Like the past ones, Farm Bill 2013 is an American boondoggle

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Article Highlights

  • Congress has passed a farm bill on entirely partisan lines. Not one Dem voted for the bill.

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  • If crop prices fell to historical average levels, the program would cost taxpayers as much as $18 billion annually.

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  • Unless major changes to the House and Senate bills are made, the question remains: Why would any Repub or Dem vote for either?

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The House of Representatives has now passed a farm bill on an entirely partisan basis. No Democrat voted for the bill, not least because the House leadership voted out the nutrition title that would have reauthorized food stamps, or Supplementary Nutrition Assistance Program.

Several Republican members also refrained from offering support for the modified legislation because of their concerns about feckless spending on farm programs that waste economic resources and disproportionately send billions of subsidy dollars to wealthy individuals. The farms that would receive over 80 percent of all the subsidies in the 2013 House bill are owned and managed by farm households and landowners with assets that are measured in the multiple millions of dollars, and incomes that are several times larger than those of the median U.S. households.
  
The real puzzle is why any House representative, Republican or Democrat, who has any serious concerns about reducing the federal deficit, or ending wasteful and poorly targeted programs that ship transfer payments to wealthy families and corporations, would have voted for the 2013 House farm bill.

The answer leads back to the wealthy farmers, insurance companies, and agri-business lobbies that benefit most from farm programs, and their influence in farm-heavy districts. They wanted to preserve and expand agricultural entitlement programs that pay their constituents billions. Reforming the program to make it economically efficient, equitable, and effective seems to have taken a back seat to other concerns.

How else could one explain why serious Republicans who have consistently sought for more efficient and sensible fiscal policies supported a bill that includes a crop insurance program that costs taxpayers over $10 billion per year, pays more than 80 percent of its benefits to the wealthiest 20 percent of farm households, and encourages high risk and wasteful management practices. The government picks up 70 percent of the cost of the crop insurance program that provides unlimited subsidies to wealthy farmers, thousands of whom receive six figure plus premium subsidies every year. The federal government also pays crop insurance companies like Wells Fargo an average over $2 billion a year to sell and service the policies.

Then there is a new Price-Loss Coverage program that would lock in record-high prices for farmers. If crop prices fell to historical average levels, the program would cost taxpayers as much as $18 billion annually.

Also worth mentioning is an international food aid disaster program that wastes one out of every three dollars it spends by requiring that crops be sourced from U.S. producers and shipped by U.S. shippers. The protectionist policy doesn't help save lives of starving people in places like Darfur. Indeed, more food could be delivered more quickly to millions more of the poorest people in the world at a lower cost if it was acquired locally. And, of course, a new Soviet-style program that, at taxpayers' expense, guarantees milk producers a minimum margin between the revenue they receive for their milk and the estimated costs they incur for their cows' feed.

Then there is a new cotton subsidy that will continue to violate World Trade Organization rules and is likely to continue to requires the U.S. to pay Brazil $147 million annually-just so U.S. cotton producers can continue to receive substantial subsidies.

The House Bill also ensures that a decades old sugar policy that relies on import quotas and supply controls to raise sale prices for sugar farmers will remain in place. Since 1980, the 20,000 sugar farmers in the U.S. collectively have gained an average of $1.7 billion a year from this policy which costs U.S. consumers more than $3 billion per year in higher food prices.

Undoubtedly, some farm-focused programs are important. Conservation programs provide genuine benefits for society as a whole by reducing air and water pollution and soil erosion.  And publicly funded agricultural research programs far exceed their costs to the taxpayer by lowering crop prices through technological innovation and dissemination.

Still, unless Congress makes serious and major changes to the House and Senate bills, the question remains: Why would any Republican or Democrat legislator vote for either? Bills likes this are not why Republican voters sent Republican politicians to Washington.

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About the Author

 

Vincent H.
Smith
  • Vincent H. Smith is Professor of Economics in the Department of Agricultural Economics and Economics at Montana State University and co-director of MSU’s Agricultural Marketing Policy Center. He received his Ph.D. from North Carolina State University in 1987 and his bachelor’s and master’s degrees from the University of Manchester in 1970 and 1971. Dr. Smith’s current research program examines agricultural trade and domestic policy issues, with a particular focus on agricultural insurance, agricultural science policy, domestic and world commodity markets, risk management, and agricultural trade policy. He has authored nine books and monographs and published over 100 articles on agricultural and other policy and economic issues. His work has been recognized nationally through multiple national awards for outstanding research programs. In 2008, he became a Distinguished Scholar of the Western Agricultural Economics Association. Currently he is a Visiting AEI Scholar and co-director of AEI’s agricultural policy initiative. Dr. Smith is married and he and his wife, Laura, have two children, Karen and Meredith.
  • Email: uaevs@montana.edu
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