American Agriculturist, PA
05-21-07
Extreme Changes Proposed for Future Farm Bills
John Vogel jvogel@farmprogress.com
Yet another package of Farm Bill proposals made its way across Washington,
D.C., to the halls of Congress. This one comes from the American Enterprise
Institute, a not-for-profit group dedicated to research and education on issues of
government, politics, economics, and social welfare.
The institute commissioned 18 well-known ag economists to study the effects of
U.S. ag subsidies, spending programs and regulations, and to offer policy
recommendations. The work was directed by Bruce Gardner, ag economist at
University of Maryland, and Daniel Sumner, director of the Ag Issues Center at
University of California-Davis. Here are a few of their most controversial findings:
* Eliminating farm subsidies for corn, wheat, and soybeans would have
virtually no effect on the production or prices of these commodities. These
subsidies are, in effect, "money for nothing," claims Bruce Babcock, director of
the Center for Agriculture and Rural Development at Iowa State University.
* Farm households earn 20% more than the average American household.
The average income of commercial-scale farms, which receive almost all farm
subsidies, is more than three times that of the average household, contends
Gardner. The median net worth of farm households in 2005 was estimated at
$460,000, nearly five times the estimated $92,000 for all U.S. households.
* Elimination of farm subsidies wouldn't harm vulnerable farm families. Only
3% of all farm households have both low-income and low-net worth. These
households receive only a tiny share of the subsidies.
* Taxpayers pay $3 billion a year to subsidize crop insurance and $2 billion for
ad hoc disaster payments, according to Joseph Glauber, special ag envoy for the
U.S. Trade Representative. Much of the insurance subsidy pays for
administration and marketing costs; only 60 cents of every dollar gets to the
farmer.
* The U.S. sugar program costs consumers hundreds of millions of dollars
each year by keeping U.S. sugar prices at about double the world level, claims
John Beghin, Iowa State ag economist.
* Current policies significantly distort international trade. Subsidies cause the
United States to flood the world with excess cotton, driving down market prices
by 10% , to the detriment of producers in developing countries, asserts Babcock.
* Humanitarian food assistance in poor, disaster-stricken countries costs U.S.
taxpayers nearly $2 billion a year, reports Christopher Barrett, co-director of the
African Food Security and Natural Resources Management program at Cornell
University. Because U.S. food aid is mandated to be bagged, processed, and
shipped by U.S. producers, USAID purchased $654 million worth of food for
international food aid programs and spent nearly $1 billion in transport, storage
and administrative costs. Logistical costs ate up 60% of the food aid budget –
compared to only 32% by Canada.
Among their policy recommendations …
Many of the 18 ag economists have been involved in U.S. farm policy
development in the past. Here are a few of their policy recommendations, from a
long list:
* Eliminate Title I subsidies. American agriculture is financially healthy.
Farmers don't need subsidies to prosper. Current commodity programs are
vulnerable to challenge before the World Trade Organization. Well-designed
payments for ecosystem services could replace them.
* Alternative approach: Integrate them into a nonduplicative safety net with
disaster assistance and insurance programs.
* Eliminate or reform crop insurance: It makes no sense to have recurring
disaster programs plus expensive crop insurance.
* Dairy: Replace dairy price supports, milk orders and MILK with direct
payments.
* Specialty crops: Shift funds toward assistance of specialty crop industries,
increasing funds for research and development, protection from invasive species
and promotion of crops meeting public consumption interest.
* Bioenergy: Tax fossil fuels or institute a cap-and-trade system for
greenhouse gas emissions, instead of expanding ethanol subsidies. Or adopt
alternative fuel mandates plus R&D programs that don't exclusively favor ethanol.
* More detail on these and other proposals can be found at
www.aei.org/farmbill.