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Press Release

    Would a Farm Bill by any Other Name Smell as Sweet?

    10/09/2001

    Thomas Jefferson was effusive in his praise for the farmer. He believed that the future of republican government hinged on the extent to which the character of the citizenry would reflect that of the independent, yeoman agriculturalist. Last week, the United States House of Representatives was sure to remind people of Jefferson’s pro-farmer mindset when it voted, 291-120 to pass the "Farm Security Act of 2001."

    Known until September 11th as the less dramatic, "Agricultural Act of 2001," the "farm bill," as it is commonly known, is the latest installment of the federal government’s ongoing policy to centrally plan much of the nation’s food procurement. As passed by the House, the farm bill amounts to a $170 billion handout to both independent farmers – to the extent that they still exist – and the thriving agribusiness industry.

    As Congress resumed after the August recess, most analysts believed the farm industry would be in for a moderate increase in price supports and other subsidies. But that was before the word "security" was inserted into the farm bill’s official title. Like many other spending initiatives to come before Congress in the wake of the terrorist attacks, the farm bill’s lavish subsidies were defended as "essential" to national security.

    There is no doubt that an abundant domestic food supply will be essential during the nation’s war on terrorism, but this farm bill pays the industry over $16 billion NOT to produce food. That’s more than a 75 percent increase on our current conservation programs. In what sense is paying Iowa farmers millions of dollars not to raise hogs essential to national security? Perhaps this question should be posed to the 291 members of Congress at their next town hall meetings.

    Much of the rest of the farm bill is devoted to subsidies for commodities such as wheat, barley, corn, soybeans, cotton, wool, and oats, among others. These funds are administered to the agriculture industry by different agencies, depending on the assistance program in question. These assistance programs range from the direct cash assistance program, to the marketing loans program, to the crop disaster insurance program, to emergency relief, to the processing, storage and transportation fund, to several export programs, to other lesser known bureaucratic endeavors.

    All of these programs, and the thousands of bureaucrats required to administer them, are necessary because of the farm bill’s contradictory goals of repealing supply and demand, while at the same time ensuring that a "free market" develops. Instead of realizing the futility of such a mission, Congress simply decided that more money and more bodies were needed to make the impossible possible. Such optimism would be welcome, if it did not come at so great a cost to the taxpayer.

    This farm bill reverses the course set in the "Freedom to Farm Act" of 1996, which attempted to move the farm industry away from government-subsidized prices and production. The "market orientation" of the 1996 Act was not ambitious. It simply replaced some explicit price supports with other forms of income assistance and attempted to reduce overall expenditures by curtailing some of the farm bill’s excesses. But the farm lobby was not satisfied: Between October 1998 and October 2000, Congress passed four emergency supplemental commodity assistance packages to provide the same price supports they tried to move away from with the ’96 Act. This time, Congress relieved us of the suspense by including the generous price supports in the original bill.

    Yet, supporters contend that a market will develop because the price supports are intended merely to serve as "insurance" in case prices somehow fall below the Congressionally specified level. Prices themselves are nothing more than a reflection of the intersection of supply and demand: The easiest way to ensure that prices fall below a certain level is to immunize producers from the normal consequence of overproduction, which, of course, is rapidly falling prices. In this way, price supports guarantee the outcome they are supposedly designed to guard against.

    The farmers understand this better than anybody, but are not going to let reality stand in the way of $170 billion. As economist and agricultural consultant Bruce Babcock has noted, farmers have "outmaneuvered nearly every other interest group in terms of capturing more federal dollars. It's mind-boggling how effective they are."

    One hopes that the agriculture industry really is uniquely effective because the nation cannot handle any more spending initiatives of this extravagance. The economic growth of the 1990s can be attributed, in part, to the restraint of Congress, which resulted in government spending as a percentage of GDP falling for the first time since the 1950s. Now that the economy is sagging dramatically, the lessons learned from fiscal restraint must not be forgotten.

    Neither can the lessons taught by Jefferson, who respected the character of the farmer, but understood that character and prosperity are best attained through action independent of government. As he said in his first address to Congress, "Agriculture, manufactures, commerce, and navigation, the four pillars of our prosperity, are then most thriving when left most free to individual enterprise."