Democrats took control of Congress vowing to take a fresh look at wasteful programs and spending priorities.
The expiration of the federal farm program — it has to be renewed every five years — was a golden opportunity to put some substance behind those promises.
Crop prices are high, and farmers are thriving; net farm profits from 2003-06 totaled $279 billion, the highest four-year total ever.
In addition, U.S. farm policies are harmful to U.S. interests abroad, doing harm to farmers in less-developed countries and posing a significant impediment to the conclusion of the “Doha round” of international trade liberalization.
The Democrats blew it, passing a bill in the House that kept the status quo in place. There was hope for a brief moment in the Senate, considering that Senate Agriculture Chairman Tom Harkin (from Iowa, of course) had spoken in June about the need to overhaul the farm subsidy system. But the $288 billion (over five years) version the committee approved was devoid of anything remotely resembling reform. Indeed, it made the sugar program, which forces U.S. consumers and manufacturers to pay twice the world price for sugar, a bit more egregious, which is doing something.
What’s wrong with the farm program, which was begun in the 1930s, when farm prices really had collapsed, as a “temporary” measure until farmers got back on their feet again? Here’s a short list.
The farm program is sold as a way to help family farmers stay in business, but a majority of subsidies go to large corporate farms with average incomes of $200,000 and net worths of almost $2 million. More than 90 percent of subsidies go to just five crops — wheat, cotton, corn, soybeans and rice. Subsidies are paid per amount of crop produced, which means the largest farms get the largest checks.
The subsidy program is an incentive to plant more of a subsidized crop, which leads to overproduction, which puts downward pressure on prices, which provides a justification for further subsidies.
Without this program, we are told, supplies of agricultural products would fluctuate, prices would be unstable, and we would have to rely on foreign growers, which could be a national security issue in time of conflict. But two-thirds of agricultural products (including beef, poultry, fruit and vegetables) receive no subsidies at all, yet supplies are plentiful and prices have been stable.
Federal farm programs raise food prices, which hurts poor people and minorities disproportionately. Federal agricultural subsidies represent a straight transfer of income to a relatively prosperous class. The average farm household income in 2006 was $81,420 (29 percent above the national average) and net worth was $838,875 (eight times the national average).
The healthiest thing for the country and the agricultural economy would be to end the farm program entirely. Australia and New Zealand largely eliminated subsidies in the 1970s and 1980s and, after a brief adjustment, their farm economies are flourishing. An alternative would be to offer those in the program one lump-sum payment before ending the subsidies.
President Bush has made noises about possibly vetoing the farm bill, but Agriculture Undersecretary Mark Keenum said the administration was “very pleased” that the bill contains a minor tweak — an optional revenue safety net that simplifies formulas and might save $4 billion over five years.
That’s less than window-dressing. President Bush should break out his veto pen for this one. That might be the only way to get even modest reforms.