In an engaging presentation at the Russell Senate Office Building on Wednesday, leading agricultural economists examined the budget implications of the 2012 Farm Bill’s proposed shallow-loss provisions. The event coincided with the release of a paper authored by Vince Smith of Montana State University and AEI, Barry Goodwin of North Carolina State University and Bruce Babcock of Iowa State University entitled, “Field of Schemes: The Taxpayer and Economic Welfare Costs of Shallow-Loss Farming Programs.”
Barry Goodwin began by describing common misconceptions about the profitability of farming and the well-being of farms in general. According to Goodwin, farming household incomes have risen more quickly and remained higher than average household incomes, particularly since 1996. Additionally, farmers are, on average, less leveraged and significantly wealthier than non-farmers.
Vince Smith then alleged that the Congressional Budget Office’s scoring of shallow-loss provisions fails to examine the scenario under which crop prices fall to more historically consistent levels. In this scenario, the costs of the shallow-loss programs are likely to exceed those of the Direct Payments Program they would replace. Smith wrapped up the conversation by explaining that a shallow-loss program would guarantee farmers up to 90 percent of their average revenues over the past five years — a situation that other business sectors could only dream of.
— Brad Wassink
One of the main provisions of the 2012 Farm Bill is a “shallow-loss” program. Shallow-loss programs would give farmers subsidies, ensuring that farm revenues do not dip below 90 to 95 percent of the average revenues those farmers received over the past five years — even if crop prices fall.
This program is being portrayed as a safety net, but there are significant questions that must be examined before the program is enacted. How much would shallow-loss programs really cost and how are they structured? How accurate are Congressional Budget Office estimates of these costs? Are there limits on potential taxpayer liabilities in shallow-loss programs? And, finally, would large, wealthy farms benefit disproportionally from these programs?
At this event, Vince Smith and Barry Goodwin will discuss these questions and will release new research and analysis on the cost of shallow-loss programs.
Registration and Lunch
Vincent H. Smith, Montana State University and AEI
Barry Goodwin, North Carolina State University
Question and Answer Session
Event Contact Information
For more information, please contact Brad Wassink at [email protected], 202.862.7197.
Media Contact Information
For media inquiries, please contact Véronique Rodman at [email protected], 202.862.4871.
Barry Goodwin is the William Neal Reynolds Distinguished Professor in the Department of Agricultural and Resource Economics and the Department of Economics at North Carolina State University. His award-winning research deals with many important issues in public policy analysis, trade, economic history and crop insurance.
Vincent H. Smith is a professor of economics in the Department of Agricultural Economics and Economics at Montana State University (MSU) and co-director of MSU’s Agricultural Marketing Policy Center. 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 as well as on economic issues. He has been recognized 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.