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Press Release

    The Real Threat from the Farm Bill

    04/09/2002

    The economics of contemporary American agricultural production is so complicated that few outside of the USDA and the industry understand it. The politics of contemporary agricultural production, on the other hand, is straightforward: American producers, dependent on explicit subsidies, sub-market loans, and price supports for their livelihood, besiege their elected officials to ensure that Congress transfers as much wealth from other sectors of the economy as possible.

    In town hall meetings across America, hundreds of senators and members of Congress discovered – if they didn’t know already – that farmers are an almost irresistible force in American politics. For two weeks, farmers wildly interested in the contents of the $171 billion farm bill currently in conference committee traveled thousands of miles to offer their views on agricultural assistance policy. While the pleas for cash differed in specifics, they all seemed to share one thing in common: an almost pathologic distrust of markets.

    This should not be surprising. The nation’s food procurement policy is a corporatist arrangement, similar to the economy of Japan, where financing decisions are made through cooperation between industry and the government. Previous farm supports – including the 1996 farm bill and four emergency supplemental commodity assistance packages between 1998 and 2000 – have created a class of farmers dependent on direct federal assistance and supervision. In states and congressional districts where this dependency is most intense, federal support for agriculture dominates the political landscape.

    With an election in November that will decide control of both the House and Senate, the administration dispatched USDA Secretary Ann Veneman to attend events with Republican officeholders during recess. At events in Montana, Colorado, and Indiana, she emphasized administration support for a farm bill “that is within the proposed budget and would spend funds evenly throughout its life.” Of course, this is a mere preference: the administration would like it if Congress acted responsibly, but would prefer something egregious instead of nothing at all.

    More troubling than the administration’s indifference, however, is its active support for new programs to conserve “environmentally sensitive” farmland. “One important aspect in both (the House and Senate) farm bills is that substantially more money is allocated for conservation,” Veneman said at a Modesto, California event. “The administration will push for more money to address environmental concerns on working farmlands, not just conservation programs that take land out of production.” The administration wants the farm bill to not only set the nation’s food production levels, but dictate how private land is used to reach those quotas as well.

    The Senate farm bill devotes $21.3 billion towards new environmental conservation programs and $350 million a year for the “Farmland Protection Program,” which buys development rights to land to prevent citizens and private businesses from using the land as they see fit. The House bill provides $16 billion for conservation and $50 million a year to confiscate property.

    Conservation programs are particularly threatening because they undermine property rights and create new dependency on federal aid. While explicit economic intervention to benefit producers of commodities such as corn, wheat, soybeans, and cotton may violate international trade agreements, new environmental conservation programs do not. Thus, tying federal funding to environmental mandates is a way to subsidize farmers while not instigating an international trade war.

    In the past, Congress supported price levels by rewarding farmers for not using land to produce food, but new conservation programs would pay farmers to preserve soil, protect wetlands and aquifers, preserve wildlife habitats, and reduce runoff of fertilizers and manure. Farmers do many of these things already and would be happy to do the others if the price is right.

    As environmental groups are well aware, farmers are “stewards of half of the country’s surface area.” The farm bill would give extreme environmentalists control of this land and supplant private property rights with federal mandates. The agriculture industry is eager to cede this control if it results in more lavish subsidies, which makes it difficult to confront federalization, since the very property owners whose rights are being trammeled are complicit in the arrangement.

    But the threat to private property and agriculture markets is obvious. A new round of commodity subsides will almost certainly draw retaliation from America’s trading partners, whether or not the World Trade Organization endorses such action. The most heavily subsidized commodities are also the ones “dumped” in international markets. The United States exports one-third of its soybeans, 20 percent of its corn, half its wheat, and 60 percent of its cotton. This in the face of a strong dollar that has depressed other American exports.

    As the farm bill demonstrates, if explicit subsidies lead to a trade war, an eager coalition of environmentalists and agribusiness is in place to replace that assistance with money for conservation. This would push domestic agricultural production even further from anything that resembles a market economy and empower the government to set commodity prices, production levels, and determine how land is used. The government would make every major decision relating to food procurement and the use of farmland.

    Since passage of the Rural Development Program in 1955, the government has dominated the economics of agricultural production through subsidies, crop insurance, and below-market interest rate loans, but the resources used to produce food has remained in private hands. This farm bill would usher in a new era of agricultural policy by ceding control over the factors of production – most importantly, the land itself – to government control and manipulation.

    In their search for more resources from the government, many agriculturalists have willingly accepted the changing character of conservation subsidies, but this new revenue will come at price. As the billions of dollars in direct subsidies for “proper” land management add up, it will not be long before environmentalists demand that farmers not only adhere to their mandates, but hand over their land as well. Telephone and electricity companies de-legitimized their property rights when they accepted monopolies and guaranteed profits from the government and have been on the defensive when it comes to public use of their facilities ever since. It is quite likely that new conservation subsidy programs will result in the same problem.