Monday, October 22, 2007

Meet The New Farm Bill, Same As the Old Farm Bill

From today's Washington Post: "This was the year the antiquated and expensive farm subsidy program was to be reformed. A growing chorus has turned against the $16 billion annual subsidy, and yet the 2007 farm bill is pretty much the same as previous versions."

What's wrong with farm subsidies and who's against them? Here's a list from the Post article:

1.Most of the farm subsidies go to 150,000 big corporate farms rather than the small farmers for whom the program was designed during the Depression, further hastening the death of the small family farm.

2. Major business lobbies, including numerous Fortune 500 companies, have attacked the farm bill because it is blocking a multibillion-dollar global trade deal.

3. International charities oppose farm subsidies in the U.S. because they undermine poor foreign farmers, who can't compete against subsidized American crops.

4. Environmentalists want the program changed because it rewards farmers who are among the nation's biggest water polluters.

5. Parents worried about obese children, and the growing cult of foodies -- from celebrity chefs to urbanites newly addicted to full-flavored tomatoes -- made impassioned pleas for the money to go toward local and organic produce.

6. Surging prices for corn, milk and other commodities have raised farmers' incomes and undercut arguments about the need for this expensive income transfer.

In other words, just about everybody is against farm subsidies in general and the 2007 farm bill in particular.

So who's in favor of farm subsidies? The "Iron Triangle" of: a) rich corporate farmers harvesting cash subsidies and addicted to the lucrative D.C.-style pork, b) the pork-pushing politicians catering to a well-organized special interest group in return for votes and contributions, and c) the bureaucrats at the Department of Agriculture whose jobs depend on distibuting the pork to the pork addicts.

And why doesn't this change? It's a perfect example of the "tyranny of the status quo."

Masonomics would explain it this way: "Governments do not face competitive pressure. They are immune from the "creative destruction" of entrepreneurial innovation. In the market, ineffective firms go out of business. In government, ineffective programs develop powerful constituent groups with a stake in their perpetuation."


At 10/22/2007 9:13 PM, Anonymous Anonymous said...

Prosperity of Farmers Depends Heavily on the Future of Federal Farm Policy

The Kansas City Region’s farmers rely heavily on the federal government for financial assistance in the form of price supports and emergency aid. Corn, soybean, and wheat crops are covered by government farm programs and are produced heavily in the Region. Consequently, government assistance to the Region’s farmers has been substantial. Over the past 16 years, the federal government has provided nearly half of the net farm income for the Region’s farmers compared with about a quarter for the rest of the nation (see Map 2).

Because of the Region’s dependence on farm programs, producers and rural constituents are paying close attention to congressional discussions of the 2007 farm bill. Some in Congress want to continue the 2002 bill, which is favorable to farmers; however, the bill has opponents in other countries who claim that price supports distort world agricultural prices. In fact, Brazil has threatened World Trade Organization (WTO) litigation against U.S. corn and soybean programs following successful challenges of the U.S. cotton program and the European Union sugar program. Others in Congress would like to take steps to reduce payments to farmers and replace them with funds for rural development.7 Still others would like to expand farm programs to include specialty crops, such as vegetables and fruits, which could cut funds for traditional program crops.

Given farmers’ historic and ongoing dependence on federal farm payments, any changes to current programs could hurt their cash flow positions. Policy changes also may affect the price of farmland, because federal farm supports, which have existed in various forms since the 1930s, have been capitalized into property values.8 For example, one U.S. Department of Agriculture study estimates that 69 percent of North Dakota’s farmland value may be attributed to this expected stream of government payments. From a lending standpoint, cuts in programs would affect the value of underlying real estate collateral and the ability of farmers to repay their loans. The Region’s rural economies would also be affected by cuts to traditional programs, although shifts in funding to rural development could offset some of the potentially negative consequences.

Your tax dollars at work:-(

At 10/22/2007 9:55 PM, Anonymous Anonymous said...

This bill sounds like the rest of government. I thought that the Republican Party stood for smaller government. When confronted with a majority in both houses of Congress and the Presidency, I did not see any overwhelming evidence that the government was shrinking...Just the opposite has taken place. Nobody wants to vote themselves out of a job. The farm subsidies work the same way. Nobody involved with the subsidies is going to say "Forget it, I don't need it!"

At 10/22/2007 11:23 PM, Anonymous Anonymous said...

Here's an example farmfare subsidy:

To recap: the farmer got $198,000 from the government when he took out the loan. Then he paid the government $198,000 (+ interest), and the government paid him $198,000 (+ interest) for the grain. Then the farmer paid the government $175,000 for a commodity certificate. And the government gave him 100,000 bu. of corn for the commodity certificate. So what is the farmer left with? What is the economic net? It is the exact same result as if the farmer had walked in and paid off the loan at the market rate: $23,000 worth of gain and 100,000 bu. of corn to sell in the market. But none of that gain counts toward the payment limitation, and the government is not saddled with the grain.

At 10/23/2007 10:05 AM, Anonymous Anonymous said...

This is from the 10-23-07 WSJ:

Big Sugar. The farm bill requires the USDA to buy up domestic sugar equal to the amount that is imported from Mexico under Nafta, which is a disguised form of trade protection. This sweet deal is like requiring the Transportation Department to purchase a Ford and GM car for every Nissan and Toyota imported into the U.S. The taxpayer cost: $1.4 billion.

At 10/23/2007 10:15 AM, Anonymous Anonymous said...

Think Big Sugar when politicians say "We've cut programs to the bone, we need higher taxes."


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