Rep. Dick Armey of Texas, now the House Majority Leader, once called American farm policy "Moscow on the Mississippi." But as the 104th Congress rewrites the farm bill, perestroika on the Potomac doesn't look too likely.
The GOP's attempt to reform farm policy may become an example of what Milton and Rose Friedman called "the tyranny of the status quo"the difficulty of making radical changes in a democracy. Although the Republicans are so far sticking to their promises to cut subsidies, a combi nation of interest-group politics and institutional inertia threatens to block more fundamental re forms.
That didn't have to be the case. House Agriculture Committee Chairman Pat Roberts, an affable Kansan, began the term as an unapologetic defender of existing farm programs. That changed after the House leadership started making noises about disbanding the Agriculture Committee. Facing the threat of extinction, Roberts convinced GOP leaders to keep the committee. He argued that only he had the expertise to craft reforms to provide an orderly transition to the free market.
Roberts kept his word: His Freedom to Farm Act not only met the Republicans' mandate to cut $13.4 billion from projected subsidies over the next seven years, it also swept away much of a regulatory system so arcane and esoteric that Armey once called its advocates "esoterrorists." The plan, which had the blessing of Armey and the Republican leaders, even prompted the previously skeptical Wall Street Journal editorial page to declare, "the Kansan has joined the revolution."
Under Freedom to Farm, subsidies would drop from $10 billion now to $6 billion next year to $4.3 billion in 2002. The bill would phase out most farm loan guarantees, price supports, and prop erty set-asides. Rather than basing subsidies on the number of acres planted (or kept out of produc tion) or the amount of crops harvested, the bill would offer existing farmers fixed but declining payments. Meanwhile, farmers could plant any crop in any quantity. Or nothing at all.
The regulatory changes would be even more significant than the money saved. Take cotton, which the General Accounting Office says cost taxpayers $1.5 billion in subsidies in 1993.
If you've noticed clothing made with "microfiber" (a.k.a. polyester) filling department store racks, here's why: There's a worldwide cotton shortage. Enterprising American cotton farmers haven't rushed to ease the crunch, in part because federal regulations restrict cotton supplies, guaran teeing hefty profits for growers. Farmers get money for leaving some acres idle. They also benefit from "deficiency payments," subsidies offered to growers when the market price for cotton falls below an arbitrary, often inflated "target price" set by government regulators.
And when U.S. farmers grow "too much" cotton, the feds pay growers to keep it off the mar ket. If a banner harvest threatens to drive down world prices, farmers can store their cotton at tax payer expense for as long as 10 months. Freedom to Farm would end these practices, which gave 295 cotton growers more than $250,000 each in subsidies in 1993.
Freedom to Farm got support from farmers, particularly in the Midwest and West. Such farm -state newspapers as The Chicago Tribune, The Kansas City Star, and the Des Moines Register endorsed it. Articles in these and other papers quote farmers willing to give independence a try. And while the Washington Association of Wheat Growers took no position on the bill, one official told Spokane's Spokesman-Review that many of his members favored the plan.
The reason is simple: With Asian economies growing and trade restrictions falling, demand for grain will increase. Acres kept idle by subsidies could be profitably tilled. In a Hudson Institute study, Dennis Avery and Dave Juday conclude that American farmers lose $65 billion a yearmore than five times the amount they receive in farm subsidiesbecause of agricultural regulations.
But Roberts' bill has run into trouble. Freedom to Farm pits the Midwest against the South, rice paddies against corn fields, dairy farmers in Wisconsin against their colleagues in Louisiana making the politics of passage tricky.
In the South, for example, cotton is no longer king. Rice and dairy farming are popular, too. Except for storage subsidies, rice growers receive many of the same benefits that go to cotton grow ers. And dairy farmers get price supports that vary between regions. Thanks to those subsidies, it's possible to profitably milk 150 head of dairy cattle in North Carolina; in states like Wisconsin, which receive lower subsidies, a viable dairy farm would need to be several times that large. Resistance to changes in these commodity programs has been strongest in Dixie.
Not surprisingly, those who take advantage of regulations to keep land idle, supplies low, and prices high oppose Freedom to Farm. Rep. Richard Baker (R-La.), an Ag Committee member, argues that declining fixed payments would hurt cotton, rice, and dairy farmers in his district. It costs nearly four times as much to grow cotton in the Mississippi Delta as it does wheat or soybeans. If farmers in other regions could grow cotton profitably and more cheaply, Baker's constituents might have to grow less lucrative crops.
Ending agricultural protectionism would indeed punish people who undertake economically unsound farming practices. But current farm policies, which force farmers to grow the same crop on the same land year after year, also cause environmental damage. Perennially tilling the same soil strips the land of crucial nutrients. Farmers compensate by accelerating their use of fertilizers and pesticides, which leach into ground watera major source of soil erosion and other environmental problems in the Mississippi Delta and the Everglades. An August study by the Competitive Enter prise Institute concludes that ending crop subsidies and other agricultural land-use regulations could end much of this damage, letting farmers use 35 percent less pesticides and 29 percent less fertilizers per acre.
And commodities that don't get direct subsidies clip consumers anyway. For instance, rather than deficiency payments, sugar producers get loans that are linked to a government-set target price. If prices fall below the target, a grower can simply give the sugar to the government and keep the money. And import quotas help the feds keep domestic sugar prices at about double the world level. The cost to consumers: $1.4 billion a year, says the GAO.