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Executive Summary #1534 on Agriculture

April 9, 2002

April 9, 2002 | Executive Summary on Agriculture

Executive Summary: Agriculture Lobby Wins Big in New Farm Bill

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The House and Senate are now in conference and are close to agreement on legislation reauthorizing most farm programs for the next 10 years, incorporating elements from the Farm Security Act (H.R. 2646) and the Agriculture Conservation and Rural Enhancement Act (S. 1731). Both of these bills abandon the reforms initiated by the 1996 Freedom to Farm Act, the goal of which was to phase out mistargeted and counterproductive crop subsidies. In fact, both bills would escalate farm subsidies to a scale never before witnessed in America.

Although this legislation will cost the average American household nearly $4,400 in taxes and government-inflated food prices over the next decade, taxpayer and consumer groups have failed to play a role in the farm policy debate that is on a par with that of the leadership offices of several farm organizations. As a result, the farm bill that emerges from the House and Senate conference committee is expected to include record farm subsidies, and these subsidies will be tilted to the largest and wealthiest farms, including many of the most politically active agribusinesses.

Producers of the five largest subsidized commodities--wheat, corn, cotton, rice, and soybeans--have been responsible for much of the nearly $70 million that has been donated by agricultural interests to federal candidates since 1999. Leaders of organizations such as the American Farm Bureau Federation, which have also been multimillion-dollar campaign donors, were appointed to federal commissions where they proposed several new expensive farm programs to Congress. Not surprisingly, nearly all of the recommendations made by these organizations ended up in the House and Senate bills.

The sugar industry donated $4.3 million to federal political candidates in hopes of retaining federal sugar supports that triple the price American consumers pay for sugar. One-fourth of these donations came from just one company--Flo-Sun, Inc., a sugar empire located in Florida and the Dominican Republic and owned by brothers Alfonso (Alfie) and Jose (Pepe) Fanjul. Although this corporation is scarcely in need and the Fanjuls' sugar fortune has been conservatively estimated to be worth $500 million, the government's sugar program provides them with approximately $125 million per year in federal benefits. In December 2001, a Senate amendment that would have saved consumers $1.9 billion per year by eliminating the federal sugar program was defeated by a vote of 71-25.

Likewise, the peanut industry sought assurance that it would not be harmed by the elimination of price supports. Organizations including the Western Peanut Growers Association and the National Peanut Growers Group donated nearly $250,000 to candidates for national office and testified before Congress several times in favor of replacing peanut price supports with generous federal subsidies. Both the House and Senate voted to include $3.5 billion in peanut subsidies over 10 years, thereby shifting the cost of the peanut program from consumers to taxpayers.

Meanwhile, dairy farmers have been defending milk price supports that impose a "milk tax" costing consumers $2.7 billion per year. Organizations such as the National Milk Producers Federation (NMPF), which told Congress that these milk tax policies are actually good for consumers, were responsible for much of the $3.3 million that has been donated by the dairy industry to federal political candidates. While Congress did allow one dairy price support program--the Northeast Interstate Dairy Compact--to sunset in 2001, the Senate voted to provide a new $2 billion golden parachute payment for dairy farmers across the country.

Many political scientists no doubt would consider agriculture policy a classic case of special-interest politics. The beneficiaries of farm subsidies may be few in numbers, but they have dedicated substantial resources to influencing the debate on farm policy because its outcome will result in massive gains or losses for them.

On the other hand, while the vast majority of Americans are harmed by subsidy policies, they have not felt a pressing call to action, given that the effects of subsidies on an individual level are relatively small and are hidden in food prices and tax bills. Consequently, the more active and impassioned farm lobby has succeeded in preserving its special-interest subsidies.

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author

Brian M. Riedl Grover Hermann Fellow in Federal Budgetary Affairs
Thomas A. Roe Institute for Economic Policy Studies