(Washington, DC) -- Although federal agricultural policy needs significant reform, placing limits on individual farm payments is a good step toward fulfilling President Bush's goal of a "lean budget that sets priorities," according to the non-partisan National Taxpayers Union (NTU). The 350,000-member citizen group joined organizations from across the political spectrum at a news conference today in support of Senator Charles Grassley's legislation that would cap direct payments to farmers.
"Due to the nearly unlimited subsidy payment amounts available under current law, hard-working taxpayers end up footing the bill for a program that doesn't even meet its stated justification of preserving 'family farms,'" said NTU Director of Government Affairs Paul Gessing. "Instead, these tax dollars are easily converted into subsidies for large agri-businesses who are eager to evade free-market competition."
In a letter to Senator Grassley, Gessing noted that since passage of the 2002 farm bill direct payments have grown to more than $20 billion per year -- up from an average of $9 billion in the early 1990s. According to NTU the Senator's legislation would save taxpayers at least $430 million annually until 2007 (when the current farm bill expires).
In addition to the savings for taxpayers, Gessing said these modest payment limits would also reduce incentives to overproduce commodities (such as cotton) that have been found to violate our obligations under the World Trade Organization, and would even out the disproportionate allotment of direct farm payments.
"Those who are opposed to these cuts on the grounds that agriculture subsidies help small farmers stay in business need to take a closer look at the facts," said Gessing. "In reality, the top 10 percent of recipients receive nearly two-thirds of all subsidies while the bottom 80 percent -- which includes virtually all of the family farmers -- claim just 19 percent of all subsidies. This disparity harms family farmers by spurring rural land price inflation."
Although NTU commended Senator Grassley for his "willingness to take the lead in addressing one of the most egregious aspects" of farm policy, Gessing was quick to point out that more significant economic liberalization of the agriculture sector is needed. He urged policymakers to study the examples of Australia and New Zealand -- two nations that largely eliminated direct payments to farmers during the 1980s yet are highly successful in the international agriculture marketplace.
"There is no economic justification for the current path of agricultural policy in the United States, especially after these two successes," Gessing concluded. "Although taxpayers will support any move to reduce payments, reforms that will encourage farmers to plow for profits on their land rather than reap subsidies from taxpayers' pockets are ultimately needed."
NTU was founded in 1969 to work for lower taxes, smaller government, and more accountability from elected officials at all levels. Note: For NTU's letter and more information on the group's agricultural policy work, visit www.ntu.org.