Government Bytes


Farm Bill Ruse Falls Short

by Nan Swift / /

Politico reported that a bill to extend the farm bill by one more year was pulled at the last minute yesterday:

Facing certain defeat, Republicans pulled their one-year farm bill extension from the House docket late Tuesday in favor of a narrower $383 million disaster aid package to address the immediate needs of drought-stricken livestock producers.

The abrupt turnaround came just minutes before the House Rules Committee had been slated to take up the extension in anticipation of floor votes Wednesday. Within hours, the slimmer 22-page disaster bill had been filed with the promise of floor votes Thursday.

With proponents of Big Ag pushing the extension (H.R. 6228) as a ploy to go to conference with the Senate’s own bloated farm bill, this is a big win for the free market.

The Congressional work-around was floated in order to avoid a full debate of H.R. 6083, the House FARRM bill. Weighing in at almost $1 trillion over the next decade and with far reaching policy implications for farms and consumers alike, the five-year farm bill is a major matter that deserves real and open debate.

While it is true that the drought in the Midwest has wreaked havoc on this summer’s corn and other crop staples, little good can come from legislating defensively to suit emergency circumstances without looking at the long term outcomes and the broader context. Despite claims from special interests that they need an urgent bailout, many farmers will be able to recoup their losses under their current crop insurance plans without any extra taxpayer-funded relief.

In addition, American farmers are coming from a place of record-level profitability thanks to a decade of high commodity prices and better yields. The Department of Agriculture reports that though farming inputs have stayed relatively stable since 1948, productivity has soared. The net income of farmers nationwide last year was almost $98 billion and corn alone raked in $76 billion. Since the 1990s, farm income has trended upward at a much faster pace than other U.S. households. In 2010, the average annual income for a farming household was $84,440, well above the national average of around $64,000.

At the same time taxpayers have continued to struggle with high unemployment and mounting national debt, billions in tax dollars have been redistributed to Big Agriculture through subsidies and direct payments. Just this month the Government Accountability Office reported that from 2003-2011 $10.6 billion in direct payments were given away to producers who did not even plant any crops. And though reauthorization packages in both the House and Senate have been touted as cuts to spending, the price tags are 60 percent higher than the previous 2008 farm bill. 

If this is reform, it’s a reform we can’t afford. With farmers riding high on a decade of record profits and strong bipartisan support for repeal of direct payments this might be the best opportunity we have to make serious course corrections.          

The best course of action Congress could take to relieve the effects of the drought that are sending livestock-feed prices through the stratosphere is to immediately repeal the ethanol mandate in the Renewable Fuels Standard (RFS). Extending wasteful programs and special interest carve-outs for another year will do little to mitigate the effects of the drought, but Congress can seize this opportunity to repeal a misguided mandate and immediately free up corn supplies.

Even in the heart of the suffering Corn Belt, the Chicago Tribune is advocating an urgent stop to the diversion of food to fuel:

But there is one important step that should be taken soon: The U.S. Environmental Protection Agency needs to waive its requirement for using corn-brewed ethanol in U.S. motor fuels.

Under a program called the renewable fuel standard, the EPA requires petroleum blenders to dilute their gasoline with increasing amounts of biofuel each year. This year, the RFS mandate calls for 13.2 billion gallons, nearly all of it corn-derived ethanol. This page has pointed out many times the absurdity of this intervention in the marketplace. Few government programs cost so much and deliver so little benefit to the public.

What makes matters worse in light of the drought is the enormous drain of ethanol production on the corn supply.

Waiving, reforming, or repealing the ethanol mandate is not just one immediate step that Congress can take to help alleviate the terrible effects of the drought on livestock producers and consumers, one that would save taxpayers money, not cost them – it is also a perfect, though depressing, example of how government meddling affects markets and leads to unfortunate unintended consequences. 

While the RFS continues to cut a swath of destruction across our economy, it should make legislators pause before passing enormous farm bills that have an equally broad impact on markets, taxpayers, consumers, and the economy. This is a clear case of government failure and there is no reason to assume, based on past experience, that the House and Senate’s new “reforms’ will be any better. On the contrary,  in the face of this sobering mess, things could get far worse.

Taxpayers can breathe a sigh of relief for today - if farm policy can be shelved until 2013, we might just get the time we need to enact the real, free-market reforms the agriculture sector so desperately needs. Of course, there’s still potential it might rear its ugly head during a lame duck session.  Still, one thing is clear, whether the battle recommences one month or one year from now, it’s time to get government out of the tractor seat.

Go here to tell your legislators to oppose the farm bill.