BILL MOYERS: As so many people face empty fridges and bare pantries, American farmers are going all-out to meet the world-wide demand for food — and earning record prices for their efforts, as they should. Farm income almost doubled last year, and is now reaching an all time high. With grain prices skyrocketing and the federal deficit out of sight, this would seem the moment to cut back on those tens of billions of dollars that taxpayers shower on milk producers, cotton and rice farmers, and growers of corn, soybeans, wheat, and sugar — subsidies that keep coming whether they're needed or not. Our farm policies frankly are a ramshackle, a costly mess — a monster jerrybuilt by politics. What was supposed to be a temporary financial safety net for imperiled family farmers has become a huge boondoggle for a fraction of wealthy farmers, including landowners who've never gotten close enough to a barn to slip on the manure. But you don't have to take my word for it. Listen to a team of journalists from the Washington Post —which by the way, won six Pulitzer prizes this week. They spent over a year producing a long series of painstaking reports on farm subsidies. This account of what the post reporters found was produced by my colleagues at Exposé.

NARRATOR: This is El Campo, Texas, once the heart of the historic Texas rice belt. But many of the rice mills have been abandoned.

NARRATOR: For Ed Gangl, a tenant farmer who has worked these fields for over four decades, there is less land to grow rice on every year.

ED GANGL: All this here was in rice, for the last, uh, since World War II.

NARRATOR: He used to farm this field. But it's not for rent anymore. The reason? It isn't drought or blight or any other natural disaster. It isn't even about Texas. It's about Washington.

NARRATOR: This is where they make the laws that govern farming...and where the Washington Post's Dan Morgan began covering farm policy in the 1970s.

DAN MORGAN: One of the troubles with the farm program is it's a hodgepodge, it's not one program.

DAN MORGAN: The loan deficiency payment, the livestock compensation program, the price support, subsidized crop insurance, disaster relief programs. It's one program kind of layered on another.

NARRATOR: Years ago, Morgan became convinced that the nation's farm bills —particularly, its farm subsidies — were the source of an enormous waste of taxpayer dollars. Potentially billions.

NARRATOR: His evidence? A particular kind of farm subsidy known as the Loan Deficiency Payment: the "LDP."

DAN MORGAN: The LDP is not something that is a household name in Washington, or New York, but out in farm country, it's the discussion that every football, Friday night football game, you know, everybody is talking about. "What's the LDP this week?"

NARRATOR: With the LDP, farmers can collect a subsidy when the market price of their crop dips below a government-set floor price. This way, when prices are low for crops, the government steps in and makes up the difference.

NARRATOR: But, Morgan learned, there's a way to make a killing on the LDP.

DAN MORGAN: You can get the subsidy, pocket the subsidy, wait for the price to go up, and then sell later. There's big money in this.

DAN MORGAN: It made me scratch my head a little bit, because I said, "Isn't the LDP supposed to compensate farmers who are losing money?"

NARRATOR: Back in 2000, Morgan wrote a memo to the Post's national editors. He told them about 8 billion dollars worth of farm subsidies —taxpayer dollars — and how a lot of it was going to those who knew how to, quote, "game the system."

NARRATOR: He wanted to do the story. His editors did not.

DAN MORGAN: I think I mentioned the LDP. That was probably a big mistake, because once you start throwing those acronyms around, people's eyes glaze over and they — it's hard for them to understand, you know, what may be behind that.

NARRATOR: But Morgan wouldn't take "no" for an answer, and in 2005 he pitched the story again, this time to the paper's top investigative editor, Jeff Leen.

JEFF LEEN: Dan came to me with a memo that, I have to confess, sounded and looked like it was written in Greek. But I knew from Dan and I knew from my experience with, with working on really tough subjects, that something was there. My instinct, my spider sense just told me that something was there.

JEFF LEEN: So Dan set it up for us to go to the USDA, which is based here in Washington. We met with a senior official and he was very blunt. He said, "This is a broken system."

NARRATOR: Jeff Leen assigned two reporters to join Dan Morgan on the project: two-time Pulitzer prize winner Gil Gaul and former government economist turned reporter Sarah Cohen, an expert in data analysis.

NARRATOR: To crack the farm bill code, Cohen would have to make sense of a database of 217 million individual subsidy payments that the Department of Agriculture — the USDA — had shelled out over 15 years.

SARAH COHEN: This is the amount that the person got, in this case it's 163,700 dollars; this is the date they got the check and this big number over here is the identifier that tells you who got the check.

NARRATOR: The Post began its investigation by examining a kind of subsidy born in 1996.

NARRATOR: The Republican controlled Congress — critical of what it termed Big Government — wanted to wean farmers off subsidies and to encourage them to grow whatever the market demanded.

NARRATOR: But to get votes, the reformers had to make trade-offs with farm State congressional Democrats and Republicans bent on maintaining payments to their farmers. The result was a classic Washington compromise: one kind of subsidy was ended. But in exchange, a new subsidy was created: one that paid farmers not for the crops they grew — but for the land they owned.

NARRATOR: That compromise now costs taxpayers billions.

DAN MORGAN: The taxpayers spend more than 5 billion dollars a year paying farmers not on what they grow, but on what farms grew in 1996. They took a sort of a snapshot of American farms and said, "How many acres — if you grow 100 acres of corn, those are your base acres, and we're no longer going to tell you what to plant on those acres: you can plant corn, you can plant nothing, but we're still gonna send you a check to support your income."

NARRATOR: Dan Morgan wanted to know more.

DAN MORGAN: I nosed around up on Capitol Hill and found a guy, a member of the staff, who said, "You ought go down and look at a rice production area near Houston. People are being paid down there, they're getting checks from the government covering 500,000 acres of rice. But guess what? There's only less than 200,000 acres being grown now and yet, and yet they're still receiving these payments."

NARRATOR: Morgan and his colleague Gil Gaul headed for rice country to investigate. In El Campo, Texas, they met Ed Gangl — the rice farmer who can no longer rent the land he used to farm.

ED GANGL: There's just another example of what's happened to the Texas rice industry.

NARRATOR: No one farms here now, yet the owner still receives a subsidy — what's called a "direct payment" — from the Feds.

ED GANGL: On this farm he is receiving somewhere around the lower ten thousand dollars for not having a farmer out here. He runs his own cattle on it. He can do that or lease it out, or actually do nothing at all with the land, and still be better off than having a farmer on the land.

NARRATOR: At a roadside restaurant, Ed Gangl arranged for the reporters to meet more struggling local farmers.

GIL GAUL: What happened was one guy down at the end of the table mentioned, "Well, you should go look at these, these mansions out on these old rice fields. They're collecting government payments because they were built on these old rice fields and they qualified." And you know, I just kind of looked at him like he was nuts, and thought to myself, "No way."

DAN MORGAN: And I remember Gil walking into one of the government offices down there, and he saw posted on the bulletin board some real estate brokers' cards. By talking to the real estate agent, Gil was able to pin this down, and, uh, was told that, "Yeah, you'd be able to live on the one acre, and collect government payments on the other nine acres. They call these 'Cowboy Starter Kits.'"

NARRATOR: The term "Cowboy Starter Kit" meant a tract non-farmers could buy with enough room to build a house and still keep a horse out back.

NARRATOR: And it was used as a marketing tool: in essence, buy this land and get a free, annual federal subsidy.

NARRATOR: But in order to know how much federal money was going into the Cowboy Starter Kits, Gil Gaul would first need to know who owned them.

NARRATOR: And he knew which local official would give him the information.

GIL GAUL: If you want to know anything about who owns what land in a community, you go to the Tax Appraiser first. And a lot of them are excited to actually see a reporter, because they've never seen a reporter before. They're sort of shocked that anybody would want to ask them a question.

NARRATOR: Armed with names and addresses, Sarah Cohen was able to cross-reference them with her database of 217 million payments from the USDA. She began to identify who was getting subsidies...and how much it was costing taxpayers.

NARRATOR: Among the USDA payments Cohen found was nearly half a million dollars that had gone to a Texas physician for his 10,000 acres of former riceland.

GIL GAUL: This is supposed to be a safety net, but it's not a safety net. You're not saving anybody: you're saving a surgeon in Houston.

NARRATOR: The Post would report that in Texas — as recently as 2005 — 37 million dollars was paid out to owners whose land was once planted with rice but is no longer.

NARRATOR: In fact, the state now had more former riceland....than current riceland.

NARRATOR: On July 2nd 2006, the Post published the first report in a series called "Harvesting Cash." The investigation into direct payments found that nationally more than 1.3 billion dollars over six years had been paid to people who were doing no farming at all.

NARRATOR: The first farm bill was passed in the 1930s, during the Depression, when one in four Americans lived on farms. The intention was to provide subsidies for key crops, like cotton and corn, to protect farmers from economic hardship and natural disasters.

NARRATOR: In some instances, that's still the case. But as the Post team continued reporting, they found troubling story after troubling story.

JEFF LEEN: What we found was that, the way that farm policy had grown up over the decades, it had created a number of what I would call absurdities. And these absurdities were done for political reasons, they were done with good intentions, they were compromises to get bills passed. But however they occurred, they were, in the end, Kafka-esque.

NARRATOR: The Post didn't just identify over a billion dollars for farmers who don't farm. They would soon uncover hundreds of millions in drought relief where there had been no drought.

NARRATOR: In 2002, the White House and the USDA came up with a $750 million fund to aid ranchers and dairy farmers who suffered economic damage from drought.

NARRATOR: It was called the Livestock Compensation Program.

ANN VENEMAN: What we're here today to announce is an important step that this Administration is taking to assist livestock producers who have been...

NARRATOR: The Post would report it was no coincidence the program arrived in time to help a Republican candidate in an election year and the politicking was just beginning.

DAN MORGAN: Once the USDA had announced this program, right before the 2002 election, everybody wanted a piece of it.

NARRATOR: And everybody would get a piece of it — in 2003 when politicians in Congress expanded the program.

GIL GAUL: They removed the restriction that there actually had to be a drought, and said that any kind of declaration would make the counties eligible for funds in the second year.

NARRATOR: In other words, whether they had suffered losses or not, livestock owners could collect, as long as the Feds declared some kind of disaster.

NARRATOR: On February 1st 2003, the space shuttle Columbia broke up upon reentering Earth's atmosphere.

NARRATOR: For all of America it was a tragedy.

NARRATOR: But for cattle owners in East Texas, where some of the debris fell, it was also the beginning of a livestock compensation boondoggle.

NARRATOR: In order to recover debris and pay emergency costs, President Bush declared a disaster.

NARRATOR: And that disaster declaration, the reporters discovered, had triggered livestock compensation payments in East Texas...despite the fact that NASA itself would say the shuttle disaster had caused little damage on the ground.

NARRATOR: But who had received the payments? Had they gone to people who suffered no losses? And how much had the government paid out?

NARRATOR: Reporter Gil Gaul figured it was the public's money...it ought to be public information.

NARRATOR: It wasn't.

GIL GAUL: The USDA didn't know and wouldn't say, because it didn't really, it didn't really keep the information that way.

NARRATOR: To follow the money, Gil Gaul first needed to rule a few things out.

NARRATOR: He knew farmers and ranchers in East Texas might have qualified for livestock compensation payments if they had suffered legitimate losses from non-shuttle disasters, including drought.

GIL GAUL: Sarah and I put together a map where the shuttle explosion, you know, occurred in East Texas.

GIL GAUL: I also went and looked at drought records, and I looked at rainfall records for each of those counties, and so I knew that in, you know, in Chandler, Texas, they hadn't had a drought in three years, but yet they had awarded a million dollars to farmers and ranchers in these livestock compensation programs.

NARRATOR: What the reporters learned was startling. The area in white is where there had been little or no drought over a two year period. But each black dot represented a quarter of a million dollars in livestock compensation payments.

GIL GAUL: I then went into our database. I could identify farmers who got payments in that area, but I still, you know, wasn't exactly sure why they had qualified.

GIL GAUL: When I picked up the phone and called the farmers, I would get to a point of the interviewing process where I would say, "And why were you eligible for this?" and the farmers would hem and haw, but eventually they would say, "Well, you know, I don't really know, but I think it was because the shuttle exploded."

NARRATOR: But how had these farmers even known they were eligible for federal subsidies?

GIL GAUL: They would have been told by their local county office that they now qualified for the Livestock Compensation Program.

NARRATOR: The county executives were federal employees — representatives of the USDA — based in Texas.

NARRATOR: Now Gil Gaul had some questions for them.

GIL GAUL: I would call up, and would be told, "Well, I've been told I can't talk." "Oh, who told you that?" "The State office of the Farm Service Agency," which is USDA. "Oh, really?" "Yeah, we got a memo." "Oh, can you send me a copy of that memo?" And a couple of the people sent me copies of the memos.

NARRATOR: Federal officials in the Texas USDA office sent out detailed instructions on how to handle inquiries from The Washington Post.

NARRATOR: They included: "Keep the interview positive...simple...brief...and accurate."

NARRATOR: "Do not be evasive, but don't volunteer information."

NARRATOR: And "Silence is OK."

NARRATOR: One man who got that message also got several calls from Gil Gaul.

GIL GAUL: Blake English was the county executive for the Farm Service Agency in Denton County, Texas. He felt like it was his duty as a public servant, that he owed it to the taxpayers, to explain, to the extent that he could, what had occurred.

BLAKE ENGLISH: I will not lie to protect my own rear end; I'll be darned if I will lie for someone else. And, and this was sort of the, the feel that I had was, huh, "Cover for us. This might be an embarrassment to us."

NARRATOR: Blake English is retired, now, and living in Oregon, where he spoke with Exposé. He was still on the job in Texas when he talked to Gil Gaul.

GIL GAUL: Blake didn't go out of his way to volunteer information about why they qualified, but he would give me a hint that, well, had I read the county minutes? And I said, "OK, you know, I'll send a Freedom of Information Act request." And looking at the minutes, there was this wonderful discussion in which Blake English said that, "We don't even know why we qualify for this money, but we've been told by the State office that we're eligible now, and that we should be looking for a disaster to, to qualify our farmers."

BLAKE ENGLISH: The State office was saying with this space shuttle declaration, "Maybe you should, huh, use that as a basis for our eligibility in the Livestock Compensation Program."

BLAKE ENGLISH: I thought that was ludicrous.

NARRATOR: But why would authorities want to send disaster payments to people who hadn't suffered? Blake English suspects an old-fashioned horse trade.

BLAKE ENGLISH: There is a mindset within the bureaucracy maybe that says that if you obtain these federal dollars for a particular area, then it's one that you can proudly say, "Look what I've done for you. Therefore, when November comes around, we want your vote" ... the unsaid, the unspoken part.

NARRATOR: Blake English knew he had little choice but to fill out the paperwork that led to the release of 433 thousand dollars to ranchers in Denton County. Henderson County netted over seven hundred thousand.

NARRATOR: One rancher there, who had suffered no damages, told the Post, quote, "Believe me, we would be better off if the government...limited the payments to those who really need them."

NARRATOR: He received $40,000 in disaster compensation.

NARRATOR: The paper would report, "For hundreds of ranchers from East Texas to the Louisiana border, the shuttle explosion opened the door to about 5 million dollars."

NARRATOR: John Johnson, a top official at the USDA, acknowledges there are legitimate questions about the Livestock Compensation Program.

JOHN JOHNSON: But nonetheless, at the end of the day, Congress writes the legislation, it's embodied in a much bigger piece of legislation, and the President decides to sign that piece of legislation for a variety of reasons that may be much broader than strictly agricultural policy. And once that becomes the law of the land I don't have any discretion of how I carry that program out. If Congress has said that I have to make all livestock eligible in every county where there's a disaster declaration of any type, I have no discretion about that.

BLAKE ENGLISH: No, I'm not trying to blow the whistle, but I do insist on some integrity in the programs. Without that integrity, we lose, we lose any future programs. If we cry wolf too many times, "We've got a disaster, here," and then we look at the disaster as a space shuttle disaster, then the connection between that and a farm disaster makes it hard to get another disaster program approved, even if we need it, need it desperately.

NARRATOR: The shuttle payments in East Texas were a tiny fraction of huge government payouts from a program originally designed to provide drought relief.

NARRATOR: The reporters knew, because once again they had followed the money.

SARAH COHEN: All of the areas in green, here, now, are places that got money from this program but never had a serious drought.

NARRATOR: In Washington State, ranchers in one county received $1.6 million dollars for an earthquake that caused them no damage. In Wisconsin, a winter snowstorm triggered millions of dollars more.

DAN MORGAN: To me, the fascinating thing about the Livestock Compensation Program, when you think about it in the largest sense is, it's kind of indicative of, of, of what happens in Congress. The farm lobby is very important and powerful, and so, quite often, these programs are just ways to get money into rural areas and not, "Does this make good policy sense? Is this a good policy?"

NARRATOR: The Post found that, all told, 635 million dollars went to livestock owners across the nation who suffered little or no damage from drought.

NARRATOR: And that 635 million was just a drop in the bucket of farm bill misspending that the Post uncovered.

NARRATOR: The paper's findings included:

3.8 billion dollars corn farmers got in subsidies in 2005, by simply playing the LDP. That is, collecting a subsidy when corn dipped below its floor price, then selling when the price went up again. 9 billion dollars in disaster payouts to farmers, most of whom were already covered by subsidized federal crop insurance. And 400 million dollars worth of powdered milk, millions of pounds of it, the government gave away free to feed cattle during a drought. Instead, ranchers, feed dealers and brokers made millions by selling it in Mexico, the Netherlands, New Zealand and the Philippines.

SARAH COHEN: There's a real pattern in these stories, which is: in order to get money to somebody that it's intended to get to, you send a whole bunch of money to people it was never intended to get to.

NARRATOR: Tallied up, the Post had identified over 15 billion taxpayer dollars spent on what it called "wasteful, unnecessary or redundant expenditures."

ED GANGL: For 43 years I've been able to make a living farming. It's a profession that I like and love, and would love to continue to do. And when you see a program that rewards somebody for doing nothing, it seems very unfair to me.