Medill Reports, IL
10-30-07
Senate to debate 'antiquated' farm bill with higher crop subsidies
by Eric Kroh
Headed to the U.S. Senate is an expensive farm bill that has drawn heavy
criticism for doling out money where it's least needed.
The bill—a $280 billion behemoth that addresses farm, energy and nutritional
policies and was approved last week by the Senate Agriculture Committee—has
come under attack by legislators, economists and farmers for what they consider
extravagant commodity subsidies.
“The current bill is an antiquated system of giant payments to a handful of farms,
while ignoring the needs of most American farmers,” said committee member
and former chairman Richard Lugar, a Republican from Indiana, in a press
release.
Lugar will introduce an alternative plan that would “end depression era federal
crops subsidies that benefit only a few farmers, of a few crops, in a few states.”
The biggest payments go to producers of corn, soybeans, wheat, rice and cotton.
Lugar's bill would decrease direct payments to farmers by $1.7 billion and invest
it in food stamp and emergency food assistance programs.
According to Lugar, 70 percent of farm subsidies over the past 10 years have
gone to 6 percent of farms.
The committee-approved, five-year bill is similar to the current, 2002 farm bill,
and includes subsidies that pay farmers for production of certain crops
regardless of demand. The House of Representatives already has passed a
similar bill.
Some experts contend the production-based payments unreasonably favor big
farms.
“If one consistently ties payments to those criteria, one would expect that you
would be making larger payments to larger farmers, and smaller payments to
smaller farmers,” said Michael Boehlje, professor of agricultural economics at
Purdue University.
These subsidies would be better spent assisting farmers who are experiencing
shortages or other problems, said Steve Ruh, president of the Illinois Corn
Growers Association.
“There are times when the farm bill pays folks that probably do not need it. We
would like to see the flipside of that,” Ruh said.
“We would like to see some of the direct payments moved to more of a revenuebased assurance program. We as corn producers are willing to give up a portion
of these direct payments to assure stability in troubled times,” Ruh said.
A revenue-based assistance would make payments to farmers if national
revenues for a certain crop drop below a target limit. The current farm bill makes
payments to farmers based on crop prices rather than revenues. Under this
system, farmers receive little assistance if they experience weather-related
shortages or other problems when prices are high.
The 2007 farm bill does include a revenue-based assistance program, but it
would not take affect until 2010, and farmers would have to choose to participate
in it.
It could also provide incentives for farmers to cheat the system, said Bruce
Babcock, professor of economics at Iowa State University.
“I’d get rid of it all and replace it with a county revenue-based safety net,”
Babcock said.
Since revenues are based on a national average, farmers could under-report or
over-report their yields to receive subsidies. More importantly, farmers would be
encouraged to plant crops for the program, not what the market wants, Babcock
said.
“You want to get it close enough to the farm to affect decision-making at that
level,” Babcock said.
In an effort to reduce subsidies to high-income farmers, the 2007 bill would
reduce the income limit for subsidy payments from $2.5 million to $200,000. The
median U.S. household income was $48,201 in 2006, according to the U.S.
Census Bureau.
Only a small percentage of farms, however, would be affected by the cap, for the
median farm income in 2006 was $55,245.
Chuck Spencer, director of national legislation and policy development at the
Illinois Farm Bureau, said farmers of all sizes deserve to benefit from a safety
net.
“What we know is: farming in Illinois is extremely diverse. We have farmers with
farms eight acres in size who serve in our association as leaders, as well as
farms with four generations and thousands of acres,” Spencer said.
After considering amendments, the Senate is expected to approve the farm bill,
and then any discrepancies with the House bill will have to be ironed out in a
House-Senate conference committee before Congress breaks for the year in late
November.
If this doesn’t happen, Congress has the option of extending the current farm bill
another year.