Editorial: More accountability essential

Sunday, Dec. 9, 2007 | 2:23 a.m.

A U.S. Department of Agriculture program that uses public funds to back loans obtained by businesses in rural areas is supposed to help create or maintain jobs for Americans in rural communities.

But an analysis by The Washington Post last week shows that the USDA loan program has lost more than $1.5 billion since it started in 1974, and in some cases has literally spent hundreds of thousands of dollars in order to save a single job.

The program was created as part of the USDA's farm subsidies program to help keep rural communities afloat by making sure people could find work. By having loans from private banks backed by the government, the businesses were supposed to be able to stay solvent.

But as the Post reported earlier this week, many businesses default on their bank loans and close anyway. In 1999, for example, the USDA backed a $20 million loan to a sugar beet processing plant in Washington state, despite the fact that the business already had defaulted on existing loans. The plant closed shortly after receiving USDA support, leaving taxpayers with a $12.1 million loss.

What's more, the Post reports, the USDA has expanded the loan program to offer grants to help rural businesses - money that has gone to not only a carwash in North Carolina and convenience stores in Ohio, but also to snowmobile clubs in Maine and a country club in Montana.

The USDA says it has created or saved 1.5 million jobs since 2001, but those figures were obtained from the businesses that received the loans or grants. USDA officials accept the job estimates at face value without following up to see whether the claims hold true. In one instance, the Post reports, the agency gave $1.3 million to an inn in North Carolina to save five jobs. That's $260,000 per job.

This is an outrageous fleecing of American taxpayers. Congress should investigate the USDA's rural loans and grants program. While it is important that such a program is available to genuinely deserving recipients, it is equally important that it is run in a financially responsible manner and not be abused.