That Ox Don't Plow: The 2002 Farm Bill

Like I said, this was a school report. So don't expect any verbal pyrotechnics, just some stone-cold argumentation. It was supposed to take the form of a memo to our "favorite" congressperson, so of course I selected Albert Wynn (D-Md.), whose ex-wife called his constituents during the 2000 election to tell them just how unsuitable a candidate he was. I still voted for him.

To: Representative Albert Wynn, D-Md.

From: Constituent Andrew Lindemann Malone

Re: Agriculture, Conservation, and Rural Enhancement Act/Farm Security Act

Date: 4/16/02

The United States Department of Agriculture is currently required to provide price supports for certain farm products, including most grains, cotton, dairy products, oilseeds, and tobacco; a number of other farm products, including wool, honey and apples, have been included in the subsidies in ad hoc legislation. The objectives of these programs are to ensure that the United States has a stable food supply, to help compensate farmers for the variability of their year-to-year income, to aid small farms, and to maintain international competitiveness.

The Federal Agriculture Improvement and Reform Act of 1996 was intended to gradually decrease government expenditures on agricultural subsidies. Instead, when crop prices and export demand fell dramatically, Congress interceded to pass emergency appropriations bills giving more support to farmers than ever before, reaching a record total of $22 billion in 2000.1 Yet prices and export demand are not expected to recover any time soon, and the Food and Agricultural Policy Research Institute estimates that the net income of America's farms will fall from an average of $47.4 billion in 1996-2000 to $40.1 billion in 2001-2005.2

Now the House and Senate have each passed a new farm bill, the Agriculture, Conservation, and Rural Enhancement Act and the Farm Security Act, respectively; both call for full funding of existing programs, at a total cost of $98.5 billion over 10 years, and adding $73.5 billion to that total to deal with the challenges outlined above. The two bills are currently in committee to iron out their minor differences. Existing commodity programs would cost $70 billion over 10 years; the Senate and House bills both seek to add $40 billion to this total.3 This paper will focus on the commodity price-support programs.

There is very little one can say in favor of the commodity programs as they are currently structured, and as both the Senate and House have proposed they be continued. Subsidies tend to stimulate overproduction, resulting in the need for more price supports; price supports always end up costing consumers more than they help producers, due to deadweight losses. This vicious circle can be seen in the current funding plan, in which $40 billion of taxpayer money is allocated to help undo the forecasted results—oversupply, and thus low prices—of the already-allocated $70 billion. In one specific case, rice producers increased their acreage to 3.3 million acres last year when rice prices were at a 15-year low, thanks to subsidy payments that ballooned from $448 million in 1997 to $1.3 billion in 2000, because the government was forced to guarantee a set price.4 The subsidy and price-support programs, intended to help farmers' profit margins, have actually reduced them by stimulating overproduction and thus oversupply; taxpayers have paid for the mistake, both in the form of subsidies and in the form of food prices higher than they might be without subsidies. The Farm Bureau thinks commodity prices should be even higher, to ensure that all current farmers can stay in business; an economist would argue that too much is being produced now, because farmers' incentives have been distorted by subsidies.

Furthermore, subsidies are not providing any of the non-market benefits their supporters cite as rationales for their continuation. While subsidies are deemed necessary to ensure an adequate food supply, much of America's agricultural product, including fruits and vegetables, is not subsidized, yet there have been no major shortages of any food, subsidized or unsubsidized, in the United States for decades.5 Some complain that the European Union subsidizes farmers at even higher rates than we do, but surely the fact that one of our competitors follows a self-destructive policy does not mean that we must. (In fact, American consumers should take advantage of their generosity in the form of lower food prices.) While proponents of subsidies claim they alleviate poverty, there is almost no poverty in commercial agriculture to alleviate,6 and 60 percent of American farms receive no subsidies at all. Small farms, too, do not realize most of the benefits of subsidy programs; 8 percent of farmers (those with incomes of $135,000 or more) receive 47 percent of the total subsidy money,7 including needy farmers like basketball player Scottie Pippen and media mogul Ted Turner.8

In terms of helping to compensate for variable income, farmers and taxpayers alike would be better served by a proposal by Senator (and farmer) Richard Lugar (R-Ind.). He supports a federal subsidy for whole-farm income insurance that would ensure farmers 80 percent of their average income over a five-year period.9 This plan provides proper incentives, in economics terms; farmer will grow as much as they can sell on the market, and if prices are low when they try to sell, they will still be assured of a livable income. If it became obvious that farmer would have to leave the market, they would be assured an income for a few years as they tried to reposition themselves.

The House and Senate farm bills are essentially Democratic bills, and as such you are expected to support them; however, you represent a middle- and low-income urban district, and thus your constituents are more sensitive to food prices than most. Since your overall voting record is so solidly Democratic and since your home district support is so strong, it would seem that you could afford to break from your party on this one issue if you so chose. A "no" vote on this farm bill might give you across-the-aisle prestige that would be useful for later legislative endeavors, as well.

I would recommend that you vote no on the farm bill, and tell your constituents and your colleagues that you don't want to throw good money after bad in the worthy cause of ensuring that America's farmers learn to work within the markets while protecting them from the rapid, unpredictable shifts in agricultural prices. Be sure to note that prices on basic foodstuffs will probably decrease if we quit subsidizing farmers. Throw your support to the Lugar plan, and try to defeat the bill that comes out of committee. At the very least, you'll have helped to prepare the field for another attempt at defeating one of the most wasteful and expensive government programs currently using the public's dollars.

1Lancaster, John. "More Subsidy Going to Fewer Farms; Skewed Program Draws Senate Scrutiny." Washington Post 24 January 2002, final ed.: A1.

2Womack, Abner W., Seth Meyer, Gary M. Adams, and D. Scott Brown. "Economic Setting Overall and by Commodity." 2002 Farm Bill: Policy Options and Consequences. Ed. Joel L. Outlaw and Edward G. Smith. National Public Policy Education Committee, 2002.

3Becker, Elizabeth. "Senate Passes $44.9 Billion Farm Bill Limiting Subsidies." New York Times 14 February 2002, final ed.: A26.

4Lancaster, John, ibid.

5Samuelson, Robert J. "How Fiscal 'Discipline' Already Bought the Farm." Washington Post 6 February 2002, final ed.: A19.

6Tweeten, Luther. "No Farm Safety Net." 2002 Farm Bill: Policy Options and Consequences. Ed. Joel L. Outlaw and Edward G. Smith. National Public Policy Education Committee, 2002.

7Lancaster, John, ibid.

8Environmental Working Group searchable database.

9Lugar, Richard. "The Farm Bill Charade." New York Times 21 January 2002, final ed.: A21.

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