Farm Subsidies

Farm subsidies are necessary, but they desperately need to be reformed. What worked after the Great Depression of the 1930s has turned into a money-sucking, unmanageable monster that gobbles billions of tax dollars every year.

A revised farm bill is created by the House of Representatives and presented for Congressional vote every five years. Congress has made steps in the right direction in the matter of farm bill reform with their newest version, which was passed with veto-proof margins of 318-106 in the House and 81-15 in the Senate (nytimes.com). This historic vote occurred in May 2008 and is an excellent example of the bipartisan support that farm bills have historically garnered. President Bush promptly vetoed the bill when it was received at the White House, and the House of Representatives and Senate just as promptly voted to override Bush’s veto when the bill returned to Congress. The United States of America is now the proud parent of “The Food, Conservation and Energy Act of 2008”. Farm bills have come a long way since their conception in the 30s.

Although this legislation “is universally known as the farm bill, it actually directs far more money to feeding the poor than it does to helping farmers – about $209 billion for nutrition programs ….. compared with $35 billion for agricultural commodity programs” (nytimes.com). Important improvements contained in this bill that supporters enthusiastically point to are increased food stamp benefits, child care costs deductions, big increases for food banks and other organizations that support communities in times of food emergencies, increased funding for foreign food aid, creation of a healthy-snack program for schools, increased spending on land conservation and rural development, and even a provision that benefits endangered species.

Critics decry the “direct payment” program left intact from the previous bill that pays qualified land owners based on acreage, regardless if the land is farmed. They point fingers at a tax break for racehorse owners that was inserted by Senate Republican leader Mitch McConnell of Kentucky. Also, subsidy payments to wealthy farmers or owners of farmland have not been slashed enough, according to opponents of the bill.

Speaker of the House Nancy Pelosi does concede that “while more change is needed, the bill made important improvements to farm policy” (nytimes.com). Of particular interest is “ACRE”, the new Average Crop Revenue Election program. This program is more market oriented, pays farmers only when they face a real loss in revenue, requires farmers to be responsible for the first portion of revenue loss, cuts the Marketing Loan Program rates by 30% (addressing a concern that has triggered WTO trade disputes), and cuts “direct payments” by 20% (farmland.org). These improvements are concrete steps in the reformation of the farm bill and should be applauded because:

Making the farm bill more market oriented is important because it helps the farming industry become more in tune with domestic and/or international consumers’ desires. Consumers will send a message to agricultural producers with their dollars as to what products are the most important to them. As a result, farmers will plant crops based on actual forecasts instead of planting for the greatest benefit from a subsidy. This could result in a greater variety and higher quality of crops planted. At the very least, it will create agricultural production more in tune with the economy.

Requiring farmers to substantiate a financial loss before receiving government commodity payments will result in savings to the government and restores the true meaning of a “safety net” for producers.

Requiring producers to be responsible for the first 10% of any revenue loss will result in increased governmental savings. It will also create more of a ”partnership” between government and producers, replacing the welfare-like status of previous bills.

Reducing the Marketing Loan Program rates will go a long way in improving international relations. As a result of this benefit being reduced for America’s producers, other countries will have a more level playing field in the area of agricultural exporting.

Reducing direct payments creates revenue to pay for the new programs included in the 2008 farm bill.

It is of particular importance that the United States acts with moral and ethical responsibility regarding farm subsidies. The more US production of agriculture is subsidized, the deeper in poverty poorer countries become mired. And like it or not, their well-being is tied to ours. It is a proven economic fact that suppressing imports ultimately suppresses exports for any country (Economics Today). Exorbitant subsidies create a very difficult environment for foreign producers by creating a glut that lowers world prices for commodities, thereby creating a very difficult environment for foreign producers to compete and ultimately reducing imports.

The plight of West African cotton farmers is a good example of the damaging effects of US commodity subsidies. The majority of the farming families live on less than $1 a day. Any reduction in the world market cotton prices “directly [affects] the prices that farmers in poor countries receive for their crops” (Oxfam). They have no “cushion” to absorb the blow of reduced prices, and millions of families can be reduced to starvation by a slight reduction of income. On the flip side, any increase of world market prices, even the most modest gains, eventually translates into an improved standard of living for these families.

In conclusion, well thought-out farm subsidies are important as a safety net for US producers, but need continuing reformation to reverse long-standing negative effects on the international economy and the US deficit.

Works Cited

American Farmland Trust: News – Press Releases, “Setting the Record Straight on ACRE: A Statement of American Farmland Trust and the National Corn Growers Association”, Jimmy Daukas and Jennifer Morrill, May 20, 2008, www.farmland.org

Economics Today – the Macro View, Roger LeRoy Miller, 14th Edition, pg 842

New York Times, “House Passes Farm Bill Veto by a Veto-Proof Margin”, David M. Herszenhorn, May 15, 2008, www.nytimes.com

New York Times, “Reaching Well Beyond the Farm”, David M. Herszenhorn, May 20, 2008, www.nytimes.com

Oxfam America, “Paying the Price”, key findings from Julian M Alston, Daniel A Sumner and Henrich Brunke, 2007, www.oxfamamerica.org/newsandpublications