05-18-2002

SOCIAL STUDIES: The Farm Bill Is a Bad Joke With a Good Punch Line

On Monday, President Bush, who will apparently sign absolutely any bill
that reaches him, up to and possibly including a bill selling his family
into slavery, picked up his pen, threw away his principles, and signed a
farm bill that has been universally derided as an expensive monstrosity.
Well, any legislation condemned by the editorial pages of The Washington
Post, The New York Times, and The Wall Street Journal can't be all bad.
Never one to shrink from a challenge, I set out to find something hopeful
to say about the Farm Security and Rural Investment Act of 2002. This was
not easy.


If it is true that as goes the farm bill, so goes Washington-and usually
that is true-then Washington is in the mood to spend money, distort
markets, and slam the door on its trading partners' toes. The new bill is
expensive-very expensive. According to the Congressional Budget Office's
projections, it will cost about 80 percent more than the policy set by the
previous farm bill, which was enacted in 1996.


The new bill's defenders point out that the comparison with the 1996 bill
is misleading, because every year Congress passed additional
"emergency" aid for farmers, to the tune of $30.5 billion since
1998. The defenders are right, but they fail to mention that the 2002 bill
will itself cost much more than projected if, as many people expect, farm
prices fall instead of rise.


The reason is that the bill pegs government subsidies to market prices. If
market prices sink, government spending automatically rises to make up the
difference. Higher spending encourages production, thus driving down
prices, thus increasing spending. Farm policy found itself caught in just
such a spiral in the 1980s, with disastrous results; the new bill
demonstrates that even those who remember history may be condemned to
repeat it. "We're insulating farmers from market forces more than
ever," says Keith Collins, the Agriculture Department's chief
economist.


Interest groups are crowing about this bill, and with good reason.
"Within rural development," boasts the National Association of
Development Organizations, "the final bill earmarks $1.03 billion in
new mandatory spending for seven programs, including a new $100 million
rural strategic planning and investment program championed by NADO."
The American Sheep Industry Association "expressed [its] gratitude to
the U.S. Congress for completing the farm bill with all the provisions of
the wool program the industry testified for."


On May 2, on the House floor, Agriculture Committee Chairman Larry
Combest, R-Texas, listed 52 groups, from the National Milk Producers
Federation to Ducks Unlimited, that "we have heard from just today in
support of the bill." In case anyone was left wondering whose
interests Congress sought to serve, Combest said: "Mr. Speaker, I
heard concerns about how our trading partners to the south, our trading
partners to the north, our trading partners in Europe may be looking at
this. Mr. Speaker, this is a farm bill for rural America. This is not for
rural Mexico, this is not for rural Canada, this is not for rural
Europe." Take that, wretched foreigners!


In the current round of World Trade Organization talks, the Bush
administration is attempting to negotiate reductions in agricultural trade
barriers and subsidies. "Our early analysis indicates to us that this
farm bill will be consistent with our WTO obligations," Agriculture
Secretary Ann M. Veneman said in a speech this month. Maybe, but reducing
farm subsidies while raising them will be a nice trick. Good luck,
President Bush.


Given all this, the single best word for the 2002 farm bill is
"reactionary." The bill is a throwback, an atavism; it is a
defiant and desperate repudiation of two decades' efforts to reform what
are certainly among the government's most creaky and anachronistic
programs. The reformers have been many and brave, but also masochistic.
David Stockman, President Reagan's first budget director, tried to chomp
down on the 1981 farm bill and ended up spitting out all his teeth. In
1985, two senators-Rudy Boschwitz, R-Minn., and David Boren,
D-Okla.-boldly proposed "decoupling" subsidies from production
of particular crops. They got nowhere. For years, reformers went after the
archaic subsidies for sugar, wool and mohair, honey, peanuts, and more.
For years, they were deflected.


Yet gradually, painfully, the reformers made inroads. In his 1992
presidential campaign, Bill Clinton specifically proposed ending exactly
one federal program: the honey subsidy. To everyone's surprise, in 1993
Congress actually killed that program, and the wool and mohair subsidy as
well, in a cliff-hanging series of House-Senate confrontations. Those
reforms were harbingers of the audacious farm bill of 1996. Picking up
where Boschwitz and Boren had left off a decade earlier, the "freedom
to farm" bill largely decoupled farm payments from crop production,
and tried (but ultimately failed) to set the payments on a declining
path.


The 2002 farm bill gleefully undoes all of that and more. It returns to
dollars-per-bushel subsidies and big spending. It adds new programs for
chickpeas and lentils and apples and onions. It continues the
dysfunctional sugar program. It replaces a bizarre regional dairy cartel
with a new national subsidy. (Collins notes that the scheme will encourage
more production even as the government sits on a billion-pound, and
growing, mountain of nonfat dry milk. The Agriculture Department buys the
stuff, pays to store it until it expires, and then sells it as animal feed
for pennies on the dollar.)


"It got to be one crop after another," says a House Democratic
staff member. "You had no basis for denying anything to
anybody." And then came one final, triumphant poke in reformers'
eyes: The new bill reinstates permanent subsidies for honey and for wool
and mohair, although on less generous terms than before. "If you
can't get rid of this program," then-Sen. Dan Quayle said of the
honey subsidy in 1985, "you can't get rid of anything." (See NJ,
9/21/85, p. 2126.) It's worse than that, Mr. Quayle: Even if you can get
rid of a program, you still can't get rid of it.


But do not despair. There is good news. The peanut program was
reformed.


Yes, it is true. Thanks to the 2002 farm bill, Americans will no longer
need a federal license to grow peanuts for domestic consumption by human
beings. After, count `em, 68 years, the Depression-era controls on peanut
production-enacted because of turbulence in commodity markets in 1934-will
be replaced with a cash subsidy akin to those received by growers of
wheat, corn, and most other crops. Hooray. Be happy. By the standards of
the 107th Congress, this is a breakthrough.


Can things really be so bad? Yes and no. Yes today, no later on. The new
farm bill, like all dinosaurs, is doomed. In its flaunting of trade
liberalization, its desertion of fiscal discipline, and its disregard for
the inexorable forces of the world market, it is potent with the seeds of
its own destruction. "If this bill were sustainable," says
Collins, "I would be surprised."


In Washington, good ideas are never adopted until all bad ideas have been
tried. This takes time. It took more than a decade for the Boschwitz-Boren
reform scheme to go from pie in the sky to law of the land. The 1996 farm
bill was a good policy that was done in by bad luck. Like the 1996 welfare
reform, it sought to push federal dependents (farmers, welfare recipients)
back into the market while placing caps and time limits on federal aid. If
the farm economy had gone north instead of south, the 1996 farm bill would
have been as big a success as the 1996 welfare bill.


Now reformers are despondent and reactionaries are exultant. But the
reactionaries have bought themselves only a brief and expensive respite
from reality. A few years from now, the party will be over, fiscal and
economic reality will be lashing Congress's back, and reform will be back
on the table.


And then? Last October, Sen. Richard G. Lugar, R-Ind., proposed a
different kind of farm program. The federal government would end crop
subsidies and instead give each farmer a voucher, with which the farmer
would buy "federally backed whole-farm income insurance that would
guarantee 80 percent of the average income for that farm over the past
five years." In other words, the government would support incomes
instead of prices or production, an approach that would cause less
economic mayhem while steering federal money to the neediest farmers
rather than the biggest farms.


The Lugar idea flopped, not because it was wrongheaded but because it was
premature. In five or 10 years, its time will come, even if Lugar himself
has by then left the scene. Indeed, his suggestion went unheeded this year
but not unnoticed. The Bush administration praised Lugar's farm
bill-before the president signed its opposite.


Jonathan Rauch

National Journal