February 8, 2008
Farm Policy Needs to be Plowed UnderBy Matt Danko
In December, the Democrat-controlled Senate passed another subsidy-bloated farm bill that continues to benefit wealthy farms with unlimited payments while ignoring the real needs of small American farms as well as farmers in developing nations. Soon President Bush will have the opportunity to fulfill his promise to veto this bill and end the policy of sending payoffs to some of the wealthiest landowners in America. The importance of this legislation, and the genuine reform that is needed, cannot be overstressed, as its effects will be felt by many, including American farmers, African farmers, American taxpayers and consumers.
Current U.S. farm policy dates back to the Great Depression when the first commodity subsidies were given to family farms as a financial safety net. At that time, 20 percent of Americans were farmers. Today, less than 1 percent are farmers and most of them are not full-time farmers. In fact, agriculture in the United States accounts for less than 1 percent of our entire gross domestic product.
Obviously, times have changed, but because of the strong influence of industry lobbyists, these subsidies still exist, and for the most part, they don't go to small family farms. A study by the Heritage Foundation shows that the majority of these payments go to large corporate farms, those that already turn huge profits due to their economies of scale. These mega-farms can easily drive small farms out of business with the intent of buying them out in many circumstances.
The wealthiest 10 percent of American farmers receive 65 percent of all agriculture subsidies. The program literally rewards more farmland with more subsidies, and much of that land does not even have to be farmed. According to the Washington Post, since 2000, the government has given away more than $1.3 billion to farmers that don't farm. Many aren't even farmers, they're people with financial interests in farms. Some of these recipients include David Letterman, David Rockefeller, Ted Turner, Scottie Pippen, Microsoft cofounder Paul Allen, Enron's Kenneth Lay, and some members of Congress. (To see a map of farm subsidy beneficiaries living in New York City, click here.)
Worse, 60 percent of real farmers receive no subsidies at all. This is due to industry lobbying for specific crops. The winners are corn, soybeans, wheat, cotton, and rice, of which many are processed into unhealthy foods for consumers and feed for livestock. These crops are grown primarily by corporate mega-farms. The losers, of course, are fruits and vegetables, which are often grown by smaller farms. The disproportionate rise in the price of fruits and vegetables versus that of fast food is a red flag suggesting that perhaps we're subsidizing the wrong crops.
In 1996, the Republican congress passed the Freedom to Farm Act, which continued to grant subsidies to growers, but under the condition that they would be cut off in seven years. Literally, Congress was attempting to wean farmers off of decades of subsidies. However, when 9/11 happened, security and economic concerns provided the appropriate excuses for passage of the Farm Security and Rural Investment Act of 2002, and so the subsidies continued.
Even as farmers are reporting near-record profits, further subsidies have been authorized in the current farm bill. The posted justifications for crop-specific subsidies remain in serious doubt. As professor, syndicated columnist, and former farmer Victor Davis Hanson has noted, there are very few small farmers left in this country, the large corporate farms own the market (and get the subsidies), so there is little benefit to the traditional family farmer; food prices continue to rise, so there is little benefit to the consumer; and we continue to import almost as much food as we export, so there little benefit to American agricultural independence.
But again, the agriculture industry, like every industry, has its lobbyists. Campaigns are funded and favors are granted, and those that benefit are the politicians and a multibillion-dollar industry that will only continue to grow as the economies of Asia continue to prosper and import more American food.
Reforming farm policy can be politically hazardous: any effort to reform runs the risk of being labeled as anti-farmer, which can be detrimental during an election year. But why can't mega-farmers compete in a free market just like everyone else? Even the typical full-time American farmer retains a per capita income higher than the median family income. Why should the American taxpayer bail out an industry that's doing well, especially when our government is running budget deficits?
On a global scale, subsidies to American agribusiness encourage the overproduction of certain crops, such as cotton, the surpluses of which are sold to the rest of the world. This causes the price of cotton to drop on the world market. This hurts the small farmers of developing nations who literally depend on farming to survive. According to a study by the National Center for Policy Analysis, subsidies to American farmers cost third world farmers $24 billion each year. Add to that we put trade barriers on the importation of such crops from these nations. Trade barriers (which are subsidies by another name) only contribute to the economic impoverishment and political instability of the third world while simultaneously they drive up prices for American consumers.
All of this is in violation of rules set up by the World Trade Organization, and America's disregard for these rules has actually hampered our ability to negotiate trade deals in nonagricultural sectors of the economy. It's hard to promote free markets and free trade when you're subsidizing an entire industry to the detriment of other nations.
In West Africa, cotton is their cash crop and the only source of income for many families. By reforming cotton subsidies and lifting the associated import barriers here at home, therefore raising the world market price of cotton, while simultaneously lowering the price for American consumers, we could help 10 million West Africans significantly improve their impoverished living conditions. And this is a tradition of America: to better the lives of those in developing countries. After World War II, both Germany and Japan used the domestic market of the United States to sell goods and boost their economies. Later, South Korea and Taiwan did the same. This is a type of foreign aid that costs the American taxpayer nothing.
The last hope for a fair farm bill was embodied in several sponsored amendments which would have allowed for a more effective safety net for all farmers regardless of what they grow while placing caps on the amount of money any one entity could receive, thus leveling the playing field between family and corporate farms. They would have also reduced trade-distorting subsidies that hurt farmers of developing nations and would have brought our farm policy into compliance with international trade rules.
Unfortunately, such amendments failed, which is discouraging to say the least. The bipartisan Lugar-Lautenberg amendment was defeated. Even more unnerving, the similar Dorgan-Grassley amendment actually won a 56-43 majority, but failed because Democratic leaders had agreed to require a 60-vote supermajority lest they be filibustered by members of their own party who want to continue paying unlimited subsidies. This same tactic was employed with Senator Amy Klobuchar's amendment to end payments to farms with more than $750,000 in annual income. Hence, the Senate bill passed without any significant income caps and is now to be reconciled in committee with the House's similarly bloated version.
Fortunately, President Bush has expressed his dissatisfaction with this legislation and is threatening to veto it anyway. Unless some form of payment limitations can be worked out in committee to avoid a veto, Congress will have to attempt an override, or extend the current policy on the books and go back to begin a new farm bill, perhaps one more equitable. This begs the question: Why is a Republican administration (so called protectors of the rich) pushing for reforms and a Democratic Congress (so called protectors of the middle class) fighting for corporate welfare? The White House has called for an income cap of $200,000 while the income cap on the farm bill from Nancy Pelosi's House is a staggering $2 million! It could be inferred that the farm vote is simply another vote Democrats are more than willing to purchase with tax dollars.
Farm policy is, above all things, boring. The fact that nonfarmers are virtually unaware of these numerous contradictions and injustices is key to the existence of such contradictions and injustices in the first place. However, the very idea of crop-selective subsidies and trade barriers should hardly be one of partisan contention. Current U.S. farm policy constitutes an outdated corporate welfare program that defies the basic tenets of a free market and thus remains long overdue for reform.
Matt Danko is a freelance writer living in Knoxville, Tennessee. He blogs at PolicyMag.com