Farm Bill: The Big Government Shell Game

In her keynote address at the RightOnline Conference in Las Vegas, former Gov. Sarah Palin urged members of the new conservative media to continue to hold all members of the political class accountable, regardless of who wins in November.
Perhaps we could heed Gov. Palin’s advice right now…with the new Farm Bill legislation that is now being debated in Congress, and will set farm policy in the country for the next five years.

For many Americans who are not farmers, hearing about debate on a Farm Bill draws a yawn. The current farm legislation has been around since 1933, and most of its programs have not changed since then, despite dramatic changes in agriculture in the country.

Heritage Foundation’s Diane Katz states that the number of farms in the U.S. has decreased from 6.8 million in 1935 to 2.2 million in 2010. However, the fact that the amount of land in farms has only decreased by 13 percent suggests that, while farms are larger, they are fewer in number. Because farm subsidies, up until this point, have been distributed primarily based upon farm production, the larger farms have been the biggest winners of taxpayer-funded subsidies.

A second point to remember is that farm policy in the U.S. has allowed food production in this country to avoid the free market. Because the current policies limit the quantity of crops farmers are permitted to produce, food prices are then artificially inflated.

As a result, for the past 80 years, big government has held tightly onto the reins of America’s food production and, of course, taxpayers, by subsidizing larger farms and imposing limits on food supply. Katz sums up nicely how the Depression-era farm legislation has been another example of big government whacking taxpayers. She says, “Americans are taking a double hit: Tax revenues are used to subsidize producers, and production limits raise the cost of products.” In fact, farm bill subsidies have cost American taxpayers $284 billion over the last five years.

Many of the programs of the current farm legislation will expire in September. As conservatives are aptly making the point that free market principles, rather than taxpayer-funded subsidies to soften the effects of risk-taking, should decide costs of products, shouldn’t the same philosophy guide our new farm legislation? Shouldn’t lawmakers insist that taxpayers not fund private entrepreneurial business ventures, one of which happens to be agriculture?

Some legislators would like us to believe that the days of farm subsidies are about to end, that lawmakers will cut spending and save taxpayer money. The fact is that, instead of direct payment subsidies to farmers, Congress is now considering expanding a federal crop insurance program that would reimburse for most losses or drops in prices, potential hazards of any entrepreneurial activity. If farmed land does not yield enough crops or if food prices fall, farmers would be reimbursed through a new crop insurance program, an outcome that not only will cost taxpayers billions of dollars, but will also raise concerns about incentivizing farmers to take extraordinary risks.

The new farm legislation is welcomed by Big Agribusiness, farm lobbyists, and lawmakers who typically protect entitlement programs and come up with new ones. These sectors would like us to believe that this new farm program will save us billions of dollars in direct payment subsidies that pays farmland owners regardless of whether they plant crops. However, the truth is that the new legislation will incentivize farmers to exploit land with very high risk of crop failure. At a cost of $3 billion per year, the new crop insurance subsidy will cover any losses to farmers, known as deductibles, before their crop insurance policies pay out.

So, if you’re a farmer, why not engage in extraordinarily risky land ventures, when U.S. taxpayers are going to pay you regardless of the outcome? How is this different from any other big government bail-out?

“This is better than a government bailout,” said Steve Ellis, vice president of the Taxpayers for Common Sense, a watchdog group in Washington. “A bailout is a one-time thing when something bad happens. But crop insurance keeps giving, good or bad. And it’s about to give even more.”

Why can’t we get our act together when it comes to agricultural policies?

One of the key problems with farm policy bills is that they have been tied, in typical big government fashion, to welfare programs like the Supplemental Nutrition Assistance Program (SNAP), or food stamps. Much of the new farm bill’s spending will be on this program, at an annual cost now of about $75 billion. Severing national agricultural policy from welfare programs might be a daunting task, but one that would greatly benefit the nation. Some Senate Republicans have pushed for greater cuts to this program, but they are coming up against significant resistance from Senate Democrats and, of course, the president.

Sen. John McCain (R-Arizona) has said that the proposed farm bill would cost about $969 billion over 10 years, an increase over the $600 billion spent on the 2008 version. Similarly, Sen. Jim DeMint (R-South Carolina) observed that the alleged savings that Senate Democrats are touting in the new proposal were based on the higher baseline created by the president’s stimulus bill in 2009. Sen. DeMint noted that, compared to 2008 levels, the new farm bill will increase spending by 60%.

The new farm bill sounds like another big government shell game. We will need to stay on this one.