Economics, U.S. Economy

A real opportunity for bipartisan collaboration on farm policy

Photo Credit: Mario Vercellotti

Photo Credit: Mario Vercellotti

A remarkable thing has happened on the way to a 2013 Farm Bill. Senator Harry Reid and Senator Debbie Stabenow, chair of the Senate Agricultural Committee, along with other democrats on the committee, have recently proposed a sequestration-related farm bill. The bill would terminate the $5 billion-a-year Direct Payments program, which has widely and generally accurately been described as a welfare boondoggle for mainly very wealthy farmers.

About $1.6 billion of those savings would be needed to fund a substantial increase in enrollment in the Average Crop Revenue (ACRE) program, a shallow loss program established by the provisions of the 2008 Farm Bill under which payments are made when, on a state wide basis, revenues per acre for a crop fall below 90% of their recent historical statewide average. Annually, another half a billion dollars would be used to refund four “permanent disaster aid programs for livestock, also established in 2008, for which funding ended in 2011 and about $100 million would be used for organic and specialty (read fruits and vegetables) research. The result would be annual savings of $2.7 billion, ten-year savings of $27 billion, and no monies would be allocated to the new and potentially very expensive farm subsidy programs put forward in the Senate and House Agricultural Committee 2012 proposals for a new farm bill.

The Senate Democrats’ sequester-related farm bill proposal is remarkable because, in many ways, it addresses several legitimate concerns about wasteful farm programs essentially targeted to the wealthiest farmers expressed by many House members, including the House Republican leadership.

The Reid-Stabenow proposal does not include the economically wasteful and inefficient dairy program advocated by Congressman Colin Peterson (D-Minnesota) that would have introduced supply controls specifically intended to curtail the ability of efficient milk producers to expand their operations. It would end the direct payments “welfare for the rich landowner” program that no one beyond the House and Senate agricultural committees even tries to rationalize as good policy. And it provides $27 billion in savings that could be used as offsets for several defense programs many Republicans and Democrats see as essential for the nation’s security.

Of course, the Reid-Stabenow proposal does not go far enough. It would not touch the ACRE shallow loss program, also a potentially expensive program if crop prices shift back towards their long run historical trend levels. Federal crop insurance, a $9 billion-a-year boondoggle program that subsidizes about 67% of the total cost of a participating farmer’s crop insurance policy, would be left alone. And inefficient and ineffective conservation policies like the Conservation Stewardship Program would remain. But it is a “game changing” proposal because it establishes two important principles.

The first is that the Direct Payments program is not an entitlement program. The second is that the farm lobby does not have an inalienable right to demand that, if the Direct Payments program is terminated, most of the monies should be reallocated to new, economically wasteful, and potentially even more expensive programs like the new price support program (Price Loss Coverage) that was included in the House Agricultural Committee’s June 2012 Farm Bill proposal. That little policy nugget had the potential to cost taxpayers as much as $18 billion a year if corn, wheat, soybean, and other major crop prices moved back towards their long run trend levels. Those two principles are modest and sensible, and reflect a reasonable bipartisan common farm policy ground for House and Senate Democrats and Republicans, at least those who do not serve on the Congressional Agricultural Committees.

Vincent H. Smith is a visiting scholar at the American Enterprise Institute and an agricultural economist at Montana State University.

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