continuing]. For your conclusion. But we
have about three minutes to make it to the floor.
Ms. Sheeran. Excellent. Thank you.
Chairman Spratt. We have two votes after this vote, but
they should be five minute votes. We will be back in about
fifteen minutes.
Ms. Sheeran. Thank you, sir.
Chairman Spratt. We beg your indulgence. Thank you.
Ms. Sheeran. Thank you.
[Recess.]
Chairman Spratt. Let us resume the hearing. And Ms.
Sheeran, you were just at the conclusion of your statement. You
can take your time and wrap it up as you like. But the floor is
yours again.
Ms. Sheeran. Thank you so much, Mr. Chairman. And I will
just sum up. The world food crisis has doubled the cost and
multiplied the urgent needs of the hungry, not only for the
World Food Program but for all of those working to stem the
tide. From CARE, to World Vision, to Oxfam, to Catholic Relief
Services, Bread for the World, and others. We will all do the
job humbly and effectively, but we cannot do it without you.
This is a national security issue. Fragile new democracies
such as Liberia are being rocked to their core as food riots
have hit forty nations. I guarantee you the investment now
avoids much bigger costs later.
I invite this Committee to come visit the field, to witness
the results of your generosity. Come here for yourself, from
leaders such as President Kufuor in Ghana, or Johnson-Sirleaf
in Liberia, the transformative power of American food
assistance.
Mr. Chairman, when I travel the world I take this red cup
with me and I am amazed at the number of people who are moved
to tears because they personally experienced a cup of food from
America at some point in their life. I have met ministers in
Europe, in Japan, in Africa. In fact, the head of the
Development Committee in the European Parliament, when I held
this up, he was moved to tears. And he said, ``I grew up on a
cup of food from America.'' We knew at that time that that is
what peace and security was about, and in fact America made the
deliberate decision that we had to provide food security before
we could introduce democracy as a forceful idea and a powerful
idea in Japan and in Europe.
Mr. Chairman, I want to thank you and I want this Committee
to know that we understand that in a democracy no one person
can decree how a nation's treasure is spent. But we do know
that the role of this Committee is vital. And that none of the
assistance and help that we are able to provide would happen
without the active engagement of this Committee. We would be
honored to welcome you to the field to see the results of that
work. And I thank you so much for your attention to this matter
today.
[The statement of Josette Sheeran follows:]
Prepared Statement of Josette Sheeran, Executive Director, United
Nations World Food Programme
Mr. Chairman, and distinguished members of the Budget Committee, it
is a pleasure and an honor to testify before you today. Before I begin,
Mr. Chairman, I want to acknowledge your committee's role and
leadership in the cause of fighting hunger and malnutrition around the
world. All of your work is one reason WFP can provide life-saving food
and assistance to 90 million people this year; 80 percent of whom are
women and children. That includes three million people in Darfur alone
who depend on WFP for the only daily sustenance they receive.
Your role, however, is never more important than today--as we need
a bold new approach to food assistance in the face of a global food
crisis that is hitting the world's most vulnerable hardest.
It is important that members of this committee hear what I hear all
over the world in refugee camps, villages, HIV/AIDS clinics, schools,
slums, and orphanages that I visit: Thank you, America. The American
people provide more than half of the world's total food assistance and
this is understood and appreciated by those who receive the benefits.
This is a noble legacy carried on year after year and it will never be
forgotten or taken for granted. Your efforts have meant so much. But I
am here today to ask for more.
Mr. Chairman, two weeks ago the US Department of Agriculture
reported that some 130 million additional people have joined the ranks
of the hungry due to the global food crisis. These numbers are but the
latest articulation of a hunger crisis without borders. As I am sure
the members of this committee know all too well, high food and fuel
prices are taking a toll on your constituents right here in America.
But imagine what these prices mean to the world's poorest--the so-
called bottom billion living on less than $1 a day.
Without unified global action, the world's bottom billion could
become the world's bottom two billion, as their purchasing power is cut
in half from soaring food and fuel prices. This is a silent tsunami
hitting the world's most vulnerable, 80 percent of whom are women and
children.
Of course, we are all consumers when it comes to food. Food is so
basic to human survival that its denial is a denial of life itself.
Some say there are only seven meals between civilization and anarchy--
at the seventh meal lost, all begins to fall apart as people are
reduced to fending for survival. Ensuring access to adequate,
affordable food and nutrition is certainly one of the fundamental roles
of government, and, indeed, of civilization itself.
Today, the global food supply system is groaning under the strain
of sky-rocketing demand, the soaring cost of inputs, depleted stocks,
crop loss due to drought, floods and severe weather, and increasing
demand on the use of food for energy and other supplies. Last June, I
warned we were facing a perfect storm for the world's most vulnerable.
Today, I believe we are in the eye of that storm.
News reports and images from deadly riots in Haiti, triggering the
collapse of the government, and elsewhere throughout the globe, are
stark reminders that food insecurity threatens not only the hungry but
peace and stability itself.
Much of the global reaction--panic-buying, hoarding, speculation,
price controls and export restrictions--threaten to exacerbate the
problem. In fact, thirty countries have imposed new food export
restrictions, making it difficult for WFP and many others to procure
and deliver food to areas of need.
Since mid 2007, we have seen the most aggressive pattern ever of
global price increases for basic food commodities. In the five years
from 2002 to 2007, we at WFP faced a 50 percent increase in the cost of
procuring food for our programs. In only nine short months, between
June 2007 and February 2008, we saw another 50 percent increase.
I will give an example: On March 3, WFP bought rice at $430 a
metric ton. Five short weeks later the price had jumped to $780 a
metric ton and two weeks later it reached $1000 a metric ton. We have
seen similar skyrocketing prices for other staples like corn, wheat,
and vegetable oil.
As you all know well, this is pinching consumers hard even in
highly developed nations. But imagine the more than one billion people
in the world living on $1 a day, already spending most of their income
on food, trying to keep up. Not even the best governance on earth can
overcome such odds. Stock and cash reserves in these nations are being
drawn down to all-time lows as in Liberia, Senegal and other countries.
And just when the world needed WFP most, we were able to serve fewer
people than ever.
Let me illustrate the impact that soaring food prices has had on
WFP. WFP reaches up to 20 million children a year with life-saving
meals at school. Thousands of schoolchildren receive nutritious
porridge in a red cup like the one I carry across the world, and that
belonged to Lillian from Rwanda. For those of you who have visited our
school feeding programs, you know that for many of the children, this
is their most precious possession as it is the only cup of food they
can rely on all day. By January of this year, just simply due to
soaring food prices, we were able to fill this cup only 60 percent with
the same contribution. Many children had 40 percent less porridge; 40
percent fewer kilo calories; 40 percent fewer nutrients; and stomachs
that were 40 percent less full. That nutritional chasm will have long-
term consequences for those children, as we know.
WFP has been working closely with the Secretary-General's task
force on the food crisis and with the World Bank to help those nations
hardest hit. For example, early this year, the Government of
Afghanistan asked us at WFP to support an additional 5 million people
thrust by soaring food prices into the ranks of the hungry. But with
food prices expected, as the World Bank predicts, to be with us at
least through 2012, the crisis is not easing. A few weeks ago, the
Government asked us to extend this assistance for at least another 12
months. Clearly, the food crisis is affecting more people for longer
than expected in an already fragile nation.
In the Horn of Africa, prolonged drought and civil unrest in some
areas are being exacerbated by stubbornly high food prices. In Somalia,
WFP expects that the number of people it feeds will climb from more
than one million per month to 3.5 million by December. In Ethiopia, we
are expanding our emergency program by an additional 3.7 million people
in addition to the four million already in need under our existing
program. Based on recent assessments, WFP will need to reach 14.3
million people in the Horn of Africa region this year--constituting
almost 20 percent of our work worldwide.
Mr. Chairman, together, these challenges have culminated in a
global crisis that requires US leadership. As you know better than
anyone, that leadership begins here in this committee, as you set the
priorities for all the work of the US government here and abroad.
Mr. Chairman, I am asking you to pause and understand that I am not
here to ask for a one-time hand-out for this difficult moment. I am
asking the committee to consider making global food assistance a higher
priority so that we might get ahead of the hunger curve. I recognize
that this is no small request.
A REVOLUTION IN FOOD AID
Before I elaborate, let me give some background now on WFP and
where we stand in meeting these challenges and the things we are doing
and will do to address them.
The World Food Programme was created by the nations of the world,
as the world's urgent hunger institution. When all else fails, you turn
to us to prevent life-threatening food and nutrition vulnerability.
Today, we manage a global lifeline that can reach any corner of the
world in 48 hours--as we did during the war in Lebanon, and after
cyclones hit Bangladesh and also Myanmar. WFP deploys thousands of
planes, ships, helicopters, barges and, when needed, donkeys, camels
and elephants. Our motto is: nothing comes between WFP and a hungry
child.
We are the logistics coordinators for the UN system, delivering not
only food, but an array of life-saving goods, including medicines, for
dozens of partners. WFP provides global services, such as our
Humanitarian Air Service, which ferries 400,000 humanitarian and
development workers in and out of disaster zones each year--including
10,000 aid workers to and from Darfur each month.
WFP is 100 percent voluntarily funded; receiving no core or
assessed funds from any source. In this way, we are unique in the UN
system.
WFP has been undergoing a revolution in how it does business in
order to respond to new challenges. When WFP was founded back in the
early 1960s, it was a surplus food program with the nations of the
world sharing their extra bounty when they had it. Times have changed;
there are virtually no surpluses available globally.
Today, more than half of our budget is based on cash, allowing us
to purchase food from local farmers throughout the developing world.
Last year we spent $612 million--80 percent of our cash--buying food in
69 different developing nations, helping break the cycle of hunger at
its root.
The food we buy locally is used for emergency interventions as well
as for safety net programs, such as school feeding. Each year, WFP
provides school meals for 20 million children throughout the developing
world--thanks to generous funding of the McGovern-Dole program. We have
learned that if a school meal or take-home ration is provided to girls,
it virtually guarantees that parents who would never do so otherwise,
allow their girls to attend school. It is the most effective human
rights program for girls I have ever seen.
We seek to ensure our hunger responses are supportive of local
markets and farmers whenever possible. Let me mention an example:
In Senegal--a food deficit nation--there is a surplus of salt but
most of the salt for local consumption is not iodized. WFP has
contracted with 7,000 village salt producers--most of whom are women--
and worked with the Micornutrient Initiative to ensure access to
training and equipment needed to iodize the salt. Now they have a sure
income from their sales to WFP, and now the salt they sell locally is
iodized, helping prevent goiter, which President Wade has called one of
the biggest health challenges in Senegal. This is the type of win-win
solution that can help break the cycle of hunger and undernutrition at
its root.
Building on these successes, WFP is launching a bold initiative to
enhance our local purchasing program called Purchase for Progress, or
P4P. It is designed to use WFP's purchasing power to help break the
cycle of poverty and hunger among poor farmers--essentially bolstering
the incomes and agriculture know-how of farmers through the markets.
The World Food Program will also incorporate best practices
globally on affordable access to vital nutrition, especially among the
most nutritionally vulnerable, in particular children under two years
of age, who carry the burden of undernutrition for life both physically
and mentally. We are asking not only if the cup is full, but what is in
the cup? These ``smart'' interventions are the critical foundation for
nations to beat the cycle of hunger and poverty.
The initiatives I have been describing are included in WFP's new
Strategic Plan, approved in June by our Board. They mark a historic
shift from WFP being a food aid agency to what we are calling a food
assistance agency. By this we mean that, in all of our operations, we
will ask how our interventions meet not only the critical emergency
needs, but, whenever possible, help ensure that we break the cycle of
hunger at its roots. In this Strategic Plan, WFP has introduced a more
nuanced set of tools that allows us to ask what is causing the hunger
and which interventions would be most appropriate to address those
conditions.
This is all part of what I call WFP's 80-80-80 solution: today 80
percent of WFP's cash for not only food, but also land transport is
spent locally and 80 percent of WFP's staff is locally hired. This
helps build permanent local capacity and knowledge about food security.
WFP provides concrete help, on the ground, in often dangerous and
difficult conditions, in a way that few other institutions in the world
can, or do. Our staff feeds five million people a day in Sudan which is
our biggest operation, as well as in places like Somalia and
Afghanistan, delivering food and nutrition, while risking their lives
in the line of duty. So far this year, in Darfur alone, 83 of our
trucks have been hijacked and 41 of our drivers are still missing in
action. This year alone, 13 people have lost their lives in service to
WFP--seven in Sudan, five in Somalia and one in Kenya.
Ships carrying our food are attacked by pirates off the coast of
Somalia and unless we have naval protection from nations we cannot get
that life-saving food into Somalia. We call on all nations to provide
these escorts, which have proven an essential and effective deterrent.
This is the daily reality we are dealing with at WFP. But there is
no alternative. We must provide humanitarian food assistance to those
who are in need. This is one of the oldest, most basic humanitarian
instincts the world has--that if someone does not have enough food, to
reach out and help those in need. We have seen that hunger can be
defeated and local food security can be restored and achieved. The
world knows how to do this. But we are facing perhaps our biggest
challenge yet.
RAMPING UP INTERNATIONAL ASSISTANCE
The world--and America--has been generous in helping us to address
these challenges. During the past three months, we have gone through an
unprecedented resource mobilization effort to cover the soaring cost of
food, and to ensure these cups could remain full. We wrote to Heads of
State and governments and traveled the globe urging action, testifying
before parliaments and raising awareness. And the world came together
to stand with those most vulnerable among us. Many in the US House and
Senate have been extraordinary champions of this effort. I thank you.
Since March, we received $1 billion in response to a $755 million
appeal to help us cover increased program and operational costs due to
high food and fuel prices. The $1 billion includes a $500 million
donation from the Kingdom of Saudi Arabia. That money is being used to
purchase and distribute food in 60 nations.
On June 30, President Bush signed a supplemental appropriation bill
sent to him from Congress that included a greatly needed $850 million
to address new emergency needs. By mid July, working with our strong
partners at the Department of Agriculture and USAID, we had already
mobilized much of that funding to meet urgent needs in 17 countries--
much of it headed to the people of Darfur, Somalia, Ethiopia,
Afghanistan, Myanmar, and Zimbabwe. By the middle of August a second
tranche will be on its way.
Mr. Chairman, as much as we have done, we must do even more. Your
committee is critical here, because we are at a juncture when we can no
longer handle urgent food needs on an ad hoc emergency basis. Rather,
we must understand that more hungry people are coping with higher food
prices, posing a greater threat of civil unrest. Getting ahead of this
hunger curve will require a step increase in funding that begins right
here in this Budget Committee. We have made progress over the past four
decades--bringing the overall percentage of the world's hungry down to
17 percent from 37 percent in the 1960s. But make no mistake: Unless we
want to see these important gains reversed, we can no longer address
needs on an ad hoc basis. So let me be clear in my request to members
of this committee.
First, we need a strong message to the world that the US
will continue to lead global efforts to address hunger. The world looks
to the US to provide leadership with reliable, flexible food
assistance. Specifically, we need the food aid budgets to be bolstered
so that supplemental appropriations are not required year-after-year to
fill the red cup for children who are hungry today.
Second, WFP needs the US to provide more flexibility--both
in terms of allowing us to use in-kind contributions where we need them
most urgently; and in providing some cash so that we can buy directly
from local farmers when people have lost their livelihoods, but food
remains available for purchase.
Finally, we need America's help ensuring that all
governments let us purchase food for humanitarian purposes, exempt
these food purchases from export restrictions and extraordinary export
taxes, and permit the unhindered and safe movement of humanitarian food
within and across borders.
Mr. Chairman, this committee presides over a difficult debate: how
to balance the need to provide more food assistance with other pressing
needs, both domestic and foreign. You must balance short and long term
needs, short and long term domestic needs with strategic and foreign
policy interests, all within fierce budget constraints. It is
difficult, important work.
As you do this work, I would urge you not to let these difficult
choices be treated within a zero sum framework.
The entirety of the US budget for international assistance
comprises just 1 percent of the federal budget.
As the world moves forward in continuing to respond to increasing
needs from the global food crisis and new emergencies, we need robust
and rapid engagement. We need the world to understand that hunger
ravages individuals, communities and nations.
Let us decide that hunger is no longer an acceptable part of the
human condition. We actually know how to end hunger--many countries
have done so. We have the science and technology to end hunger. The
question is: do we have the moral and political will to do so?
Chairman Spratt. Thank you very much. We will come back
with questions, but let us proceed with our panel. Susan
Berkowitz next from Appleseed in South Carolina.
STATEMENT OF SUSAN BERKOWITZ
Ms. Berkowitz. Chairman Spratt, members of the Budget
Committee, I want to thank you for this opportunity to speak
today on behalf of the South Carolina Appleseed Legal Justice
Center about how rising food costs impact the low income
community and the programs that serve them. And I also want to
thank you for taking the time to have this hearing to look at
this very important issue.
The rising cost of food is adversely impacting all
Americans. Low income households are suffering the brunt of
these escalating food costs with overextended budgets. For
these households, the easiest personal line item to cut is
often what is spent at the grocery store. Not just the quality
of foods, but limiting the quantity of overall purchases.
In South Carolina our low income community has been
dramatically impacted by the significant increase in food
costs. South Carolina has the third highest rate of food
insecurity and the second highest rate of very low food
security in the entire nation. Over 630,000 South Carolinians
experience hunger at least once a year. A family living at or
below poverty will be forced to spend a large portion of its
income on food and rarely has money in the household that they
can access when the rapid increase in cost occurs.
In the last year the price of food has increased over 5
percent. The cost of a bare bones grocery bill for a family of
four that meets the food stamp thrifty food plan saw an 8.5
percent increase. That is a $46 monthly increase. Now, there is
a perception that the cost of living in South Carolina is low.
But I can tell you for low income families in our State, they
are struggling.
To my testimony I have attached two monthly family
expenditure budgets. The first is a modest budget for a single
parent supporting two children. The second is for a two-parent
family with one child. Almost all of the families who live at
or below 200 percent of our poverty level outspent their income
just for basic needs in our State. What this demonstrates is
that the majority of low income households, despite working
full time, are unable to absorb even a $46 increase in food
costs each month.
Unfortunately, one way low income families manage to
survive temporarily is by accumulating debt. Low income
consumers are making desperate choices. They are living on
credit cards, payday and auto title loans, that are sending
them into the downward debt spiral. One elderly gentleman I
recently helped used payday loans to, as he told me, ``make
ends meet.'' By the time he had finally contacted me he was
facing eviction, his utilities were being terminated, and he
had no food in the house because this temporary stopgap measure
had overtaken all of his income. Purchasing food seemed to be
the easiest item on his budget to eliminate. And I should tell
you he ultimately ended up in the hospital with renal failure
because this man was a diabetic.
Many working families are now turning to food pantries for
the first time. The pantry in my hometown of Columbia, South
Carolina is now open one evening a month to accommodate working
families. Most of these families coming into the food pantry
report their wages are not stretching as far due to rising
costs. And of the households utilizing the food pantry
approximately 50 percent were receiving food stamps, and many
of these families come in desperate and destitute, apologizing
for needing the food pantry. And what I have to explain to them
when I meet with them is, ``You do not have to apologize. You
are doing the right thing by coming and taking care of your
children.''
Food stamps and WIC are critical programs to combat hunger.
Approximately one in eight South Carolinians receive food
stamps. The Food Stamp Program makes an enormous difference in
the ability to purchase food for working poor, unemployed
senior citizens, and the disabled. For those eligible the
current benefit amounts do not meet their purchasing needs. And
they have eroded even further over the last year. This needs to
be corrected in our upcoming budget. The food stamp benefit
level needs to be fully indexed to permit the allotment to keep
up with food inflation. What was always a modest benefit
package has eroded over the past few months. The Thrifty Food
Plan, which serves as a national standard for a nutritious diet
at a minimal cost, is used as the basis for food stamp
allotments, and as I said earlier has seen an 8.5 percent
spike. While there will be adjustments to the benefit allotment
in October, it simply is not enough. When made, the adjustment
will already be four months out of date. In addition, it will
not change over the next twelve months despite the predicted
rise in food costs.
Congress can address this problem for the coming fiscal
year by anticipating the food price inflation that will occur
and acting to offset some of it so assistance does not again
fall short. Congress should consider properly reflecting the
price in food costs that will take place over the next year by
increasing the food stamp benefit for fiscal year 2009 from the
benefit increases that are scheduled to take place in October
2008. This will ensure that the lag in food data prices is
taken into account and households will be provided with
sufficient resources, despite the rising costs over the coming
year.
I also urge you to ensure that the Women, Infants and
Children (WIC) Program is adequately funded in the next year.
The supplemental foods provided by WIC Program are designed to
meet participants' enhanced dietary needs for specific
nutrients during brief but critical periods of physiological
development. Over 50 percent of the women and children on WIC
are members of families where at least one or both parents work
outside of the home. The average South Carolina WIC caseload
for fiscal year 2008 is almost 125,000 participants. The South
Carolina WIC Program serves over 50 percent of the infants born
in our State.
This increase in participation does not come without
financial strain to the program. It can mean substantial
delays, which are already being reported, before an applicant
can be seen. The increase in food costs over the past year have
caused food packages provided under WIC to become extremely
expensive. While the agency has not done so yet, it may be
forced to implement a priority system for who will be able to
participate in WIC if the State does not receive increased
funds.
Congress must provide sufficient funds for the WIC Program
in fiscal year 2009. Given that Congress will likely first
provide 2009 funding via a continuing resolution, it is
essential that the CR provide increased funding to WIC rather
than wait for the regular appropriation. That might be months
later, and will most certainly mean that eligible women and
children would be denied services while the Program is waiting
for sufficient funding.
Low income families are feeling the impact of increasing
food prices and facing terrible choices. Not paying the light
bill or rent, using less quality daycare, or living in 95
degree heat with no air conditioning or fan. A single mother
with no health insurance may choose to ignore the lump in her
breast, or another may be juggling over a dozen payday loans in
an effort to make ends meet.
The rapid rise in food prices, which are predicted to
continue, are eroding the value of critical programs,
especially food stamps and WIC. We must protect all of our
citizens who are suffering from this economic downturn by
helping them increase and maintain their purchasing power at
the grocery store. And we must remember that these dollars
pumped into our local economy will also help us all. Thank you.
[The statement of Susan Berkowitz follows:]
Prepared Statement of Susan Berkowitz, Director, South Carolina
Appleseed Legal Justice Center
I want to thank the Chair and members of the Budget Committee for
the opportunity to speak with you today about the impact rapidly rising
food costs is having on low-income people, especially during this
economic downturn. I am Sue Berkowitz, director of the South Carolina
Appleseed Legal Justice Center. SC Appleseed is a non-profit law office
dedicated to advocacy for low income people in South Carolina to effect
systemic change by acting in and through the courts, legislature,
administrative agencies, community and the media, and helping others do
the same through education, training and co-counseling. For the past
twenty-five years I have worked in the area of poverty law focusing my
practice to the areas of consumer, healthcare and income supports.
Through my work with SC Appleseed I have been a key participant in
formulating state welfare and food stamp policy for the citizens who
use these services in our state. In addition at SC Appleseed, we
address predatory mortgage lending, payday lending, Medicaid,
affordable housing, education, and immigrant issues. Our staff
participates with a number of non-profits/service providers and works
closely with many state agencies, including the one that administers
the food and nutrition programs. Many state agencies and legislative
committees request information and assistance from SC Appleseed staff
because of their expertise in poverty, child, hunger, housing and
consumer issues. SC Appleseed works to ensure that full representation
is provided to the low income community through its advocacy and impact
litigation work.
The rising cost of food, during this time of economic decline is
adversely impacting all Americans as they are addressing the escalating
costs of housing, energy and healthcare. Low income individuals and
families are suffering the brunt of these additional food costs as
their budgets are already overextended and they do not have resources
to assist them. Income for basic needs such as housing, electricity,
childcare and transportation is already stretched, making these
families even more vulnerable to food insecurity. For these households,
young and old, the easiest personal line item to cut is often what is
spent each month at the grocery store. This is done by reducing not
just quality foods such as fresh produce and dairy, but also limiting
the quantity of overall purchases.
In my home state of South Carolina our low income community is
being dramatically impacted by our country's significant increase in
food costs. Hunger and food insecurity is a tremendous problem for low
income South Carolinians that has been exacerbated by the tremendous
increase in food costs over the past year. According to the USDA, 14.7%
of South Carolina's total population was considered to be ``food
insecure'' (the share of people who experience food insecurity at least
once during the year) and 5.9% experienced very low food security
between 2004 and 2006. This means annually 632,000 South Carolinians
experience a food shortage. This is a 1.2% increase from 2001-2003.
South Carolina has moved from having the sixth highest rate of ``food
insecurity'' to the third highest rate, and the second highest rate of
very low food security in the entire nation.
While nationally it is reported that almost 16% of households with
children were food insecure in 2006, we know this is much greater for
families in South Carolina. Slightly over 22% of South Carolina's
children are living below the federal poverty level and 45.7% (467,254)
are very low income living at or below 200% of the federal poverty
level. It is estimated that one out of every four children in South
Carolina is going hungry or at risk of going hungry. As we see
escalating prices in food costs, this very discouraging number will
only increase, putting more of our state's children at risk.
All households are feeling the pressure on family budgets due to
the increase in food prices; our low-income families are experiencing
this financial strain to a much greater degree. A family of moderate
income will spend less than 15% of their combined earnings for its
total food purchases. A family living at or below poverty attempting to
purchase groceries that will provide a nutritionally adequate diet will
be forced to spend closer to one third of its income. These are the
families who are forced to spend the greatest percentage of their
income on food, but have no money in their family to draw upon when
there is a rapid increase in the cost. All of this family's money is
allocated for basic bills that if go unpaid can result in the loss of
the home, utilities or ability to get to and from work. These are the
families who are forced to make choices of purchasing cheaper less
nutritionally sound food, or even worse, miss entire meals.
This is the reality many families in South Carolina currently face.
In the last year the price of food has increased over 5%. USDA reports
that the cost of a bare-bones grocery bill for a family of 4 that meets
minimal nutrition standards or the ``Thrifty Food Plan'' is an 8.5%
increase from June 2007 to June 2008. That's a $46 monthly increase.
While there is a perception that the cost of living in South
Carolina is not very high, low wage workers living on the most reserved
budget are unable to make ends meet. I have attached two monthly family
expenditure budgets to my testimony. The first, (Exhibit #1) is a
modest budget for a single parent supporting two children; the other
(Exhibit #2) is for a two parent family with one child. These budgets
include only the basic needs of shelter, food, childcare, utilities and
transportation. I have included within each document information as to
the amount of income the family would need to earn to be considered at
or below 100%, 150%, 185% and 200% of the federal poverty level. These
budgets demonstrate that these low income families for the most part
must outspend their income when addressing just basic needs. Of course
some in poverty live in conditions that many of us would find
unacceptable-substandard housing, too little food, no healthcare etc.
MONTHLY BUDGET FOR FAMILY OF 3: ONE WAGE EARNER WITH TWO CHILDREN
EXHIBIT #1
------------------------------------------------------------------------
Expense Amount
------------------------------------------------------------------------
Rent/Mortgage\1\..................................... $634.00
Power, Water and Sewer............................... $225.00
Basic Phone\2\....................................... $15.55
Cell Phone\3\........................................ $29.99
Food\4\.............................................. $360.00
Transportation (car payment) \5\..................... $163.00
Gas\6\............................................... $252.00
Maintenance for home and car\7\...................... $50.00
Car Insurance........................................ $75.00
Household Supplies\8\................................ $125.00
Child Care\9\........................................ $670.00
Health Care\10\...................................... $320.00
Clothing............................................. $40.00
FICA/Taxes\11\....................................... $200.00
Church............................................... $60.00
------------------
Total.......................................... $3573.29
------------------------------------------------------------------------
INCOME
Gross monthly Income Family of Three at 150% of poverty:
$2,200.00\12\
Gross monthly Income Family of Three at 185% of poverty:
$2,714.00\13\
Gross monthly Income Family of Three at 200% of poverty:
$2,934.00\14\
Gross monthly Income Family of Three at 100% of poverty: $1467.00
ENDNOTES
\1\ This is an average rent for South Carolina for a two bedroom
apartment. Market rent is higher in metropolitan/tourist areas and
lower in rural areas.
\2\ Basic phone does not include long distance or cell phone.
\3\ This is the lowest monthly rate plan offered by mobile phone
service providers. The cost includes one line and does not take into
account any additional charges.
\4\ All families are ineligible for food stamps as they are over
the gross income level of 130% of poverty. Based on costs of $125.00
per week.
\5\ Purchasing a 2002 Mazda Protege for $7,880.00. Car financed at
9.34% APR for 60 months.
\6\ This is to purchase 15 gallons of gasoline a week at $3.91 a
gallon.
\7\ General maintenance of brakes, oil, tune-ups, does include
major repairs.
\8\ This includes diapers, cleaning supplies, paper supplies,
laundry detergent and other necessities to maintain a household.
\9\ Based on information provided by SC Dept. of Social Services
market survey
\10\ At 200% of poverty the child in the family is covered by the
State Children's Health Insurance Plan (SCHIP). Family over 200% of
poverty can not receive SCHIP for the child. The costs reflected cover
health insurance s of parent and co-pays/out of pocket costs.
\11\ All wage earners must pay FICA, Medicare, and sales tax. The
amount is based on 150% of poverty. Deductions would be higher at 185%
and 200%. Fed. Income tax will also be deducted, but not in chart.
\12\ To earn this amount the adult must earn approximately $12.79
an hour and work 40 hours a week.
\13\ To earn this amount the adult must earn approximately $15.78
an hour and work 40 hours a week.
\14\ To earn this amount the adult must earn $17.06 an hour and
work 40 hours a week.
Prepared by SC Appleseed Legal Justice Center, July 2008.
MONTHLY BUDGET FOR FAMILY OF 3: TWO WAGE EARNER FAMILY WITH ONE CHILD
EXHIBIT #2
------------------------------------------------------------------------
Expense Amount
------------------------------------------------------------------------
Rent/Mortgage\1\..................................... $634.00
Power, Water and Sewer............................... $225.00
Basic Phone\2\....................................... $15.55
Cell Phone\3\........................................ $49.99
Food\4\.............................................. $528.75
Transportation (car payment) \5\..................... $163.00
Gas\6\............................................... $252.00
Maintenance for home and car\7\...................... $50.00
Car Insurance........................................ $75.00
Household Supplies\8\................................ $125.00
Child Care\9\........................................ $333.00
Health Care\10\...................................... $100.00
Clothing............................................. $25.00
FICA/Taxes\11\....................................... $200.00
Church............................................... $60.00
------------------
Total.......................................... $2836.29
------------------------------------------------------------------------
INCOME
Gross monthly Income Family of Three at 150% of poverty:
$2,200.00\12\
Gross monthly Income Family of Three at 185% of poverty:
$2,714.00\13\
Gross monthly Income Family of Three at 200% of poverty:
$2,934.00\14\
Gross monthly Income Family of Three at 100% of poverty: $1467.00
ENDNOTES
\1\ This is an average rent for South Carolina for a two bedroom
apartment. Market rent is higher in metropolitan/tourist areas and
lower in rural areas.
\2\ Basic phone does not include long distance or cell phone.
\3\ This is the lowest monthly rate plan offered by mobile phone
service providers. The cost includes one line and does not take into
account any additional charges.
\4\ Based on Thrifty Food Plan for Family of three.
\5\ Purchasing a 2002 Mazda Protege for $7,880.00. Car financed at
9.34% APR for 60 months.
\6\ This is to purchase 15 gallons of gasoline a week at $3.91 a
gallon.
\7\ General maintenance of brakes, oil, tune-ups, does include
major repairs.
\8\ This includes diapers, cleaning supplies, paper supplies,
laundry detergent and other necessities to maintain a household.
\9\ Based on information provided by SC Dept. of Social Services
market survey
\10\ At 200% of poverty the child in the family is covered by the
State Children's Health Insurance Plan (SCHIP). Family over 200% of
poverty can not receive SCHIP for the child. The costs reflected cover
health insurance s of parent and co-pays/out of pocket costs.
\11\ All wage earners must pay FICA, Medicare, and sales tax. The
amount is based on 150% of poverty. Deductions would be higher at 185%
and 200%. Fed. Income tax will also be deducted, but not in chart.
\12\ To earn this amount both adults must earn $6.40 an hour and
work 40 hours a week.
\13\ To earn this amount both adults must earn $7.89 an hour and
work 40 hours a week.
\14\ To earn this amount both adults must earn $8.53 an hour and
work 40 hours a week.
Prepared by SC Appleseed Legal Justice Center, July 2008.
The amount of funds allocated in this budget for food is
based on the USDA Thrifty Food Plan. This is a very modest
amount allocated for food costs. It's very difficult for a
family to manage a basic healthy diet on this amount. The other
expenditures reflect actual costs of a family living in South
Carolina. As the budgets demonstrate all of the single wage
earner family are unable to afford to make ends meet under even
this modest budget and would have to cut corners each month.
Two-wage earner families do not do much better. Only families
at or above 200% of poverty have enough income to meet all
their basic needs and may have additional money each month to
apply to food. The majority of these households, despite
working full time, are unable to absorb the $46.00 increase in
food costs if they wish to purchase items under the TFP market
basket.
In South Carolina a very limited number of families receive
subsidies for housing costs, far more go without assistance and
are required to use much of their family budget to cover just
this cost. Utilities and transportation costs have increased
over the past year with tremendous impact to families. Since
South Carolina guarantees childcare assistance only for
families who live at or below 65% of poverty many are forced to
pay much more than they can afford. One of the ways that
families manage to survive temporarily at these low incomes is
by accumulating debt in order to make ends meet. I am seeing a
huge increase in calls from low income consumers who are making
desperate choices to meet their monthly bills. They are living
on credit cards or even worse usurious payday loans (391% APR)
or auto title loans (300% APR) that are sending them into a
downward debt spiral that has resulted in the majority of their
income going to maintain these debts. One elderly gentleman I
recently represented was just slightly over eligibility for
Food Stamps and used payday loans to ``make ends meet''. By the
time he contacted me he was facing eviction, his utilities were
being turned off and he had no food because this temporary stop
gap had overtaken all of his income. I often talk to senior
citizens or disabled individuals who are trying to decide
whether to pay their rent or utility bill. Purchasing food
seems to be the easiest item in their budget to give up. All of
this translates into a family making cuts to the food budget,
resulting in the purchase of less nutritious food or missing
entire meals, sending them in a downward healthcare spiral.
The increased demand on our state's food banks and pantries
has been tremendous. Many families who never turned to this
service in the past are now monthly visitors. Our largest food
bank has modified its distribution limitations from once every
90 days to once every thirty days. I personally participate in
a community effort to open the Columbia, SC pantry one evening
a month to accommodate working families that cannot come during
the daytime. It was determined that the evening shift should
take place at the end of the month as the household's food
stamps will only last less than two weeks and the family will
be in need of supplemental food by the fourth week of the
month. In an hour and a half we serve approximately 30
households, most of these are families that never needed to
utilize this service in the past. This is in addition to the
110 households that were served earlier during the daytime
hours. All of these households are informing us that they need
this supplemental food because their food stamps do not
purchase enough food for the month, they do not have enough
income to purchase additional food and their wages are not
stretching as far as they did in the past due to rising costs.
It is absolutely heartbreaking to have parents apologizing for
needing this assistance as if it is their fault their income
will not cover their children's needs. There has been a 35%
increase in the number of households utilizing the food bank
over the last year. Of the households utilizing the food bank
approximately 50% of these families were receiving food stamps
and 5% receiving WIC and another 5% receiving assistance from
Commodities Supplemental Food Program. One quarter of these
participants are children and one third of these participants
were over age 60. The food bank is now assisting with Food
Stamp applications in an effort to connect household to this
benefit.
While I am grateful for the assistance of the food banks,
this service is supplemental to the Federal Nutrition programs.
Food banks cannot fill the gap between the income families have
to purchase food and what an adequate diet costs. The chasm is
too wide, particularly in a year when food banks themselves are
challenged by the rising cost of food and fuel.
My testimony will concentrate on Food Stamps and Women
Infants and Children (WIC) programs. Both of these programs are
critical to addressing hunger in our state. While I want to
complement our state and local agencies that administer these
programs for their efforts to enroll households in these
programs, unfortunately not all those who are eligible are
enrolled in these nutrition assistance efforts. South Carolina
has enrolled approximately 68% of all food stamp eligible
persons in the program. Participation rate among eligible
working poor is slightly less at 64%. Approximately 12% of
South Carolinians or one in eight individuals receive food
stamps in South Carolina. Unfortunately there are hundreds of
thousands of lower income South Carolinians who are unable to
enroll in this program due to program limitations. These
households do not even have the benefit of this program to help
offset the high cost of food. Our WIC program has also seen
tremendous growth. The average yearly case load has increased
by 16,000 participants to over 124,000 in FY2008 compared to
just over 108,000 in FY2005. Many counties have seen such a
large increase in the demand for the program that applicants
have to wait six weeks before they can be seen for an
eligibility appointment.
The Food Stamp Program makes an enormous difference in the
ability to purchase food for the working poor, unemployed,
senior citizens and disabled. Unfortunately, program
eligibility limits keep it from reaching so many who are in
need. While families living at 200% of poverty are by anyone's
definition low income and struggling to meet all necessities,
these families are unable to access this important benefit. For
those who are eligible, the current benefit amounts do not meet
their needs, having been eroded over the last year. This needs
to be corrected in our upcoming budget. The Food Stamp benefit
level needs to be fully indexed to permit the allotments to
keep up with food inflation. The tremendous increase in food
costs has greatly reduced the buying power of Food Stamps. Food
Stamps in South Carolina purchase approximately $1.05 per meal,
per person as of 2007. With rising food costs over the past 12
months this benefit is purchasing even less. What was always a
modest benefit package has eroded over the past few months with
the spike in food costs. By June 2008, the cost of food had
increased 8.5 percent since the previous June, yet food stamp
benefits were $46 a month below the cost of the Thrifty Food
Plan for a family of four. The Thrifty Food Plan (TFP) serves
as a national standard for a nutritious diet at a minimal cost
and is used as the basis for food stamp allotments. Food items
in the TFP market basket chosen based on the latest dietary
recommendations, but the Plan serves as the basis for inflation
adjustments to Food Stamp allotments. While there will be an
adjustment to the benefit allotment in October of this year to
reflect this increase, it is not enough. When the adjustment is
made, it will be already four months out of date. In addition,
it will not change over the next twelve months reflecting the
increase in costs to these low income families. Congress can
address this problem for the coming fiscal year by anticipating
the food price inflation that will occur and acting to offset
some of it so assistance to needy families and elderly
individuals does not again fall short of what is needed to
purchase a minimally adequate diet. Congress should consider
increasing the food stamp benefit for FY 2009 from the benefit
increase that is scheduled to take place in October 2008 to
properly reflect the rise in food costs that will take place
over the next year. This will ensure that the lag in food data
prices is taken into account and that households will be
provided sufficient resources to purchase nutritional food,
despite the rising costs over the coming year.
I also urge you to ensure that the Women, Infants and
Children (WIC) program is adequately funded in the next year.
WIC provides Federal grants to States for supplemental foods,
health care referrals, and nutrition education for low-income
pregnant, breastfeeding, and non-breastfeeding postpartum
women, and to infants and children up to age five who are found
to be at nutritional risk and are at or below 185 percent of
the federal poverty level. WIC is unique among federally
administered programs in that it provides specific supplemental
nutritious food and nutrition education to a specific target
population as a short term intervention and adjunct to ongoing
health care. The supplemental foods provided by the WIC program
are designed to meet the participants enhanced dietary needs
for specific nutrients during brief but critical periods of
physiological development. WIC is sometimes incorrectly
described as a welfare program because participants must be
members of a low-income family. In fact, over 50% of the women
and children on WIC are members of a family where one or both
parents work outside the home.
Our state WIC agency has done a remarkable job making this
program available to pregnant women and children in our state.
The participation growth has been tremendous over the past
three years. The average SC WIC caseload in FY 2008 is 124,888
participants. Most years, the SC WIC program serves over 50% of
the infants born in the state. In June 2008, 37,443 infants
were being served by WIC. In a state where we are on the bottom
of the lists for child well-being and infant mortality, this is
an important program to help increase the quality of life for
these families. Through outreach efforts more families are
being enrolled and are having nutritional foods made available.
With this huge increase in participation comes strain to the
program. In recent conversations with the agency and potential
beneficiaries, I have learned that it can sometimes take up to
six weeks before an applicant can be seen. Six weeks of
inadequate nutrition can have a huge impact on a developing
fetus or young child. The only reason for this delay is high
demand and lack of resources. In addition, the huge increase in
food costs over the past year has had an impact on the budget
as a whole. Food packages provided under WIC are becoming much
more expensive. While the agency has not done so at this time,
it may be forced to implement a priority system for who will be
able to participate in WIC if the state does not receive
increased funds. What will this means for potential WIC
applicants? Pregnant women will continued to be served, and
most probably infants, but young children may not be able to
access to this important supplemental nutrition program. These
are the same families that have lost buying power due to the
diminished value of Food Stamps and are in great need. The
children of South Carolina are our state's future. Hungry
children or children being fed nutritionally inadequate meals
cannot learn and can be faced with many more health challenges.
This hurts all of our state, which is struggling to increase
our economy, productivity and quality of workforce. It's
critical that Congress provide sufficient funding for the WIC
program for FY09 to ensure that all eligible women, infants and
children receive the help they need from this vital program.
Given that Congress will likely first provide FY09 funding via
a continuing resolution, it's essential that the CR provide
increased funding to WIC rather than wait for the regular
appropriation. That might be months later and would most
certainly mean that eligible women and children would be denied
WIC, while the program waited for sufficient funding.
Low income families are feeling the impact of food prices
far more dramatically than families with means. A moderate
income household may choose to eat out of the home less often
or pack a lunch for work. A low income household has very
different choices available. It could mean not paying the light
bill or rent. It may mean that your children are sent to less
than quality daycare. An elderly individual may be living in 95
degree heat with no air conditioning or fan. A single mother
with no health insurance may chose to ignore the lump in her
breast, rather than have it examined early on. Or a low income
parent working 60 hours a week because she has a disabled
husband, is juggling 16 payday loans to keep from having her
world come tumbling down. For many households it means
purchasing food with little to no nutritional value because
milk and produce have become impossible to afford. Children are
being provided meals that are filling but do not provide them
with all the essential food groups. Working households who are
doing everything they can to make ends meet are coming to the
food bank once a month because they just cannot afford to
purchase the food they need. The rapid rises in food prices,
which are predicted to continue over the next few years, are
eroding the value of critical programs, especially Food Stamps
and WIC. We must protect all of our citizens who are suffering
from this economic downturn by helping them increase and
maintain their purchasing power at the grocery store. The
federal government has done so much to help eliminate severe
malnutrition in our country, but we are far from solving the
problem.
We still have a huge problem of food insecurity and hunger.
It is our neighbor, our classmate and even our co-worker. We
must act quickly to protect our citizens from the economic
downturn and provide them the assistance they need.
Chairman Spratt. Thank you very much. Dr. Steve Hanke is a
professor at Johns Hopkins and a fellow at the Cato Institute.
Thank you for coming in. We welcome your statement.
STATEMENT OF STEVE HANKE
Mr. Hanke. Thank you, Mr. Chairman, for inviting me.
Congressman Ryan posed a question in his opening remarks in
which he said, ``What are the causes for the food price
inflation?'' And I think the Federal Reserve, or the Central
Bank, is the main culprit in the food price inflation story.
The Federal Reserve creates what I term demand bubbles. Usually
the economy does go along in a trend. If you look at the
Greenspan years, eighteen years of Greenspan, that is quite a
bit. It is a generation almost. The trend rate of growth of 5.4
percent in the U.S. economy. And that was split. 3 percent of
that amount was real growth and 2.4 percent was inflation. And
there are a lot of deviations around the trend. And this is
where the demand bubble comes in. There actually were three
demand bubbles created during the Greenspan years, and this is
when the nominal final sales to domestic purchasers, or
aggregate demand, in the economy goes way up above trend. And
it cannot be sustained unless you start generating a lot more
inflation.
The last one of these got going after the equity bubble
burst on Wall Street in 2000, 2001. And the Fed, of course,
reacted to this as they always do when they think there is a
financial crisis. They push on the pedal and get the money pump
going as fast as they can in reaction to what they view as an
impending crisis. And so the money pump starts going after the
equity bubble popped, and the demand bubble starts coming down
at the same time.
And then in late 2002, in November precisely of 2002, then
Governor Bernanke, now Chairman Bernanke, gave a very
influential speech. And he warned that deflation was the real
crisis and problem that we were facing. And at that time he
convinced Chairman Greenspan and the rest of his colleagues at
the Fed that we were going into deflation, and we had to do
everything to fight deflation. And so as you will recall, that
is when the Fed really pushed on the accelerator and pushed the
Fed funds rate down to 1 percent by July of 2003. And they left
the Fed funds rate at the record low level for a full year.
Now, accompanying this, of course, as you know the dollar
started going down, and spiraling down. Since really 2001 these
things were going together, the money pump and the liquidity
was coming in, the inflation scare, even more liquidity, and
the dollar was going down more sharply. Now, it is just a
matter of simple economics and arithmetic to conclude that if
the dollar goes down, the dollar price of commodities,
including food, go up. If the dollar is going down you have to
pay more to buy a pig, more dollars, than you had to pay before
when the dollar was stronger.
So if we look at the contribution of the weak dollar to the
food prices and commodity price increases, it is really rather
remarkable. I have a table, table one actually in my testimony.
And if you look at that table there is a column, I go through
all the calculations and so forth, if you want to spend the
time with it, or have your staff look into it, you can
certainly do these calculations. The methodology I used is the
same one they use at the Dallas Fed. And what I assumed was in
kind of a counter factual exercise that the exchange rate
between the dollar and the euro, what if it would have remained
the same as it was at the end of 2001? Instead of going down,
it remained the same as it was at the end of 2001? And then I
calculate what the contribution of the fall in the exchange
rate was to the actual price increases that we have witnessed
in ten commodities that are in the Commodity Research Bureau
Index.
So we start with the smallest contribution is to soybeans
over that period since 2001, the end of 2001. About 59 percent
of the price increase in soybeans is strictly due to the fact
that the dollar has gone down relative to the euro over that
period of time. And then we have got corn, is 61 percent
increase; coffee, 62; wheat, 66; cocoa, 72; oats, 77. And if
you look in the column way to the right, Mr. Chairman, you will
see that all of those that I have just listed off with
percentages that are less than 100 percent, the last column has
a plus in it. And that plus means that there is some real
fundamental supply and demand factors that have been changing
around in those markets that are actually pushing the price up
even higher than the price increase that would automatically
take into account just the change in the exchange rate and the
weak dollar.
Now if you go down below that you see numbers for sugar,
live cattle, orange juice, and lean hogs where the contribution
to the price increase that we have realized since 2001 that is
caused by the weak dollar is actually greater than 100 percent.
And then in the right hand column you will see there are
negative signs. And what that means is actually the
fundamentals in those markets, the real fundamentals, the
supply and demand fundamentals, are actually deflationary. In
other words, if the dollar would not have changed at all the
price of live cattle, sugar, orange juice, and hogs would
actually today be lower than it was at the end of 2001.
So the main point here is, Mr. Chairman, that exchange
rates and the weak dollar are where the problem is in terms of
root causes, as Congressman Ryan referred to them. Now you
would not know from listening, of course, to the Fed. Because
they will cover up anything. You had Chairman Bernanke up here
on the Hill the 15th of July saying, ``We have looked at all
these factors.'' And he said, ``Speculators do not have
anything to do with it.'' I agree with that, by the way,
speculators have nothing to do with these price increases. He
said, ``Fundamentals. It is fundamentals, fundamentals,
fundamentals. And by the way the dollar, the weak dollar, has a
tiny impact maybe. Maybe some, but not very much.''
That was the 15th. Well this is just absolutely
nonsensical. I mean, you could not get any economist to agree
to this kind of thing. But I think he has pulled the wool over
many people's eyes with that position. And the Vice Chairman of
the Fed has made statements that have been absolutely identical
to this.
So if you want to reduce or stabilize food prices you have
got to increase the value of the dollar, or stabilize the value
of the dollar.
Now, let me just make one final remark, Mr. Chairman, if I
may, and refer to oil. Because oil is a commodity and it
happens to be also a very important input into the production
and distribution of food. And I know it is a hot button issue
up here on the Hill, what about crude oil prices, and so on.
Well actually it turns out that there is something that
government can do immediately about crude oil prices. We have
something called the Strategic Petroleum Reserve. And the
Strategic Petroleum Reserve is huge. Its draw down capacity is
greater than the export volume coming out of Iran and Kuwait
combined. So the SPR is absolutely huge. The problem is, and
both the Republicans and Democrats have this thing completely
wrong, about release rules for the SPR. And the release rules
now for the SPR, they are kind of Soviet type release rules. In
other words, they are tangled up with either bureaucratic
decision making or political decision making, determining
whether oil can be released from the SPR. My proposal is, and
this would reduce oil prices immediately, reduce volatility in
the crude oil market, and generate revenue, which is after all,
the Budget Committee should be interested in revenue
generation, that would offset some of the storage costs for
this crude oil in the SPR. And this could be done by a market
based solution, a very simple market based solution. And that
is that the oil in the SPR would be sold, or options in the
right to the oil in the SPR, would be sold in the private
market. So there would be consumption, it is called a call
option. So you would write a call option let us say for a
certain quantity of the SPR at $150 a barrel. Now the current
prices are, let us say are only $125. So that would be written
for a specific date. Let us say December of 2008. So in that
period of time somebody in the market would pay the government
for that call option to buy oil at a strike price of $150 a
barrel. And they would have that right until the termination or
expiration date of the call option, which would be December
2008. So the government gets revenue from this. And if the
price never goes up to $150 a barrel, of course, the guy who
buys the call option is not going to exercise. And the
government keeps the oil, and keeps the premium they get for
selling the call option. If the price goes up to $150 or
higher, of course, the buyer of the call option exercises its
delivery of the oil, which you can easily do from SPR. The
government gets the cash from selling at $150 and they also get
the premium on the call option so you have generated revenue by
doing this.
Now with this huge amount of inventory, this is a massive
amount of inventory, now it is dead. It is not doing anything.
I mean, some Democrats want to release some of it. The
Republicans of course are against that because the Democrats
are for it. And the solution is let the market determine what
the release the SPR is going to be. And this is the way to do
it. If you did it, you would have this massive dead resource
that would be alive now and dynamic. And it would put a
tremendous amount of downward pressure on the spot price of
oil, driving the spot price down relative to the future price.
And the whole structure of prices would come down immediately
if this would occur. This would, of course, help food prices
indirectly because petroleum and petroleum products are such a
huge input into production and distribution of food.
And with that, Mr. Chairman, I am going to conclude my
remarks. Thank you.
[The statement of Steve Hanke follows:]
Chairman Spratt. If you are buying a future why would the
future price not go down as well?
Mr. Hanke. The future, you would get two effects going on,
Mr. Chairman. Kind of the forward curve, if you plot out the
spot price now is a little bit lower than the future price, let
us say for December, right now if you look at the prices. So
the market is in what they call contango. And what you would do
with this SPR approach that I was talking about, you would do
two things. You would shift the whole locus of the curve down.
So to answer your question, the future price would come down
and the spot price would come down. The spot price would come
down more than the future price, so you would get the market
tilting. That curve would go into more contango than it was in
prior to selling call options in the SPR. So you get kind of a
double whammy. Spot price going down relative to future price,
and both spot and future price going down also.
Chairman Spratt. Does this potentially punish some of the
heavy speculators in the market and discourage their further
participation?
Mr. Hanke. Well, I mean, I would, if this program was
announced, I would not want to be short, excuse, I would not
want to be long in the market whether the near term or futures
market. I would want to be getting to the sideline. And that is
one reason, Mr. Chairman, that both the future prices and spot
prices would both come down if you initiated this. But just
think, if the world's biggest inventory of oil now that is
dead, would be overhanging the market. So you know, if you are
selling cars and, you know, you have got to, everything in
Detroit some politician says, ``Look you have got to keep it in
Detroit. You cannot let this stuff come into the market.'' And
now all of a sudden you have got a market based rule, well that
is that inventory of cars in Detroit, overhang the market, you
know very well what is going to happen. You are going to get a
better deal if you go in and try to buy a car.
Chairman Spratt. Sounds like a good deal.
Mr. Hanke. I think it is.
Chairman Spratt. Okay.
Mr. Hanke. And it is a simple one. And it would really end
up, I think you should have, you should have the Democrats all
for it because they want to release the SPR. And you should get
the Republicans if they would come to their senses and wake up,
they would be for it because they would say, ``Oh, this is a
great market based solution. We are using the market here.'' So
everybody is happy. And especially the person who is consuming
petroleum products, or consuming food, because those prices are
going to go down.
Mr. Ryan. Just for the record, I want my colleagues to know
that we are not picking witnesses that just come here and tell
us what we want to hear, all right?
Chairman Spratt. I am going to yield five minutes to Mr.
McGovern, since he is the originator of this hearing. Mr.
McGovern?
Mr. McGovern. Thank you all for being here. I appreciate
your testimony. I have a couple of questions. One domestic
related, and then one international. Let me begin with the
domestic stuff. For any of us who go home to our congressional
districts and visit food banks, you know, or you know visit low
income neighborhoods, this issue of rising food costs is all
people want to talk about. I walk into a supermarket in
Worcester, Massachusetts, people are grabbing me, you know,
elderly people, you know, average mothers coming up, fathers
coming up, and saying, ``The food prices are going through the
roof. A gallon of milk has gone up. You know, bread has gone
up, chicken has gone up. What are we going to do about it?''
And some people can make the, you know, can make up the
difference, but there are a lot of people who cannot. And as we
speak people are falling through the cracks.
I talked to some people in the audience here today who
represent food banks are telling me that the rising food prices
have resulted in less charitable giving, you know? The
donations are not as generous as they were. So the, what was
incoming is even less. And yet to meet the need is even more
and more expensive.
Mr. Bernstein, you talked about a second stimulus and about
expanding food stamps as not only a way to stimulate the
economy but as a way to kind of deal with this immediate
crisis. And I want to say that we have an immediate problem and
we have a long term problem. So let us just talk about the
immediate. Does everybody here agree that a second stimulus
package would be helpful? And that as part of that stimulus
package that an increase in food stamp benefits and maybe WIC,
or an increase in monies to food banks, would be an appropriate
and useful and helpful thing to do? That is my domestic
question.
On my international question to Ms. Sheeran, I wish that we
would have a debate on what national security is in this
country. And I think it needs to include more than military
bases and bombs, and number of troops. I think it also should
include things like economic security here, but also, you know,
lowering poverty rates, lowering hunger around the world. I
wish the Homeland Security Committee would get on board and be
demanding more investments in international hunger programs and
food programs because I think it is a way to bring stability to
the world. When people are hungry and people are in poverty and
they are hopeless they are more likely to turn to desperate
measures.
And, you know, one of the programs that you mentioned which
is near and dear to my heart, the McGovern-Dole School Feeding
Program, which I like not only because it has got a great name
but because it is feeding hungry children in school settings
all around the world. Kids get fed and they get an education,
they become literate. So you are getting two things done. We
have been battling on this program for many, many years to get
an appropriate funding level. We began with $300 million, got
cut down to $50 million, we are now up to $100 million in the
Farm Bill where, you know, we do not know where we are, but
hopefully above that.
My question to you is, what does $100 million buy you
today? $100 million would buy you X. What does it buy you
today? I mean, how much, how much have these rising food prices
eroded the purchasing power of what we had thought was a fairly
decent and generous program?
But let me begin with the domestic people first.
Mr. Bernstein. Well, and my answer is obviously yes to the
question of whether a second stimulus is necessary given where
the economy is and where it is expected to be over the next
year or so, and the urgency of the food needs that we have
discussed. The, just to repeat something I had in my testimony,
the Moody's Economy.com evaluated thirteen different stimulus
programs, either spending increases or tax cuts. And of those
thirteen far and away food stamps were the most stimulative in
terms of the additional bang for the buck or multiplier type of
growth you get from a dollar spent in that area. The
Congressional Budget Office agrees, pointing out that almost
100 percent of food stamps are directly spent on food by low
income families who are pressed, as you have heard from other
witnesses. So unequivocally yes.
Ms. Berkowitz. I agree with Dr. Bernstein. We need to,
people are going hungry because they do not have enough
resources to be able to purchase their food. Increasing the
food stamp allotment is going to be critical. People are coming
to the food bank now much sooner in the month because their
food stamps are not buying as much. And so the stressors are on
the food bank, they are on the individual households. And one
important way that we can address that whole problem for people
who are going hungry is to give them more spending power. And,
you know, as Dr. Bernstein said, that is money that comes into
our State, it is spent in our local economy, and it has a
multiplier effect.
Mr. McGovern. And before I go to Mr. Hanke, I just wanted
to point out for the Committee. A year ago my wife and I took
the food stamp challenge. We lived on a food stamp budget for a
week. The average food stamp benefit is about $3 a day. And so
we went and compared what we bought last year to this year.
There is a $10 discrepancy. And yet the food stamp benefit had
not changed. Now the Farm Bill addresses some of that, but it
is incremental. It does not happen all at once. Mr. Hanke?
Mr. Hanke. Yes Mr. McGovern, let me say I will react in
kind of a general way. Because I think any stimulus package,
that could cover a multitude of things.
Mr. McGovern. Well, should there be an emergency benefit,
emergency relief to expand food stamps given the crisis we are
in. I guess that is the, whatever you want to call it.
Mr. Hanke. Let me kind of stay on, try to answer your
question and be responsive and make a comment. And that is that
we have gone with the Bush Administration we have had a 68
percent increase in government spending. To compare it to the
Clinton years, Clinton was 32 percent. So we have had a
massive, wild spending spree going on in the government. And
with the announcement of the kick up in the deficit, I saw the,
I read in the New York Times the Chairman's comments, and I
think the Chairman would probably frown on increasing spending,
and stimulating something, and increasing the deficit. So I
have concerns with spending more money.
Mr. McGovern. Right, but understand one thing. For the
record, I mean the food stamp benefit has not been expanded
over these last several years. And maybe the number of people
who are eligible, but the actual benefit has not expanded. So
it has not been we have been more generous in the benefit. And
we are at a point right now where there are people who are
falling through the cracks who without additional help, I mean,
the food banks are at capacity, will go hungry. And there is a
cost to that, too. Healthcare costs. Kids who cannot learn in
school. Lack of productivity. So it is not like----
Mr. Hanke. Knowing what these price increases have been,
and their cause, coming out of this weak dollar that I
mentioned earlier, I would react positively what you are saying
if you could cut on a one to one basis something out of the
budget and reallocate it for food stamps. So if you wanted to,
you know, increase $100 million for food stamps and take it out
of the Defense Department I would not have any problem with
that.
Mr. McGovern. I am all for that when we start paying for
the War, which we have not been paying for.
Mr. Hanke. Yeah. Well, but one thing on the stimulus thing,
and the rebate program, you know the tax rebate program, the
last big tax rebate was President Nixon did this. And Milton
Friedman, who I am certain you have heard----
Mr. McGovern. Right. Oh, yeah.
Mr. Hanke [continuing]. Of Milton. And Milton was very much
opposed to this stimulus package. And of course, his reasoning
on that is the same reasoning I used when I was opposing the
stimulus package that just came out of Washington. And the
reason for it is that it is viewed as a temporary thing, not a
permanent thing. If it was a permanent thing people would say,
``Oh, my income has gone up permanently and I gear my
consumption off of that increase in permanent income.''
Mr. McGovern. Without delaying this further----
Mr. Hanke. Yeah.
Mr. McGovern [continuing]. You could actually do an uptick
in the food stamp benefit so that it could reach up to where
the Farm Bill would take it. You know, so there would not be a
drop off. I mean, I am just----
Mr. Hanke. I have no problem in increasing the food stamp
program if you can identify specifically and not with the
typical Washington fun and games kind of exercise where you are
going to take the money from.
Mr. Bernstein. You know, with respect to--can I respond to
some of Mr. Hanke's points?
Mr. McGovern. Sure.
Mr. Bernstein. With respect to much of his analysis, the
permanent or temporary income hypothesis is completely
irrelevant in this area of food stamps. What we are talking
about are people whose resources are such that they are unable
to provide enough food. So they are not looking at a stimulus
in terms of whether this is a temporary or a permanent shift in
their permanent income. They are simply having more resources
to buy completely, inelastically demanded goods, which is food.
So I do not think that applies there.
Secondly, I do not believe, you know, I think that much of
your analysis confused correlation with causation. I understand
that exchange rates and food prices have been moving in ways
that you showed in your analysis. But the list of factors, and
the Chairman listed them at the beginning of the discussion, as
to what's driving food prices does not include the, that are
widely accepted by experts in this area. Which does not mean
you are wrong. I am just saying that the conventional wisdom on
this, and I think it is correct, does not include either
exchange rates or Federal Reserve policy. It includes natural
phenomena, droughts, disruptive weather. It includes quick
rising demand in developing countries. It includes energy,
diversion into biofuels. It includes some of the hoarding that
Ms. Sheeran expressed. I do not, I was not convinced that
interest rates and dollar movements had much to do at all with
this. And secondly, the implications of your thinking on this I
thought were misguided in the following way.
The implication would be that raising interest rates would
somehow be a part of the solution to the problem we are looking
at right now. And raising interest rates right now simply would
not do anything on the supply side. What it would do would be
to slow the economy down further, to dampen demand, and to
deepen the current downturn, whether it is job losses or wage
losses. So I do not see where raising interest rates, slowing
the growth of the economy, would have any of the effects that
we want it to in this regard.
Now, if you were to dampen economic growth such that people
had fewer jobs and lower wages and lower incomes and they could
buy less food, perhaps the price would come down based on
diminished demand. That is absolutely not, you know, where I
think we need to head.
Mr. McGovern. Ms. Sheeran, if you could answer, people say
to me all the time, you know, ``You got $100 million last year,
you got $100 million this year, so you are getting the same.
You should be happy.'' What are they missing?
Ms. Sheeran. Well, as I mentioned we are able to fill this
cup 40 percent less. And as this food crisis deepens we lose
more and more of the value of this cup. So in order to keep the
same amount in this cup we actually need the additional
funding. So just the erosion of the cost of food is really
causing a terrible situation.
I will say in my job there is nothing more heartbreaking
than needing to cut off schools from School Feeding. It becomes
the lifeline for these children, and this year we had to cut
off all the school children in Cambodia. We had to end our
School Feeding Program in the slums of Kenya just because we
ran out of money just due to the higher price. And so the----
Mr. McGovern. And what happens to those kids?
Ms. Sheeran. Well most of them cannot afford to go to
school then. Because they have to go forage for food, or find
money for their families, or go feed themselves. And so we are
really, we have already triaged, as we know we lose a child
every six seconds in the world to hunger. So we obviously are
not reaching all of them. The ones that we reach are the ones
we can identify as the most in need. So these are not children
that have a backup plan. And these are not children whose
family have a backup plan.
I do want to get to your national security issue. We know
that every study shows that in order to build secure
democracies you have to have education and you have to have the
basics met. This is just the fundamentals. We knew this after
World War II. We knew this during the Marshall Plan. This cup
is a magic cup. It cost ten cents before the food crisis to
fill it. It now costs about 25 cents a day. It transforms
communities. And it is not a permanent charity. Countries take
this over. And this year we have had 28 countries graduate from
the school feeding programs introduced through the generosity
of the U.S. and others. And Jordan and Morocco now run their
own School Feeding Programs. We are out of the business. We get
out of the business because once we can structure them and once
countries see the power of them.
I saw a survey of parents to send their kids to radical
schools. Number one reason? Food. Number two reason? Uniforms.
You go down the list. How do countries compete with the radical
schools if they can't even provide a basic meal in school? And
what is so exciting is we are learning how to power pack this
cup so it has the adequate nutrition at a low cost. And we are
working with companies in America and Europe and elsewhere to
figure out how to get smart about what is in that cup. Once we
model those programs they can be handed over to communities,
and we do so regularly. And amazingly in some places we are
able to fill this with produce grown by local farmers, like in
the DRC, who are in a war zone. So it becomes a win-win cycle
of stabilizing those societies.
So I actually am a radical about school feeding. George
McGovern said he will not rest until every child on earth at
least has a cup of food in school. And I asked how much would
that cost. I was just intrigued. At WFP, under our cost
structures, for the world to say, ``No child goes to school
hungry,'' before the food crisis would have cost $1.5 billion a
year. Now this is not an end to human hunger, but the world
could say, ``No kid goes to school hungry,'' for $1.5 billion a
year. After the food crisis about $3 billion a year. But what a
powerful safety net that America has learned, even a rich
country like America, is you cannot afford to have your kids
slip through the cracks.
So even this year I was able to get the first multilateral
contribution from Brazil, who gave us the money to look at best
practices in school feeding to teach governments how to do this
most cost effectively with the biggest nutritional punch, and
how to reach the kids most in need. So we are very serious
about staying the course on this, and we need McGovern-Dole.
I had President Sirleaf-Johnson of Liberia call me the day
before the vote on McGovern-Dole. She said, ``What's happening?
What's the latest? I need this in my,'' I mean, she was just,
you know, and so the work of the committees and everything is
on the mind of the leaders in countries of Africa and
elsewhere. She was following committee action on McGovern-Dole.
She wanted to know exactly the standing of it. She wanted to
know could Liberia count on kids having food in school. This
is, there is just nothing more compelling than this program.
And I think it is nothing more symbolic of the kind of
generosity that America shows to the world.
Mr. McGovern. Thank you.
Ms. Sheeran. And I want to thank you for your leadership on
this.
Chairman Spratt. Mr. Garrett?
Mr. Garrett. All right, thank you Mr. Chairman. I just have
a couple of questions and I will throw them out first and then
look to your answers. And the one was prompted in part by Mr.
Hanke's comment with regard to the value of the dollar and how
that may impact upon food prices. I am a little bit intrigued
by Mr. Bernstein's comment with regard to affecting the rate.
So my question is this. With regard to what the Fed has done in
recent with regard to, from some perspectives either having a
negative influence on the dollar, in other words a lesser value
dollar, what is the impact therefore on the price of food? Has
the Fed's action when they did such things as, took action with
regard recently to the financial situation, crisis, if you
will, in the country, with Bear Stearns and like, where they
open up the discount windows for thirty some odd billion
dollars, the recent action in this past week we took with
regard to the GSE situation and the bailing out of Fannie and
Freddie to at least the figure of $25 billion at one analysis
of CBO to a greater potential of upwards to $5 trillion, what
impact does that have upon the value of the dollar and
therefore food prices? And lastly, and it may be all tied into
that, a question I asked to Ben Bernanke when he reported for
Financial Services is what level of ability does the Fed have
to continue to take these actions that they have taken, which
basically says to extend federal dollars to various financial
crises that we have in this country? Is there not some
limitation to the Fed's balance sheet in this area? My analysis
of it is that what we potentially would be doing, because the
balance sheet is not without limit, not the U.S. government's
balance sheet but the Fed's balance sheet, is not without
limit. So I look at an analysis between $22 billion and $40
billion at some point you are then monetizing the debt. He
disagrees with that. We are not monetizing the debt. I would be
curious your opinion on that general question.
The second one, totally different, goes to something that
hits in my backyard with regard to a particular commodity, and
that is sugar. This House has historically from both sides of
the aisle, quite candidly, has supported Farm Bills in the past
that affect sugar production. And I guess under past law the
price of sugar is heavily regulated. Regulated as to how much
can be produced in this country, how much sugar can be imported
into this country. Also I guess that sugar producers have
certain availability through the USDA to certain things called
non-recourse loans, that's statutory set loan rates which are
beneficial. And also tied to this is the whole energy
situation. And I guess we just passed in the Farm Bill
legislation saying that if they have any extra sugar then that
sugar has to go to certain, what do you call, sugared ethanol
programs in this country. So in essence there is not any
surplus that you can go to, various programs or to bring down
the cost to the consumers. The numbers I have say that the
overall policy costs consumers roughly $1.5 billion, that is
with a B, annually in higher food prices. And the second little
provision, I do not know how little, the sugared ethanol
provision costs the consumer roughly $400 million a year in
addition.
I would think that in addition to the companies that I
represent in my district, which are companies that use the
sugar, and some of them are now saying, ``Well, we should just
go and open our plants elsewhere in the world because it is
cheaper.'' They are impacted by it. I would also think that my
constituents who are lower income level have to be impacted by
this as well. And so the Farm Bill that we are trying to pass,
or do pass year end, Republican and Democrat alike, are
supposed to be out there to help the consumer. My analysis of
it is just the opposite. Tell me if I am wrong, that at the end
of the day what we do actually has hurt the consumer? And if I
am wrong, explain to me why I am wrong.
Thank you. I will yield to whoever wishes to address. And
why do you not take the financial question first, I guess.
Mr. Hanke. Why do I not start, if you do not mind, Mr.
Garrett. On the financial question it relates to what Jared was
talking about when he was critiquing my testimony. And number
one, I never said anything about increasing interest rates. I
do not know where he drew that conclusion. But also, it is very
important to realize that if you look at table one in my
testimony I do include all the real factors that Jared was
referring to. Increased demand from China, increased demand
from India. All these factors are included in the last column.
Not in a quantitative sense but I at least give the direction
of which way they were going. So all those real factors are
included. The big one that counts is the dollar. And this has
nothing to do, Jared, with correlation. It happens it is
correlated. It is straight causation. And that is if the value
of the dollar goes down it simply, the arithmetic works out you
have got to pay more dollars to buy a hog if the dollar is
weaker.
Mr. Bernstein. If it is an imported hog.
Mr. Hanke. That, no, by, all these are internationally
traded commodities. Sugar, we are talking about, cocoa, and so
on. And rice, for example, rice was mentioned earlier. It is
not in the CRB Index so I did not include it but rice is the
same thing. So all these real factors are included by just
looking at the right hand column.
Now I did not, and also the overwhelming magnitude of the
causation that you get, not correlation, the causation, is the
dollar. It is a dollar problem but no one really wants to talk
about it.
Now let us talk about sugar a little bit. If you look at
sugar in the table here, it says that the weak dollar has
caused over 112 percent of the increase in the price of sugar.
And then you look to the next column and there is a minus sign.
That means that the market itself, the fundamentals, are
bearish. In order words, if nothing would have happened to the
euro/dollar exchange rate the price of sugar would have
actually gone down from 2001. It was 7.39 cents per pound at
the end of 2001. And it would have been 6.81 cents if the
dollar had just stayed on par with the euro and hadn't changed.
That is in the chart too.
Now, bottom line to your question, Mr. Garrett, about has
the sugar program, I mean, this is a classic deal that has
taken consumers in the United States for one of the greatest
rides in history. I mean, end of story. I mean, everyone knows.
I mean, this is forty years ago they were writing Phd.
dissertations in economics about what a Rube Goldberg kind of
affair the sugar program was. So I mean it still goes on. It is
very costly. I have not looked at put a sharp pencil to the
numbers that you are talking about, but it is very costly for
users of sugar. And it is a protectionist program for sugar
producers.
Mr. Bernstein. I agree with the last part of the analysis
about subsidies. I cannot find any counterargument that makes
sense to me. So I agree with you on that point.
I suppose Steve and I could continue to argue about the
role of the dollar. The way I would view this would have a lot
more to do with understanding the role that the dollar plays in
the difference between the prices of food that is imported and
food that is traded domestically. I totally agree with Steve
that a weaker dollar makes imports more expensive. It also
makes exports more competitive. And actually that has been
demonstrably helpful to us. It is one of the few areas of our
economy that is expanding right now, is the export sector based
on a weaker dollar.
Now I did not mean to say at all, Steve, that you suggested
higher interest rates. What I tried to say is that was
implicit. My interpretation is that is implicit in the sense
that if you believe that the Fed did or is holding interest
rates too low, I know you did not say that, but if you were to
believe that the Fed's interest rates were too low and were
leading to the kinds of problems that we are talking today in
the panel then you would conclude that the Fed needs to raise
interest rates. And in fact it is quite clear that a Fed
interest rate, even the pause, they do not even have to raise
interest rates, they just stop lowering them, has increased the
value of the dollar. So if you believe that the dollar is
behind all this then it is absolutely clear that you would
logically advocate for higher interest rates, strengthen the
dollar, and reverse the problem you are talking about.
Now there are obviously other moving parts that you might
not agree with. But that part of your analysis I just do not
see how you get away from that.
Mr. Hanke. You get a strong dollar by having a strong
economy. So you can do all kinds of things to strengthen the
dollar. If you want a policy to strengthen the dollar one thing
you could do just on the policy side, the Bush administration
and the Congress have had an obsession with the Chinese. They
are beating up on the Chinese about the currency. Now that is a
weak dollar policy. You want the RMB to appreciate vis a vis
the dollar. So the overall thrust in international policy of
the Bush administration has been this obsession with one tiny,
ill considered in my view, item. And that is the RMB/dollar
exchange rate. Which is just complete nonsense and a waste of
time. And one reason we are in such hot water right now is that
the Treasury has not even been thinking about anything except
going to China, you know, and beating up on the Chinese again.
So all of the things with regard to the dollar, we do not
have to talk about interest rates at all. We have to talk about
things that make the U.S. economy strong. That is what makes
the U.S. dollar strong. And as far as the vibes go and the
policy thrust goes, we get off of the Chinese case. Because
that is an explicit weak dollar policy that we have had. And we
have been following it. And of course, no one wants to admit
that that is what the policy is. You know, they still every
once in a while come out with some kind of language and
rhetoric about strong dollar. It is just nonsense. The policy
is a weak dollar.
Chairman Spratt. Let us go now to a real food producer, a
Mississippi delta farmer, Mr. Berry.
Mr. Berry. I find myself in the position of the old story
that you heard about Capital Hill, where opponents on the same
issue were admitted to the Member's office all at the same
time. And they presented their case. And he said, ``If you want
me to agree with both of you, one of you is going to have to
leave the room.'' I think all of you make good points. I do not
think you have to be all broke out in brilliance to figure out
that if food costs more it is going to take more money to buy
enough for everybody to have enough to stay alive. I think that
is just a very simple truth. Your number of $3 billion to
provide, I presume, all the children in the world that do not
get enough today, how much are we putting into that now? How
short are we?
Ms. Sheeran. There are many, many organizations and many
faith based groups that do great work. So I only know our
numbers.
Mr. Berry. Right.
Ms. Sheeran. But WFP is reaching about 20 million kids a
year. The U.S. puts about $100 million into McGovern-Dole's
School Feeding, which reaches about 3 million of those kids.
One thing we had sought was predictability of that so that we
can promise schools we will be with them for three, four, five
years. And we have made some progress and I thank you all for
that. But there is room to be made there.
So the gap is about 59 million children. And, again, you
know, this would be a sliding scale because it is never a
permanent charity. So the gap now is 59 million children
globally who go to school hungry. Who do not receive any help
in school.
Mr. Berry. And it would take an additional $3 billion to
fill that gap, is that----
Ms. Sheeran. Under our cost structures.
Mr. Berry. Yeah.
Ms. Sheeran. You know, and again, we are not talking about
meat, potatoes, a dessert.
Mr. Berry. Sure.
Ms. Sheeran. We are talking about a humble cup of porridge
but it is a lifesaving cup of porridge. We have an ambassador,
Paul Tergat, who is the world's fastest man. I think he ran the
fastest marathon. And he grew up on the school feeding. And he
was saying that before that he would walk to school and faint.
He could never, after that it changed his life. So the cup is
enough to really sustain life and allow children to concentrate
in school.
Mr. Berry. That seems to be a pretty simple concept to me
and it is not that expensive when you spread it out.
Ms. Sheeran. In a $40 trillion global economy, is this
something humanity can figure out now?
Mr. Berry. Yeah.
Ms. Sheeran. Is how to ensure that at least no kid goes to
school hungry. That is a big investment for humankind.
Mr. Berry. I thank all of you for your work, and for being
here today. I find the economic discussions interesting. And
one of the things that interests me about it is that there is
never any consideration given that I have ever heard until I
ask for it, and most of the time do not get it then, about the
connection between the cost of production and how much this,
the cost of production has no relationship to what the food
sells for. That is the reason we have farm programs. The
farmers, the people that produce this food, take what they are
offered by the market. It does not matter what the dollar is
worth. It does not matter about any of those things, that is
what they get for it. They are completely at the mercy of the
market. And that is they way they are treated. And it always
kind of gets under my skin when people criticize farm programs
and I know that is done abundantly here. And that is fine. In
this country everybody is entitled to their own opinion. But
how we have had these farm programs criticized for these many
years we have also had the cheapest per capita food costs in
this country of any country in the history of the world. And it
remains that way, and I suspect will be for a long, long time.
And I think those things need to be entered into the equation
along with a lot of other, is it macro? I am a tractor driver.
I am not an economist. But macroeconomic considerations. But I
thank all of you for taking your time to be here.
Mr. Bernstein. Can I respond to your comment? You know, I
take your point and I think as an economist the cost of
production has to be considered in understanding the price of
food. And I also understand how critically important these
markets are. And the economic conditions faced by our, and
natural conditions, faced by our farmers are. And the
importance of their ability to hedge, and the importance of
their ability to offset years that are particularly
unfavorable. And so my comment to the Representative a minute
ago was based on a simple calculation of what subsidies cost
people. That does not mean that those subsidies are useless, or
even necessarily bad, but they are costly. And that money could
arguably, is arguably being well spent in terms of diminishing
volatility in the markets. The only problem I personally have
with this, and you know I am happy to chat with you at your
convenience about it, is that the subsidies do not appear to be
all at flexible to prices. So that when food prices go through
the roof, and the farmers are, price times quantity is going
way up, one could imagine subsidies adjusting under those
circumstances.
Mr. Berry. Thank you.
Mr. Bernstein. Thank you.
Chairman Spratt. Mr. Jordan?
Mr. Ryan. I did not mean to jump on you. I gave Scott the
chance to go earlier because he had to get going. So I will
take my time now. Thanks.
Mr. Hanke. Mr. Chairman? I was going to respond briefly to
Mr. Berry, if I could.
Mr. Ryan. Sure.
Chairman Spratt. Sure.
Mr. Hanke. He was talking about input costs, the cost of
producing food and I wound up by talking about oil prices. And
oil and oil products are a very large input into the production
and distribution cost picture for food. And looking then at the
point that I started out with about the dollar, you have to
realize oil is trading now, crude is trading for let us say
roughly $125 a barrel. $60 of that $125 price is now accounted
for simply by the decline in the value of the dollar since
2001. So anyone, Mr. Berry said he is driving a truck, and
obviously has a trucking company or something like that, I do
not know the details, and is involved with farmers, and worried
about their input costs. Well, if you told a farmer that by
having a stable dollar that stayed the same relative to the
euro as where it was at the end of 2001 you would knock $61 off
the price of a barrel of oil the guy would be jumping for joy.
So this is the point. Coming back to this causation of
thing here with the dollar, we are talking about big bucks here
with regard to production costs that Congressman Berry was
concerned about. Thank you.
Chairman Spratt. Mr. Ryan?
Mr. Ryan. Bring up chart three.
[Chart]
Mr. Ryan. This is a very interesting conversation and I am
glad Mr. McGovern decided to have this. Oh no, I am sorry.
Chart six. I will just go through this fairly quickly. This
shows, this is a nominal chart, nominal dollars, we have
doubled food aid for the federal budget over the last eight
years. If you go to chart five, 59.2 percent of food aid by
major donors over the 1995 to 2005 comes from this country.
[Chart]
Mr. Ryan. And if you take a look at this dollar issue, we
are not stretching our dollar very far. And so you are
quantifying it and your cup is being knocked down by 40 percent
per cup?
Well, if you could go to chart two, please, this is a
little bit different.
[Chart]
Mr. Ryan. We kind of do our own charts here. But I read
that Dallas Federal Reserve study, which I commend to anybody.
I think it is a very interesting study which attributes and
tracks the price of the dollar, the relative price of the
dollar, versus commodities. This is the price of the dollar,
which is the blue line, versus agricultural commodities, the
green line, and oil, crude oil prices, the red line. And you
can see a direct causation, I would say, not a correlation. If
you go to chart one, we are now in negative federal fund rate
times right now.
[Chart]
Mr. Ryan. And so to Jared's point--I am sorry, that is your
first name. Mr. Bernstein's point, I apologize.
Mr. Bernstein. You can call me Jared.
Mr. Ryan. To your first point, I would have if I were a
Federal Reserve Board governor, voted with Richard Fisher and
not voted to cut those last few rates. And the argument would
be now we are in negative rates, negative territory. We are
feeding inflation. And if you take a look at consumer prices,
meaning consumer cost of money, consumer rates are not going
down with these federal fund rate cuts.
Mr. Bernstein. Would you raise rates now?
Mr. Ryan. I would take back these rate increases, I would.
And I will be brutally honest about that. Because I think we
need to do more to leach inflation out of this economy. I think
the Federal Reserve is courting inflation. The Federal Reserve
thinks they can get this back in the bottle before it is too
late. I am suspicious of that. Even the Federal Reserve's own
measurements, the TIPS yields, the Mishkin survey, all of them
are showing that we have inflation. Headline inflation is
screaming, it is a 17-year high. And so if you take a look at
what the Federal Reserve has done lately, consumer rates, car
loans, auto loans, mortgage loans, credit card loans, those
rates are not going down. So this is not even getting passed on
to those consumers at the low income scale that we are so
concerned about.
So let me just make a point and then I have a question. Ms.
Sheeran, did I get that right?
Ms. Sheeran. Yes.
Mr. Ryan. Ms. Sheeran, I found your testimony very
compelling, very interesting, real food for thought, no pun
intended. And I think there are many around here that are
rethinking this issue. Rethinking the issue from a foreign
policy perspective. Rethinking the issue from a ``how do we win
the hearts and minds,'' because that is after all what our real
foreign policy challenge is now. And when we look at this issue
I think a lot of us take more of a sympathetic view to Jim's
ideas and his policies. But when you look at the root cause of
this, the dollar decline is a major factor here. It is a major
factor to low income people in South Carolina. It is a major
factor to people in the third world. But then you combine that
with what Congress is doing. And I am not blaming Democrats
here. Republicans are equally, you know, to blame for this. You
get a Farm Bill which I would argue props up prices for
commodities. You have got a Farm Bill that among other things
led to Doha blowing up yesterday which was supposed to be the
third world round. Now we are denying market access for third
world countries to get on to lives of self-sufficiency. And so
we do not see a real end in sight here. We see the dollar still
declining. We see inflation on the horizon. We see the dollars
we are spending in these food programs being stretched more
thinly. We see no more trade markets opening up for the third
world or for our agricultural commodities for that point. We
see a Farm Bill that is a protectionist Farm Bill, that is
going to prop up prices.
And so let me ask you, Dr. Hanke, to start with. If we were
to do what Mr. Bernstein said, or asked, my question, if we
were to take back some of these rate cuts from the Federal
Reserve. If the Federal Reserve were to tomorrow make a very
explicit, I think Mishkin gave a speech on price inflation
targeting the other day. That may have made a little bit of a
difference. But if Chairman Bernanke, Vice Chairman Kohn were
to say, ``Inflation is the biggest concern. We now are, you
know, we explicitly go after inflation, it is outside of our
comfort zone, and we are taking back some of these rate cuts.''
What do you think the response would be in the markets and with
respect to the price of the dollar?
Mr. Hanke. My inclination is consistent with yours and with
Fisher at the Fed, the Dallas Fed, the President of the Dallas
Fed. So I would have no problem with taking back these. And if
we did take back some of them, now this gets to what Jared says
was implicit in my statement. I will make it explicit, if that
makes you and him happier. I would be inclined towards taking
them back in a strategic way because I think inflation is a
major problem that hurts everyone. And Jared, you know very
well it hurts the poor more than it hurts anyone else. I mean,
they are consuming 100 percent of their income. They have no
way, they are not saying anything so they do not even have to
worry about protecting it with TIPS or some other kind of
inflation hedge of some sort. They are right in the corner,
just getting screwed into the corner with inflation worse than
anyone else. As I said, it hurts everyone but it really is a
scourge for poor people.
And so I would be wanting to fight it. And if you took back
some of the rate cuts and assuming, you see it gets tricky when
you talk about currencies. Because it depends on what the
European Central Bank and other central banks are doing
simultaneously.
Mr. Ryan. And they have been raising rates.
Mr. Hanke. They have been raising rates because inflation
is even more out of control in Europe than it is here. And they
have been very focused on getting this thing contained. But
again, I think we would have to talk about some things that
maybe are near and dear to our heart like, you know, reducing
taxes on capital. Remember what Ronald Reagan did and what
happened to the dollar when the supply side revolution came in.
So, I mean, if you want a strong dollar there are lots of
things that you have to look at on the menu and evaluated. And
it gets into a fairly complicated picture.
But one thing, a position similar to President Fisher of
the Dallas Fed would be the one that I would take. So you would
have to conclude that I would be perfectly comfortable taking
back some of the rate cuts. And I think there would be a huge
rally in the dollar. Gold prices would really tank and
commodity prices would come off very sharply. Oil would come
off very sharply, combined with this thing that I was
mentioning about the Strategic Petroleum Reserve. I mean, oil
could come off, you know, $50 or $60 a barrel like nothing.
Mr. Bernstein. Can I just make a quick response?
Mr. Hanke. Sure.
Mr. Bernstein. You know, the story that you are telling and
the story that Steve is telling, I understand it. And I think
there are a lot of moving parts. And I think you have some of
them right and I think you have a lot of them wrong, and we
could have a good argument about it.
Mr. Ryan. Do not go and get too Keynesian.
Mr. Bernstein. And as Steve says, there are a lot of
complicated moving parts here and I agree with that. I think
the whole discussion of the dollar, the macro policy, the SPR,
the extent to which dollar policy bleeds through into food
inflation is at some level a real distraction from what is so
compelling right now that I have tried to express in my
testimony, and my two colleagues here, which is just the actual
budget constraints faced by people today. Much more severe, of
course, internationally, but you can go to South Carolina and
see this. So we could have all the great arcane economic
arguments you want, and you would score some absolute points. I
do not want to suggest that what you and Steve, but the fact is
that expanding food stamps is very simple and gets money, you
know, gets water on the fire today as opposed to perhaps your
macro model, you know, is not really as correct as you think.
Mr. Ryan. Okay. I am not trying to deny that point. If it
costs $2 to buy a sandwich instead of $1, you know, you are
going to have to add another buck to the till. The point is,
what we should be talking about here is what is the root cause
of this. Why is this happening? Instead of increasing our
budget deficit and paying for more of it. Let us address the
root cause of it.
Mr. Bernstein. Can we do both?
Mr. Ryan. Why it is costing so much more. So I am not
denying the notion, the need that our dollars are not going as
far and therefore we are feeding fewer people. But as a policy
maker I think it is important we address the root cause so that
we break this cycle.
Mr. Bernstein. I agree with that point.
Mr. Ryan. And so I think it is important for those in the
food community who are looking at just expenditures, who are
looking at the fiscal side of it, to contemplate the monetary
phenomenon behind this and to realize and understand the
monetary policy, which I am criticizing our administration's
monetary policy. You have heard me do this. I am saying we
ought to look at this root cause. And if some better monetary
policy were begun, were practiced, I think that is interesting.
Let us say we do a 50 basis point hike tomorrow and an
explicit, you know, declaration of, you know, in concerns of
inflation, you would see a dramatic improvement in these
programs and the ability to fund these programs. That is theory
but it is theory backed up by a lot of data. It is theory
backed up by a lot of sound data.
Mr. Bernstein. You will also see unemployment rise and job
losses deepen, and nominal wages grow more slowly. I mean----
Mr. Ryan. Let me throw back at you that. They just laid
off, they are closing down a big GM plant in my hometown
because of $4 gas prices. Because of oil hitting, you know,
$120. The airline in my district just slashed their jobs by 40
percent because of fuel prices. Because they hedged at $80 a
barrel, that is what they though it was going to be, and wham.
Mr. Bernstein. We have a national problem with energy.
Mr. Ryan. So inflation is costing jobs in this economy as
well. And inflation, I would argue, is probably causing more
harm in this economy than these federal fund rate cuts which
are not producing results for consumers. These rate cuts are
not filtering through to the consumer. They are stoking
inflation. And that is the argument that I and others would
make. But, yeah, if you want to add, Ms. Sheeran, I want to
make sure I pronounce your name right.
Ms. Sheeran. Thank you, Congressman Ryan. I just wanted to
urge that we also look at the food supply issue. Because what
we are finding is no matter how much cash we have we are having
a hard time procuring enough food. And we are seeing nations
having a hard time procuring it. According to IFPRI the world
has been consuming more than it produces for the last three
years. By the year 2050 the world has to produce twice as much
food. This should be very good news for American, because we
are one of the major food producers, if not the most major, in
the world.
Mr. Ryan. That was my next question. Tell me the story
about rice, and about some of the more protectionists policies
in other governments, I think India is probably the number one,
that have been hoarding rice. Tell me about how that is
affecting these programs.
Ms. Sheeran. I think we are down to less than 7 percent of
the rice in the world actually being traded on markets. And
actually there is only a small percentage of food that is
actually ever traded on global markets. Which is part of the
problem, because you just tip that balance just a little bit.
You have countries go into hoarding, or building up supplies,
or panic buying, and it actually creates a supply problem. And
so, you know, part of, you know, if you look at the whole food
security structures after World War II they were really
designed for a different market, a different world, and
different production system. We are now in a world where we
have been through a period of time of more abundant food, lower
cost food. We need new food security structures in each country
to deal with the challenges that we have coming ahead. And we
have to look at facts like do we need emergency stocks? Should
we have a global SPR for food? All of these issues in order to
both deal with price mitigation, but also supply issues. How do
we get the production up?
We have a huge burgeoning humanitarian crisis in countries
like Kenya, where farmers cannot plant because they cannot
afford the fertilizer or the diesel. So we have this kind of
compounding crisis. But we also have a supply problem. There is
not right now enough food, and all these stocks have been drawn
down to all time lows. So I just urge that we also look at this
issue. And I think it would serve the United States well to
really look at food security to really kind of dust off the
whole picture and look at it for the coming years ahead, when
the world is going to need twice as much food produced, and how
the United States farmers can not only benefit from that but
how to ensure that our food security structures are responsive
to that.
Mr. Ryan. Thank you, Ms. Sheeran.
Mr. Hanke. Congressman Ryan, on the rice issue I have
looked at this quite intensively since I am a professor at a
university in Jakarta, Indonesia which was close to the
epicenter of the rice problem. And the fundamental problem here
is that you have got governments involved in manipulating the
rice production and market to such a mind boggling extent, and
contradictory policies that are working at cross purposes. And
they almost all have buffer stock programs, like the SPR, I
mean, you mentioned.
So you are going to have a government. And the government
is going to take care of everyone's rice security because they
have a rice storage program in Indonesia. Well, the Indonesian
program, it is a typical soviet failure where the planners
cannot even estimate, even come close to what the supply is
going to be in any one year of rice produced in Indonesia, or
what even the demand is going to be in Indonesia. So how can
you know how much to import? Because the government has a
monopoly on importing rice in Indonesia. And how much can you
know about storage of rice, and rice buffer stocks? Because the
government does not know production or consumption information.
So the whole thing is a complete mind boggling mess, country by
country, when you go to it.
And of course the key thing is, as you mentioned, you have
only got about 6 or 7 percent of world rice production that is
actually traded in the international market. So when somebody
like the Philippines all of a sudden earlier this year says,
``Oh, our buffer stocks are kind of low. We had better get out
there and start buying Thai rice,'' the prices went to the moon
because there was not any of it. There was no float, basically,
in the rice market. So Mr. Garrett had talked about sugar being
fouled up with programs. Well rice, just kind of take a factor
of ten and put it on sugar programs, and you have got the rice
mess. And of course rice, like sugar, is very important and
used everyplace.
Mr. Jordan. Thank you, Mr. Chairman. And I want to thank
our panel, too, for being here. I have got three questions. And
Professor Hanke you had talked about this a little bit earlier
and I think Ms. Sheeran as well. The first one is, and this,
you know, whatever is causing the commodity prices, I happen to
think the dollar is certainly a contributing factor, but it
seems to me oil drives everything else up. So I want your
thoughts on that one commodity and its impact on the others.
The second question would be the ethanol debate that we are
having. I come from the second largest ag district in the State
of Ohio. Full disclosure, I have actually voted against the
Farm Bill, though, I thought because too much interference in
the marketplace, etcetera. But I want to hear your thoughts on
the ethanol issue.
And then third, and this is, we have talked about macro/
micro. On a micro level third question would be, specific
program, and I happen to think, you know, we actually right now
in farm policy pay farmers, pay producers, not to produce, the
CRP Program. I think it is crazy, particularly when we are
dealing with the issues that we have all been discussion here.
I happen to think, you know, if we want more supply allow the
farmers out, typically it is a 10-year contract, allow them out
of the contract. Allow them to plant the ground next year. A
lot of farmers will do it, particularly with the prices of our
commodities where they are right now. So talk to me about that
program, too.
So oil and how it is driving everything, ethanol, and then
the third would be the CRP Program. We will start with the
economists and then if we have time we will go to the ladies
who seem to be getting left out. But go ahead.
Mr. Hanke. The oil price, I do not know the percentage
input, but it is one of the top five inputs in production of
food. And if you look at the President's Council of Economic
Advisors report and go back in the appendices that have all the
good data and everything, they have the price indices for the
major inputs into agriculture. And of course, fuel is one of
them. There are like four or five. So I do not know what the
exact percentage is, but it is big time. I mean, we are talking
about a big, big input.
Mr. Jordan. Transporting, moving the food to various
markets.
Mr. Hanke. Right. Right. And that table I was talking about
in the CEA's report is only production, not distribution.
Mr. Jordan. Right.
Mr. Hanke. So you have got trucking and all the rest of it.
So that is very, very important and that is why I came around
to oil at the end and got it involved with the food business.
The ethanol thing, I have not studied this in detail. But I
have seen what the IMF has done on it. And the IMF's conclusion
in their studies is that the ethanol programs have been a big
factor increasing grain prices. They have made a significant
contribution. And depending on what IMF study you read it is
like between 25 and 50 percent of grain price increases are
probably connected with the ethanol programs. So I would
suggest to look at their work and, you know, have some of your
staff look at it. And it is significant, very significant.
On the last program I do not know the details about this
program, okay? So I am not acting as an expert. But I did read
in the paper this morning, I think it was in the New York
Times, that they are not going to let people take land out of
the conservation program and plant even on a temporary basis.
Which I tend to agree with you. I mean, why, if we are in a
food price crisis, you know, why not add on the supply on a
temporary basis and let people take it out of the conservation
program?
Mr. Jordan. Thank you.
Mr. Bernstein. I can be very quick. Oil is important in
precisely the way you both alluded to. I think in terms of
ethanol I would urge Congress to reexamine the commitments to
ratchet up the amount of our corn stock that we are devoting to
ethanol. I believe it is 25 percent, going up to 40. Given
conditions on the ground and how they have changed it would be,
I think, very wise to revisit that and, in the context of the
kinds of pressures we face now.
Mr. Jordan. You are saying turn off the quota?
Mr. Bernstein. Yes.
Mr. Jordan. Okay.
Mr. Bernstein. And I have a similar view in terms of the
subsidies we were mentioning. As I said earlier to Mr. Berry, I
do not know if you were here, I absolutely see a rationale for
these kinds of subsidies having to do with diminished market
volatility, having to do with having to smooth out good years
and bad years. However, the way they are applied is much too
inflexible given price realities and supply realities. So I
would argue to I would call a more realistic appraisal of the
need for increased food supply right now would militate against
such an inflexible application of those subsidies.
Ms. Sheeran. Thank you. I am in the hunger business and
when I try to determine what the need will be one of the
factors I look at is the price of oil for two reasons. One is,
I know farmers all over the world would be affected by the
price of the inputs and the level of planting that happens in
countries will be affected by the cost of inputs and the cost
of transportation. And we have seen, again, planting at one-
third, one-half of what it was a year ago because of the cost
of the inputs.
But also, we are in a world where food and fuel have become
inexorably linked. Let us just talk globally now for a moment.
When fuel is over $80 a barrel it becomes cost effective to
turn food or agricultural products into fuel. And so all over
the world you are seeing pretty much anything that you can grow
being turned into fuel when fuel prices are high. $80 is about
the breaking point for profitability for turning cassava, palm
oil, any kinds of oils, any kinds of products, into fuel. And
so we are finding, WFP is one of the largest purchasers of
grain in the developing world, that we are getting outpriced by
fuel buyers all over the world and we cannot compete. I do not
have the depth of pockets to compete. And so palm oil now is
selling at fuel prices, fuel buyer prices, pretty much on all
the markets. And this is driving up the cost. I mean, we are
not getting the tenders, and we have our contracts constantly
broken. So I am buying food for kids in Cambodia, and I have
had three contracts in a row broken after we placed them by
people who could come in and outbid that contract to the point
that the penalty fee will be paid because the price is so much
higher. So it is, there is a whole new world out there in food
markets. And they are very linked to the energy buyers.
Mr. Jordan. If I could just interrupt. Let me ask you
specifically, would you be in favor of amending or having some
flexibility in the CRP Program, which is the program that,
again, pays farmers for not producing on land for conservation
reasons, whatever. But would you be in favor of some
flexibility in that program to put more land in production next
year?
Ms. Sheeran. Well, we have a problem at WFP which is,
again, a supply problem. And I have urged the United States and
Europe and others to look at whether or not we need to up the
availability of supply for humanitarian purposes.
Mr. Jordan. Good.
Ms. Sheeran. Last December, so the U.S. tells us we have a
certain allotment of money to buy the food aid in U.S. markets.
The U.S. buys in open markets. There was no wheat to buy. It
was sold out. 2007 and 2008 crop was sold out. In fact, it was
sold out at 120 percent, I think. This is a real issue. So
depending on how long and how deep, whatever the cause is, you
know, for hungry people in the world whatever the cause is they
are asking does the global system have resiliency to help them
cope? And so we have to keep buying for our programs. And so
whatever it takes to make sure----
Mr. Jordan. Okay.
Ms. Sheeran [continuing]. That at least the humanitarian
needs of the world are taken care of. I think we all have to
think that through because we are having a problem.
Chairman Spratt. Thank you, Mr. Jordan. I have just a few
questions. Ms. Berkowitz, you have been left out of the
argument, sandwiched in between all this talk about the value
of the dollar. Let us talk about the basics of what you do. How
much of your assistance is federally supported?
Ms. Berkowitz. No, we do not receive any federal funds for
the work we do. We are a private nonprofit and we receive grant
donations and other contributions. We used to be federally
funded but we are no longer.
Chairman Spratt. You still get some commodities from, I
thought----
Ms. Berkowitz. Oh, you are talking about, I thought you
meant my program. No, the food bank program does receive
federal funds. As a matter of fact, the Food Bank Association
negotiated to receive all the TEFAP commodities and also
receives administration fees. I'm sorry, I thought you meant my
particular program.
Chairman Spratt. You still get commodities from the USDA?
Ms. Berkowitz. Yes, they do. The food banks do get surplus
commodities. And they have a contract with the Department of
Social Services so that instead of once a month, or once a
quarter they used to distribute the foods whether people needed
them or not. What they now do is they have them at the food
bank so that when people come to the food bank as needed the
food banks and the food pantries can distribute them on need.
Chairman Spratt. Do you give everything away or do you sell
some things?
Ms. Berkowitz. What the food bank does is they have
contracts with sister agencies, where they will sell food at a
very reduced rate to soup kitchens, other social service
providers, and other pantries. To the agencies they sell, but
all that is given to the individuals that come is free food.
Chairman Spratt. Can a food stamp beneficiary use his food
stamps at your food bank?
Ms. Berkowitz. Well, no. All the food that is given away at
the food pantry is purely given as a donation.
Chairman Spratt. Okay.
Ms. Berkowitz. There are programs, for example Angel
Ministries, that does have reduced food packages that will take
food stamps so that the food stamps can go further, and they
can get more for what they are buying. But at the food pantries
they are not purchasing the food at all.
Chairman Spratt. Do you get State assistance as well?
Ms. Berkowitz. I know that the money runs through the State
of South Carolina, through the Department of Social Services. I
do not believe there is any State dollars that are put into
those programs at this time. Last year there was an effort to
try to get some State funding for what was called the SNAP
Program, which was an after school children's snack program,
which I think they are going to have to rename. And
unfortunately because the State budgets are in so much trouble,
while there was a little bit of money initially in the South
Carolina budget for it, it had to be taken out.
Chairman Spratt. Since you mentioned snack, there was an
article yesterday or the day before in the Washington Post
about local food banks, suppliers of your kind, becoming much
more conscious of nutrition. Do you have the wherewithal to
have sort of a pro-nutrition policy in what you distribute and
what you recommend?
Ms. Berkowitz. The food banks do try to put together
packages that are nutritionally sound. Of course, that becomes
strained at times because their donations are down. Especially
during the summertime when we are finding that the
participation has been absolutely tremendous. I mean,
summertime you do not have school nutrition programs so you
have children at home, and parents are coming in at a higher
number. With these families they are trying to provide
nutritional packages. But when donations are down, you know,
that can sometimes be less so. But I am not a food bank
operator so I am not sure I am the best person to provide that
information. But I can talk with our food bank association. I
would be happy to provide you all that information.
Chairman Spratt. How many people annually do you serve, or
how many families?
Ms. Berkowitz. I recently contacted the food bank and the
numbers are up tremendously. When I was talking to the head of
the pantry for the Harvest Hope Food Bank trying to talk to her
about the number of people that were coming through, she had, I
think she told me there was about a 35 percent increase, if I
am remembering it correctly, over last year. They are, they are
overwhelmed. They cannot keep up with the demand.
Chairman Spratt. So what does this mean to you? Cut back
the portion that you give people?
Ms. Berkowitz. Well, they have been bringing a lot of folks
from our community together to try to talk about how to address
that. What they are trying to do is do more with food
donations, make sure that they have, you know, the TEFAP and
they are getting the emergency food now that they can directly
given. They are working with providers to see if they can get
donated products. I do not think there is a time that goes by
in the week where I do not go somewhere where I do not see a
Harvest Hope canister out at some large office building where
they are trying to get donations. They are at their total and
complete maximum. They are working to try to get food stamp
applications at the food bank, so when people are coming who
are not on food stamps they can get them on the Program to try
to help limit their dependency on the food bank. But even for
people who are on food stamps, the food stamps are not going
far enough now. They are not, they have not kept up with the
cost of food. So they are coming to the food bank mid-month to
try to supplement until the next allotment comes at the
beginning of the next month.
Chairman Spratt. Well thank you for your very compelling
testimony. We very much appreciate your coming. One last
question now I have for Ms. Sheeran. One of the criticisms of
our trade policy has been that internationally and I guess the
United States too, bilaterally, we have encouraged countries to
grow for export in order to build up the hard currency reserves
and have the ability to have some resources for construction
and modernization of their economies. As a consequence people
have, farmers in poor countries, African countries for example,
have grown for export instead of growing for their own self-
sufficiency. Are we moving away from that policy? And has it
been a mistake that we are now coming to recognize?
Ms. Sheeran. Well I will say that this food crisis has
triggered a major debate in the developing world about how they
have positioned themselves in food security. So many, many
countries did get out of the business of producing food, came
to rely on regional and global markets, and now are coming up
short and cannot buy. So countries like Liberia, that are out
there, that cannot compete for food at the level that it is,
their local production really ground down to, you know, very
little except for crops for export.
I think we are really in a critical time for the world.
When you have a crisis kind of all the puzzle pieces get thrown
up and people begin to ask how do they need to come down. And
countries are wondering, do they need to hunker down, and build
up their own stocks, and hoard, and prepare, and not count on
global markets? Or can they count on global markets? And I
think this is why Doha was so important, to send a signal that
global markets can be relied on. That there will be open trade
in food. I mean, you cannot mess around with food, right? You
either get it right or you have a big problem in your country.
So people are not willing to take a lot of risks.
Chairman Spratt. Sure.
Ms. Sheeran. And when I meet now with leaders in Africa or
Haiti, and they are not producing enough food, they are
wondering if they have to go into a self-sufficiency mode. I
will just say, you know, traveling through Africa, not every
country can produce every type of crop and it is not cost
effective to do so. I was in one African country where there
was tremendous hunger. Next door there was a lot of food and
there was a 200 percent tariff between the countries. So we do,
the world has to look at what type of global trade structures
in food will help reduce hunger and the vulnerability of
nations. But right now is the time to do so.
And, you know, these things happen maybe at inconvenient
times. In the United States we are in the middle of an election
and all this. But the signals become very, very important right
now. We have countries in deep crisis, good countries, good
leaders, who do not know how to get their food security
together. So I think you have really hit the nail on the head.
And I know that, I think you have owned a farm, you have
studied economics, all these things are coming together to be.
In food, it is the basic, right? This is not a luxury good. So
I am really hoping we can get through this in a way that the
world will vote for a food security system where we can be
mutually reliant on each other. But I think that debate is
going to play out over the next months as countries figure out
how to get through this crisis.
Mr. McGovern. Mr. Chairman?
Chairman Spratt. Mr. McGovern?
Mr. McGovern. Just a couple, first I want to thank you
again for holding this hearing. I also thank Mr. Ryan, Mr.
Jordan, and others who have participated here today. I just
wanted to make two points which I think are important. One is,
we saw a chart earlier about increased spending by the United
States government on food and nutrition assistance. I do not
know if it was domestic or international. But the reality is
that we have spent more domestically but the need has been
greater. More people need food stamps today than last year and
the year before. More people are hungry around the world, and
it is getting worse because of this, the spike in food prices.
There is a need. So we are going to have to invest more in the
short term. And we have to respond to this crisis in the short
term. And in the long term I think all the discussion here has
been very, very interesting.
But it struck me that one of the problems we have when it
comes to food, hunger, and food security issues domestically
and internationally, is that we are not very good in this
country in terms of a coordinated strategy. There is not one
office that deals with food insecurity issues in the United
States. There is not one office that deals with food insecurity
issues around the world. I mean, McGovern-Dole is through the
USDA. But, you know, but the State Department, USAID do food
programs. It is all over the place. And everybody has their own
kind of opinion on how best to deal with some of these issues.
Same domestically. I mean, it is not all, even in Congress,
it is not one committee that deals with food and nutrition
issues. It is multiple committees. And as a result, it seems
that we do not have a coordinated, comprehensive strategy. And
that is what you need in the long term. I mean, whether it is
the monetary issues or whether it is, you know, helping
countries around the world develop their own kind of food
security, you know, kind of plans. I mean, that is what is kind
of lacking here.
And so that is a long term issue. Maybe we need a Food
Czar, or whatever, but in the short term I think that there are
immediate urgent needs that do not give us the luxury to debate
about, you know, what those long term strategies are. I mean,
people are hungry. Here, you see it in South Carolina, I see it
in Massachusetts. And I see it almost every day when I am home.
And around the world the situation has become beyond urgent. So
I appreciate very much your testimony.
And Mr. Chairman, I would like to ask unanimous consent to
insert a couple of articles in the record, if that is okay.
[The articles provided by Mr. McGovern follow:]
[From Reuters, Wednesday, July 23, 2008]
Pricey Meat to Boost Food Prices 4-5 Percent in '09
By Charles Abbott
Washington (Reuters)--Higher beef, pork and chicken prices, driven
up by sky-high grain prices, will fuel an increase of 4 to 5 percent in
U.S. food prices in 2009, the third year in a row of hefty increases,
the government forecast on Wednesday.
Food prices are estimated to rise by 5 percent this year, the
largest annual increase since 1990. They rose by 4 percent in 2007,
after years of trailing the overall inflation rate.
In its first estimate for 2009, the Agriculture Department said
food prices would rise by 4 percent to 5 percent for the year, led by
red meat and poultry, which account for 10 percent of food spending.
Beef prices will rise by 6.5 percent, it estimated, and pork and
poultry by 5.5 percent.
USDA economist Ephraim Leibtag, who prepared the forecast, said
higher feed costs ``will impact the meat industry, supplies and
production will tighten, and prices will rise.''
Earlier this month, USDA estimated per-capita meat consumption
would drop by 4.6 lbs, or 2 percent, to 215.8 lbs (98 kg) in 2009 as
livestock producers trim output.
Corn, wheat and soybean prices at the farm gate are at record
highs.
``We're still going to have higher prices but the rate of increase
is going to slow down a bit,'' Leibtag told USDA's radio news service
in sizing up 2009.
For this year, the biggest price increase are forecast for eggs, up
14 percent, cereals and bakery products, up 9.5 percent, and fats and
oils, up 12 percent.
In that group, cereals and bakery products are the largest
component of the food basket, 7.4 percent of overall spending. All
would moderate in 2009, rising at 4 percent or less.
Americans spend more than $1 trillion a year on groceries, snacks,
carry-out food and meals in restaurants. Farmers get 20 cents of the
food dollar. The rest goes to processing, labor, transportation and
distribution.
[From the Boston Globe, July 16, 2008]
Schools Feel Crunch on Lunch Programs
Food Costs Hit Budgets Hard
By James Vaznis, Globe Staff
The rising cost of grain, milk, and vegetables is expected to drive
up school lunch prices this fall for tens of thousands of students,
causing even further financial hardships for already-strapped public
school systems across Massachusetts, education officials said.
Some of the school systems that will be hit the hardest are the
ones trying to offer the healthiest menu choices--fresh fruits and
vegetables and other vitamin-rich choices that cost more than the
processed fare that marked school lunches of old.
Dozens of districts, such as Brookline, Chelmsford, Quincy, and
Marshfield, will increase prices 25 cents to 50 cents this fall in
hopes of avoiding a deficit next year.
Tonight, the Boston School Committee will consider a plan to close
an estimated $3.8 million deficit in its food service program for this
past school year and a projected $6.7 million deficit for the coming
year. A district spokes man said the plan is not expected to include a
price increase. Rather, it will look at greater efficiencies and
encourage more parents to apply for federally subsidized free or
reduced-priced meals.
Lunch programs are the latest victims of surging fuel costs that
make it more expensive to deliver food. School officials are already
seeing the impact of dwindling state local aid dollars and a reluctance
on the part of voters to support property tax increases in the form of
overrides.
School leaders across the state are concerned that the higher
prices could prompt some students from working-class families who don't
qualify for federally subsidized meals to skip lunch. They also are
concerned that cafeterias could be forced to scale back menus, possibly
cutting healthier items because they cost more. Dedham, for example,
may stop serving fresh-fruit cups.
``This will be the most difficult year we've had since the early
1980s,'' when the federal government cut reimbursement rates to local
districts to balance its own budget, said Joanne Morrissey, Quincy
schools food service director and president of the School Nutrition
Association of Massachusetts.
Nationwide, 75 percent of school districts are expected to raise
lunch prices this fall, far more than the 30 percent that traditionally
raise prices in a given year, according to the national School
Nutrition Association. The average national price of a school lunch is
expected to be $1.98, a 32-cent increase from this past school year.
``We truly are at a point of crisis,'' said Katie Wilson,
president-elect of the national School Nutrition Association, who last
week asked a congressional committee to increase federal assistance and
make meals free for all students. ``Without proper nutrients, brains
don't operate properly. How can you concentrate on calculus when you
are so hungry?''
School districts are feeling the pinch after spending the past few
years bolstering the nutritional content of lunches amid national
concerns about increasing childhood obesity. Many cafeterias no longer
fry foods and are offering made-to-order sandwiches, soup and salad
bars, whole-grain breads, and more meals made from scratch.
This approach allows schools to better control sodium, sugar, and
fat content but requires more labor. But school districts had not
expected prices to soar.
Meat costs have risen by 11 percent over this past school year,
fruits and vegetables by 13 percent, bread by 17 percent, and milk by
19 percent, according to preliminary results of a meal cost survey
conducted this summer by the national School Nutrition Association.
And like many restaurants, cafeterias are moving away from or
responding to local bans on trans fats. But alternatives cost more.
``If I wanted to go with frozen bags of vegetables and more
prepared products rather than cooking from scratch, could I balance my
budget? Yes, but that's not the kind of food the community wants,''
said Ann Johnson, food service director for Brookline schools, who
declined to disclose the amount of the deficit in her approximately
$1.5 million annual budget.
Last week, the federal government announced that it would raise its
per-meal reimbursement rate for students who qualify for a free meal to
$2.57, a 10-cent increase over this past year and one of the highest
increases in recent years.
Yet the national school nutrition group says the increase is not
enough to cover inflation and the true per-meal cost of $2.88 to
prepare a healthy lunch. The group predicts that school nutrition
programs could lose about $3.3 million per school day nationwide next
school year.
To avoid deficit spending, the Massachusetts Department of
Elementary and Secondary Education recommends that districts complete a
monthly reconciliation of costs, training staff on proper portion sizes
and purchasing food through regional collaboratives and the state,
which most Greater Boston school districts already do.
In one controversial move, Chelmsford is turning to a private
Andover-based company that prepares and sells prepackaged school lunch
items in individual servings. The move will save the district about
$225,000 next year by eliminating six school food service managers and
reducing work hours of the 34 remaining cafeteria workers so many of
them no longer qualify for benefits.
But the district, which is reeling from voter rejection this year
of a $2.8 million property tax override, will still have to increase
lunch prices by 25 cents.
``It's tragic,'' said Chelmsford's superintendent, Donald Yeoman,
noting that many of the laid-off workers had been there for 15 years or
longer. ``They were great, great people and employees, but my job is to
make sure we are in the black, and we have to be efficient.''
Mr. McGovern. And again, I thank you very much for holding
this hearing. Thank you all.
Chairman Spratt. Let me thank our panel again for an
excellent presentation, and for your forbearance while we had
to go for votes as well. We appreciate your coming. We have
learned a great deal and in the coming years I think we will
put to our use some of the things we learned from you today. We
appreciate it. Mr. Ryan, would you like a parting comment?
Thank you very much indeed.
[Questions for the record submitted to witnesses from Ms.
DeLauro follow:]
Question for the Record Submitted to Ms. Berkowitz From Congresswoman
DeLauro
1. While the cost of food rose by 6.1 percent from June 2007 to
June 2008, the cost of the Thrifty Food Plan (the mix of food items on
which low-income people rely) rose even faster--8.5 percent over the
same time period. The Thrifty Food Plan market basket priced in June
determines the amount of the maximum food stamp monthly allotment
households can get during the following fiscal year (starting October
1st). This means that when FY 2009 begins in October, food stamp
benefits will already be four months out of date, and will grow more
out of date as the year progresses. If food inflation next year equals
this year's levels, the shortfalls will be twice as large. We tried to
provide some relief in the farm bill, but the farm bill's improvements
will not address the increased cost of food over the fiscal year if
food inflation proves to be high again next year and will not help many
of the poorest families who struggle the most to afford sufficient
food. This demonstrates the need for a second stimulus package. You
mentioned some of the heartbreaking stories about the perils that some
South Carolina families are facing. What are some of the trade-offs
that you have seen these families make when escalating food prices do
not fit in their budget?
Question for the Record Submitted to Mr. Bernstein From Congresswoman
DeLauro
1. Congress is in the process of considering provisions to include
in a second economic relief package. Rising food prices are one of the
many pressures that are depleting low-income families' budgets. In
addition, any stimulus package will have to be targeted given our tight
budgetary environment. What are your recommendations for programs that
would create a simulative effect in the economy and help low-income
families weather the economic downturn? Do you believe that a temporary
increase in food stamps would help people through this sharp spike in
prices, as well as their other economic stresses?
Questions for the Record Submitted to Ms. Sheeran From Congresswoman
DeLauro
1. It is clear that an immediate international response is required
to address the global food crisis and to ensure that the underpinnings
of long-term solutions are in place. Earlier this year, you had
mentioned that the United Nations is coming together to tackle this
emergency. You also indicated that the World Bank President has called
for a ``new deal'' on global food policy. Are you able to outline what
this `new deal' would entail?
2. Your testimony mentioned how the McGovern-Dole program provides
school meals for 20 million children throughout the developing world.
As you know, my colleague Jim McGovern and I fought to have increased
funding for this program in the farm bill because it is programs like
this that are critical in helping nations increase safety nets such as
school feeding and productive social safety nets. The point you make in
your testimony underscores the point that we tried to make during the
farm bill debate and that is--if a school meal or take-home ration is
provided to girls, it virtually guarantees that parents who would never
do so otherwise, would allow their girls to attend school. It truly is
the most effective human rights program for girls. Do you have any
statistics on how the McGovern-Dole program has increased school
attendance for these girls or any other statistics that quantify the
significant impact this program has on school girls in developing
countries?
3. You have been a leader in raising the issue of the global hunger
crisis. I consider your voice the ``canary in the coalmine'' raising
awareness and giving warning of this crisis that is bound to get worse
before it gets better. The hunger crisis threatens to pull more than
100 million additional people into poverty--on top of the nearly 1
billion people who currently live on less than $1.00 per day. Our
attention to this crisis is not only a moral imperative; it will
literally save lives. What steps can the United States take that will
immediately help put food in the mouths of those who are desperate and
how would you recommend changing our food aid programs to address this
global crisis?
4. As you know WFP in 2000 launched a global school feeding
campaign aimed at putting in place national school food for education
programs and the McGovern--Dole International Food for Education and
Child Nutrition Program uses food as an incentive to improve education
and nutrition. Can you comment on the importance of international
school feeding programs and the data that WFP has gathered with regard
to the effectiveness of school feeding programs?
[Responses to Ms. DeLauro's questions follow:]
Respondents' Answers to Ms. DeLauro's Questions
Q1. The UN-wide response to the global high food and fuel prices
emergency was developed by the UN Food Crisis Task Force chaired by
Secretary General Ban Ki-moon. The Task Force called for immediate
interventions to meet the needs of the hungry, while acknowledging the
fundamental urgency of addressing medium and long term needs.
On a related track, World Bank President Robert Zoellick's call for
a ``New Deal for Global Food Policy'' was endorsed by the Spring 2008
World Bank meeting of Finance Ministers. The proposal emphasized the
need to shift from traditional food aid to a broader concept of food
and nutrition assistance, focusing not only on hunger and malnutrition,
access to food, and food supply, but also addressing interconnections
with energy, yields, climate change, investment, the marginalization of
women and others, and economic resiliency and growth. This was quickly
followed by the launch of the World Bank's $1.2 billion rapid financing
facility in May 2008--the Global Food Response Program. This Program
has approved and begun disbursing $851 million in 27 countries.
WFP has been playing a key role in the design and implementation of
the UN wide response to the global food crisis. It has also worked
closely with the World Bank on implementation of the bank's global food
response program, with WFP receiving funds in several countries from
the Bank's rapid financing facility.
Q2. WFP has not undertaken a study specifically of McGovern Dole
school feeding projects. A broader study of WFP's school feeding
programs in 32 countries in Sub-Saharan Africa from 2002-2005, many of
which countries receive McGovern Dole funding, revealed that the
average absolute enrollment increased by 28 percent for girls and 22
percent for boys during the first year of a school feeding program.
Programs which combined the provision of take-home rations for girls
with on-site feeding for all pupils sustained rates of increased girls'
absolute enrolment at values around 30% year on year. Programs that did
not offer the take home ration along with the on-site feeding saw the
initial increase in girls' absolute enrollment but without subsequent
increases in attendance rates year on year.
Q3. Historically high food prices are being followed by continued
market volatility. A global financial crisis is enveloping the
developed world and is spilling into the developing world as incomes
are affected, and trade, capital flows and remittances slow. The UN
Food and Agriculture Organization estimates that the number of hungry
people in the world is nearing 1 billion. WFP already needs to reach
about 100 million of the world's hungriest people in 2009 at an
expected cost of US$5.2 billion. Without a rapid injection of funds,
millions of people in Afghanistan, Somalia, Haiti, the Congo (DRC),
Ethiopia, Kenya and other hunger hot spots will run out of food
assistance by Spring 09.
There is no radical change required in US food aid programs to
address the immediate humanitarian challenges; US food aid programs
need immediate cash infusions on a scale to fit the need.
But as the GAO has pointed out, the various US programs are not
closely coordinated and lack balance and proportion in light of the
needs. For the intermediate to long term, the US needs a comprehensive
plan to enhance current programs and take them to scale. Essentially,
we need to help the world do today what the US did at home in the
'70s--shore up tools to help those in acute need, enact rapid-impact
programs to boost agricultural productivity and stave off next year's
and next decade's emergencies, strengthen nutritional assistance for
the most vulnerable members of society (analogous to the WIC, food
stamp, and school lunch programs all across America) and to the maximum
extent possible, structure assistance as productive investments to
break cycles of hunger among the most vulnerable. This means increases
in current food aid levels--both in-kind and cash; increases in school
meal programs and a wide range of other efforts to promote child
nutrition; increased support to international agriculture development
programs; and flexibility to provide assistance tailored to the
specific beneficiary needs and market dynamics of any given hunger
situation,.
My staff is currently working within a partnership of several US
NGOs, think tanks, and international organizations to articulate a
comprehensive plan of action. The proposals will be ready by early
2009. I would be more than happy to share the details with you.
Q4. School feeding is an all round win.
Studies by IFPRI and others confirm that a meal during the school
day promotes the nutrition and concentration children need to learn and
to grow. Food also attracts children to school and encourages parents
to send them there. In schools where WFP provides meals, absolute
enrolment increased by 28 percent for girls. Child enrolment increased
on average by 14 percent in schools with WFP school feeding programmes.
School feeding also helps improve the health and nutrition of
students by providing needed micronutrients, vitamins and minerals. In
the United States, school feeding has been a flagship programme for
more than half a century. Increasingly, WFP is using micronutrient
powders, also known as Sprinkles(tm) or MixMe(tm), to fortify school
meals and maximize nutritional benefits. These products can produce
dramatically improved outcomes--particularly for children. In 2007,
deworming was implemented in 27 percent of WFP-assisted school feeding
projects and reached 10 million children.
School feeding is a powerful and affordable human rights programme
for girls. Globally, half of the school children WFP feeds are girls,
many of whom also get a take-home ration as an incentive for attendance
and enrolment.
School feeding provides a platform for delivering complementary
activities like de-worming and micronutrient supplementation, fuel-
efficient cooking stoves, water and sanitation at school, health
education, HIV/AIDS education, psycho-social support, malaria
prevention, and school gardens.
Home-grown school feeding (HGSF) aims to increase school enrolment
while promoting increased local food production in rural food insecure
areas and supporting small-scale farmers.
It costs 25 US cents a day to give a child a WFP school meal or
US$50 a year. About 59 million primary school-aged children attend
school hungry throughout the developing world, with 23 million of them
in 45 African countries. To feed 59 million hungry schoolchildren it
would cost the world just $3 billion a year--a small investment with a
huge return.
[Whereupon, at 4:53 p.m., the Committee was adjourned.]