[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


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                        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.]

                                  
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