Two years ago, an editorial in The Washington Times demanded an investigation of the billions of dollars in payouts to blacks who asserted that they were wrongly denied subsidized farm loans. Congress conducted no investigation, and the Obama administration recently promised at least $1.3 billion to women and Hispanics who asserted that they, too, had been victims of U.S. Department of Agriculture discrimination. Before any new claimant classes race to court, it is time to recognize the profound flaws in the archetype for absolving USDAs alleged sins.
When the Clinton administration settled the initial class-action lawsuit, named after Timothy Pigford, the original claimant in 1999, analysts expected only a few thousand legitimate claims. However, more than 90,000 blacks asserted that they were wrongly denied farm loans or other USDA benefits in the 1980s and 1990s.
This was surprising because there were at most 33,000 black- operated farms nationwide in that period. But that number itself was wildly inflated by USDA methodology. Anyone who sells more than $1,000 in agricultural commodities the equivalent of 150 bushels of wheat or one horse is categorized by USDA a bona fide farmer.
The vast majority of those 30,000-plus black-operated farms were either hobby farms or part-time endeavors. Half of black-operated farms in the mid-1980s had gross sales of less than $2,500 per year and almost 90 percent had gross sales of less than $20,000, according to a 2001 report by the Land Tenure Center at the University of Wisconsin at Madison. Small farms are far less efficient and productive than large-scale farms, which helps explain why average farmers (both white and black) with less than $20,000 in annual sales consistently lost money every year in the 1980s.
Then there were the claimants who merely "attempted to farm." David Frantz, one of the lead counsels for the Pigford claimants, explained in late 2010 how the settlement class vastly expanded. CNS.com reported: "The case is not limited to those who were farming, Mr. Frantz added, but included those who were prevented from farming because they did not get USDA loans. 'I personally worked with many, many young individuals who went through that, Mr. Frantz said. 'A typical scenario would be that 'I was born and raised on a farm, and then I went into the Army after high school. When I came back, I wanted to get back into farming, and I went to the Farm Service Agency to get a loan so I could rent some land. My uncle was going to rent me 250 acres, so I was going to raise beans. I went to get a loan, and they turned me down. Thats a very common scenario."
According to Mr. Frantz, "I was going to raise beans" is sufficient grounds to demand and receive $50,000 in restitution from fellow Americans. Some Pigford claimants were lavishly compensated because they did not receive subsidized loans for which they never applied. In other cases, black farmers were certified as discrimination victims because USDA refused to give them a new subsidized loan after they failed to repay prior subsidized loans.
The Pigford settlements may also have involved "massive fraud and cynical political opportunism," according to Peter Kirsanow, member of the U.S. Civil Rights Commission. As early as 2004, then-Rep. Marion Berry, Arkansas Democrat, warned his constituents that "some organizations are attempting to profit from black farmers by extorting funds in exchange for the promise of filing a claim under Pigford.... I am concerned by methods used by some to wrongfully profit off of false claims against USDA."
National Review noted in 2011: "John Stringfellow, a farm-loan supervisor covering six Arkansas counties, called Pigford 'the largest scam against federal taxpayers in the history of the United States, saying that among the 800 or so claims he personally received, more than 80 percent had never applied to USDA assistance programs, nor farmed at all."
The federal government has been lax in policing in part because Attorney General Eric H. Holder Jr. pledged to Pigford claimants that they would see the "federal government standing not as an adversary, but as a partner."
The Government Accountability Office (GAO) noted that most of those claims were "evaluated based solely on the information submitted by the claimants and, as a result, the adjudicator of these claims has no way of independently verifying that information." It was as if requiring clear evidence would have simply compounded the damage from the original discrimination.
When Agriculture Secretary Thomas J. Vilsack announced another round of payouts to Pigford claimants in 2010, he declared, "We have worked hard to address USDAs checkered past so we can get to the business of helping farmers succeed." Mr. Vilsack ignores the ultimate Pigford fallacy: that USDA loans are magic beans that automatically turn recipients into successful farmers. In reality, legions of farmers went bankrupt in the 1980s because they received too many subsidized loans, according to the GAO. Farmers Home Administration chief Vance Clark told me in 1988 that some loan applicants "dont even possess the basic farming ability they are selling used cars and they decide to come to us and become a farmer." Still, Congress pressured USDA to shovel out loans to uncreditworthy borrowers, and many recipients financially destroyed themselves as a result.
If the Obama administration wants to truly help both taxpayers and farmers, it should abolish subsidized USDA loans. "No handouts and no favoritism" is an equal opportunity policy that would do justice to Americans of all races, creeds and occupations.
James Bovard is the author most recently of a new e-book memoir, "Public Policy Hooligan" (Sixth Street Books, 2012).
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