Reason.com , August 9th, 2007
The fight to end farm subsidies lingers on.
Last week, the House of Representatives passed the 2007 Farm Bill, a five-year "overhaul" of agricultural policy that House Speaker Nancy Pelosi (D-Calif.) lauded as representing "a new direction." But as much as Democrats have heralded the bill's supposed reforms, even the lightest reading shows that it represents more of the same - a flawed, wasteful approach to agricultural policy.
The House Farm Bill allocates $286 billion over five years to agricultural programs - that's an even bigger price tag than the one attached to the bloated 2002 Farm Bill, which increased agriculture spending by 80 percent over 1996's Freedom to Farm Act, itself a huge bill.
It continues the tradition of giving huge subsidies to wealthier farmers, though on a more limited basis than the 2002 Bill. Where the 2002 Bill dished out subsidies to farmers earning up to $2.5 million annually, this bill establishes an annual income threshold of $1 million, or $2 million if a husband and wife each claims subsidies. A slight improvement, at best.
President Bush, who signed the handout-happy 2002 bill that paved the way for this year’s extravagant spending, to his credit, asked for subsidies to be withheld from farmers earning more than $200,000 per year. That request was disregarded, apparently because the Democratic leadership wants to protect agriculture-heavy districts the party picked up in the 2006 election—those of Rep. Nancy Boyda (D-Kansas) and Rep. Zack Space (D-Ohio), for example.
The last thing taxpayers need is this type of wasteful, extravagant spending while already saddled with a massive budget deficit and enormous entitlement liabilities. Nor do we need tax increases—which reduce revenue flows in the long term—like those targeting multinationals with U.S. subsidiaries, also included in the bill.
Then there's the vast market interference that comes with enormous government subsidies and expansive farm programs. Sugar, the subject of a major subsidy program maintained under the 2007 House bill, costs twice as much in the U.S. as it does in the rest of the world.
Nor is it beneficial to perpetuate a system of reverse wealth distribution, by which those earning up to $2 million a year are the beneficiaries of de facto welfare payments, often funded by those earning a mere 5 percent of their annual income. The Environmental Working Group finds that the largest 10 percent of farm businesses have received 72 percent of farm subsidies in recent years. If this is a good idea, perhaps we should start cutting welfare checks to partners in big-time corporate law firms and millionaire plastic surgeons in Los Angeles, too.
Of course, agricultural subsidies also represent a constant sticking point when negotiating free trade agreements, and they tend to make the U.S. vulnerable to trade sanctions. That's bad news for consumers, who benefit from the reduction and elimination of tariffs on imported goods, and suffer from the continuing retaliation and re-retaliation when countries slap sanctions on other countries for rigging their markets. Subsidies also hurt farmers in the developing world looking to export goods to U.S. markets, where they could make decent money if only the system weren’t artificially rigged to benefit wealthy U.S. producers.
The real tragedy of the House version of the 2007 Farm Bill is that some legislators wanted to do more than pay lip service to a system that deals with farming as if we’re still stuck in the Great Depression. Rep. Ron Kind (D-Wis.) and Rep. Jeff Flake (R-Ariz.) pushed a plan to cut farm subsidies and introduce farm savings accounts, which farmers could use to cover losses when crop prices are low or yields are poor—a potential sea-change in agricultural policy.
Not only would their plan have dealt with the issue of farmers getting hammered should they be unable to harvest a healthy crop or should prices fall, but it would also have avoided the negative side effects that come with farm subsidies, not to mention have saved up to $55 billion over the next ten years. Yet despite all the positive and truly reformist aspects of this plan, it gained little traction in the House.
The Farm Bill next moves through the Senate, likely just after the August recess. Perhaps a vacation and some rest will help the upper chamber move U.S. farm policy out of the 1930s.