Before 1996, farmers received large crop subsidies that were
based on: 1) the crop planted; and 2) the market prices of the
crop. These policies resulted in farmers basing planting decisions
more on government policy than market demands. The 1996 reform was
called "Freedom to Farm" because farmers traded away subsidies for
the freedom to decide what to plant without the government treating
Although subsidies were set at $6 billion annually and then set
to phase out over the next several years, farmers reacted to slight
price decreases in 1998 by requesting and receiving the first of
several annual "emergency packages" which totaled $24 billion
between fiscal years 1998-2000. Now, instead of paying farmers
emergency payments, Congress and farmers want to return to the old
system of annual crop-based payments - at payment levels
unprecedented in US history.
Although central planning has failed
worldwide, the farm bill reads more like a 1930s Soviet-style
five-year plan than as a strategy for capturing 21st agriculture
Under the Senate bill, the federal
government will determine who can grow crops, how much they can
grow, and the prices at which they can be sold.
Farmers are in no more need of
subsidies than other industry. In 1999, Farm households had an
average income of $64,347, 17% above the national average, and an
average net worth of $563,600, double national average (the
difference is even larger when factoring the 10-40% lower cost of
living in the rural areas farm are located in).
As an industry, farm incomes have
been rising steadily over the past few years and are now at record
levels. Farms fail at only 1/6 the rate of non-farm businesses. Yet
Congress continues to tax working Americans to subsidize these
H.R. 2646, which passed on October 5,
will increase the 10-year cost of agriculture policy to $190
billion taxes and $261 billion in higher food prices, for a total
of $461 billion.
This huge tab will cost the average
household $4,377 over the next decade in higher taxes and food
prices, as the average full-time farm will receive over $1 million
in subsidies and price supports.
The increased food costs will fall
most heavily on the poor.
The Senate Bill's cost has not been
finalized, but it will be even higher than the House Bill due to
massive dairy price supports.
Although many believe that subsidies
are going to save the small family farm, a vast majority of the
subsidies go to wealthy farmers and agribusiness.
Two-thirds of farm subsidies go to
just 10% of subsidy recipients, most of whom are earning well over
Fifteen Fortune 500 companies and 14
members of Congress receive farm subsidies, and wealthy individuals
like David Rockefeller, Ted Turner and Scottie Pippen receive
subsidies as high as 75 times the annual median of $935.
Both the Senate and House bill hurt
Both bills place the US dangerously
close to exceeding the World Trade Organization's subsidies limit
(approximately $19 billion annually). Violation of the WTO would
result in large fines against the US and possibly trade sanctions
on US agriculture exports.
With 1/3 of American agriculture
dependent on exports, these sanctions would have a devastating
impact on US agriculture and the economy as a whole.
The current farm bill doesn't expire
until September 30, 2002, but some lawmakers want to pass a farm
bill now so they can lock in these massive subsidies before the
surplus is gone, and to score political points.
Congress should focus on the war and
the stimulus now, and then come back next year to examine fresh
approaches to agriculture.