Quantcast

Wean prosperous farmers off federal teat

Published September 25, 2012 1:01 am

This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The following editorial appeared in Monday's Washington Post:

House Speaker John A. Boehner, R-Ohio, has made it official: There will be no vote in the House on a new five-year farm bill until after the November elections. Predictably, some are decrying this as the latest example of Washington dysfunction, what with rural America still recovering from a bad drought, farmers in need of certainty for next year and so forth. The farm lobby was desperate to get a bill through before November for fear of what might happen if a new Congress and president take up agriculture programs in a big deficit deal next year.

But for those who think, reasonably, that agriculture needs a bigger haircut than the Senate farm bill's $23 billion in savings over 10 years, the delay is not cause for concern at all. Operation of critical programs, including food stamps, won't be affected for the time being. Meanwhile, Congress can think some more before approving legislation whose 10-year price tag approaches $1 trillion — and whose key innovation is to replace existing crop subsidies with a costly new crop "insurance" program that creates all sorts of perverse incentives for farmers.

Among the relevant evidence Congress should ponder is a new Organization for Economic Cooperation and Development report on farm subsidies in advanced economies.

The good news is that subsidies have shrunk to an all-time low average of 19 percent of total farm income in the 34 countries surveyed. The United States has led the way: Today, government handouts make up just 9 percent of farm income, down from 22 percent a quarter-century ago and a lower proportion than anywhere else but Chile, New Zealand and Argentina.

The OECD report cites the recent expiration of ethanol tax breaks and tariffs as a helpful move toward more market-oriented policy. All things considered, this puts the United States in a stronger position to argue for market-oriented policy in global trade talks.

The bad news, however, is that rising commodity prices accounted for the shrinkage in subsidies' share of U.S. farm income since 2002; there was precious little policy reform in the past two farm bills. As the OECD puts it, "markets today are providing the remuneration to farmers that . . . policies have sought to provide in the past." In other words, U.S. farmers got rich by selling their crops in a market buoyed by demand from China, India and other emerging markets — but even without that they might have gotten just as rich off government aid.

Advocates of the proposed new crop insurance program argue that farmers need it to protect them not only against natural disasters but also against sudden price declines. Why farmers, alone among all businessmen, should be entitled to a nearly guaranteed income is especially inexplicable when total U.S. farm equity is projected to $2.3 trillion this year, up $500 billion since 2008, according to the Agriculture Department. The OECD expects "relatively high" commodity prices to continue, a reasonable forecast given the growth in emerging markets and the Federal Reserve's plan for near-zero interest rates through mid-2015.

This is the time to wean our prosperous farmers off the federal teat, not to give them another five years' worth of taxpayer guarantees.