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7 Signs the Upcoming Farm Bill Will Contain Disastrous Subsidies

by The Daily Signal | Updated on 3.27.18

Daren Bakst / @darenbakst / March 14, 2018

Daren Bakst studies and writes about agriculture subsidies, property rights, environmental policy, food labeling and related issues as The Heritage Foundation’s research fellow in agricultural policy. Read his research.

Perhaps as soon as next week, the House Agriculture Committee will release its farm bill, and it looks now as if the end result likely will be a system that funnels even more money to agricultural producers.

Here are seven signs the taxpayer-funded “safety net” in the legislation is a disaster:

1) The bill would maintain or expand federal assistance to agricultural producers.

This is the bottom line indication that the House Agriculture Committee’s safety net is a complete disaster and should be treated as “dead on arrival.” If this turns out to be the case, the committee will demonstrate that it has completely ignored the harms caused by subsidies.

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The safety net programs cost taxpayers about $15 billion a year, but the costs of subsidies go beyond the fiscal costs. Subsidies can, for example, discourage innovation and private risk management, distort planting decisions so farmers don’t meet the needs of consumers, create barriers to entry for new farmers, and have negative environmental impacts.

2) The bill assumes the market and competition are harmful.

The current farm handout system is designed primarily to insulate farmers from competing in the marketplace and insults them by treating them as incapable of managing ordinary business risks.

If revenue targets are not met or prices are lower than hoped, taxpayers are forced to come to the rescue. The system doesn’t even require crop losses, drought, hurricanes, or other risks that most people think of as the reason for the safety net. Instead, the market itself is seen as a major enemy of farmers.

3) The bill provides excessive subsidies to a handful of favored commodities even though most commodities succeed with little to no subsidies.

According to the Congressional Research Service, 94 percent of farm program support goes to just six commodities—corn, cotton, peanuts, rice, soybeans, and wheat—that account for only 28 percent of production. This means, about three-fourths of the country’s agricultural production receives 6 percent of the farm program support.

If most agriculture can succeed with limited federal support, so too can the specially favored commodities. The current system is just cronyism and the D.C. swamp at their worst.

4) The bill ignores the goals of the Trump administration and the bipartisan desire for major subsidy reform.

The Trump administration has proposed significant steps to reform the safety net in both its 2018 and 2019 budgets. These reforms include commonsense changes such as placing a $40,000 limit on the size of the subsidies that help farmers pay for crop insurance premiums.

Lawmakers from across the ideological spectrum have been pushing for major reforms for years, from eliminating the two major new commodity subsidy programs (Agricultural Risk Coverage and Price Loss Coverage) to reforming the federal sugar program. The agriculture committees should integrate many of the various reforms instead of ignoring them.

5) The bill would maintain supply controls.

Most farm subsidy programs don’t intentionally limit the supply of commodities to artificially drive up prices. But then there’s the federal sugar program.

This egregious program, which costs consumers about [$3.5 billion] ( per year, limits the amount of sugar that can be sold in the country through what are called marketing allotments. Artificially high sugar prices are not an unintended consequence of the program, but rather its purpose.

6) The bill doesn’t address the duplicative nature of farm subsidy programs.

When agricultural producers experience “losses,” such as dips in expected revenue, they can get handouts from multiple programs, not just one. It shouldn’t be too much to ask for Congress to pick one unnecessary subsidy program per commodity.

7) The bill continues to cover shallow (i.e. minor) losses, including through the federal crop insurance program.

Any safety net that is reasonable would at most protect farmers when they have experienced a deep loss, i.e. a major loss that requires a “net” to help them get back on their feet. However, the current system provides handouts when agricultural producers have minor “losses,” such as a small dip in expected revenue.

In the past, Congress has failed the public by consistently turning a blind eye to the seemingly endless subsidy schemes dreamed up by agricultural special interests and the House and Senate Agriculture Committees. This needs to change.

This change will happen only if legislators outside the agriculture committees stop rubber-stamping whatever the committees and special interests push when it comes to subsidies.

Lawmakers need to start asking tough questions and push back on the out-of-control farm subsidy system. They need to pay attention to the red flags and make it clear to the agriculture committees the next farm bill will be revolutionary, not evolutionary.

The Daily Signal

Written by The Daily Signal

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