Farm Bill Follies

Congress avoids every opportunity to reform wasteful and outdated subsidies

The $300 billion farm bill is being cobbled together by Congress this week. As Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) noted, "It's not just a farm bill. This is a farm and a food and an energy bill."

As Otto von Bismarck quipped, "Laws are like sausage. It's better not to see them being made." Let's take a look at these three aspects of this unappetizing piece of sausage.

First, what do the farmers get? Answer: A lot. Last year, net farm income reached a record level of nearly $89 billion due to high crop prices. Farm household income averaged $84,000 in 2007, according to the Environmental Working Group (the 2006 average for all U.S. households was $66,000). Despite such good times, the federal government showered $5 billion in direct payments on 1.4 million farmers.

These direct payments have nothing to do with crop productivity or a safety net in case of low prices—they are basically gifts to farmers just because they are farmers. In fact, farmers with gross incomes up to $2.5 million have been eligible for these payments. President Bush wants to cap that at $200,000 in income, but the House is considering a cap of $500,000, and the Senate voted to cap the payments at $750,000 per year in income. Overall, Congress shaved just 2 percent off of the direct payments of $5 billion per year over the next four years. While this is a barely discernible improvement, one would think record high farm incomes combined with a world food crisis would make this a good time for Congress to scrap farming subsidies altogether.

It is true that about two-thirds of farm-bill spending funds nutrition programs such as school lunches and food stamps. Lawmakers added $10 billion to the food stamp program to help lower-income Americans address higher food prices. But why are food prices higher in the first place? Part of the reason is the federal government's subsidies and its mandate to turn food into fuel—which brings us to the legislation's energy policy madness.

In December, Congress passed and President Bush signed the Energy Independence and Security Act, which mandated that the U.S. produce 9 billion gallons of conventional biofuels this year. The Act requires that 15 billion gallons of conventional biofuels be produced by 2015 and that 36 billion gallons of conventional and "advanced" biofuels be produced by 2022. How does this affect food prices?

Higher corn prices result from biofuel mandates and subsidies, which encourage farmers to plant fewer acres of wheat and soybeans—which in turn raises their prices. In addition, corn is the chief feed grain for which producers of beef, poultry, and pork must pay higher prices which they will eventually pass along to consumers. In 2006, a bushel of corn sold for just under $2; today it sells for nearly $6.

Currently, most biofuels are produced by turning corn into ethanol. The U.S. Department of Agriculture estimates that the 2008 corn crop will be 14.6 billion bushels, of which 3.2 billion[*] bushels will be fermented into ethanol. In other words, about 22 percent of our corn crop will be floating out the tailpipes of our automobiles next year.

The new farm bill contains a small gesture in the direction of sanity by reducing bioethanol subsidies from 51 cents per gallon to 45 cents per gallon. This should reduce the price of a bushel of corn by about 3 cents, according to the Des Moines Register. On the other hand, Congress is trying get around the unintended consequences of its biofuels policy by offering $1.01 per gallon subsidy for so-called cellulosic ethanol. Large-scale production of cellulosic ethanol has yet to take off, so the farm bill also disperses $400 million in tax credits in the hope of jumpstarting such production. In addition, the bill extends the tariff on imported ethanol until 2012.

The biofuel mandate is not the only reason for higher food prices—higher oil and fertilizer prices as well as commodity speculation also contribute substantially.

But there's no excuse for Congress to make matters worse with this farm bill. As Rep. Ron Kind (D-Wis.) declared, "Negotiators managed to avoid every opportunity to reform wasteful, outdated subsidies while piling on additional layers of unnecessary spending." As a consequence, Americans can look forward to thinner wallets as they struggle to fuel their cars and feed their kids.

Ronald Bailey
is reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.

[*]: Due to an editing error, this originally read million.

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  • TallDave||

    Perhaps of relevance:

    http://www.ers.usda.gov/Publications/OCE081/OCE20081e.pdf

  • No, duh||

    Farmers have pictures of congressmen with farm animals.

    Therefore, farmers get lots of subsidies.

    What's the next Reason Hit And Run topic? "Sun Rises in East!"

  • NeonCat||

    Between farm subsidies and the no-one-here-will-be-surprised-when-it-happens bailouts of the Big Three automakers, can we push the Midwest out of the country? Please?

  • stoneymonster||

    The U.S. Department of Agriculture estimates that the 2008 corn crop will be 14.6 billion bushels, of which 3.2 million bushels will be fermented into ethanol.

    Think you meant 3.2billion, otherwise the percent doesn't work.

    -Your friendly backseat copyeditor

  • kinnath||

    . . . can we push the Midwest out of the country?

    We're not happy with you either.

  • Ryo||

    Sure NeonCat. Let's also push out the NE due to the bank and savings and loan bailouts. The SE due to federal insurance and hurricane bailouts. Then we'll remove any remaining airline hubs due to the repeated airline bailouts. Speaking of which, there goes a handful of SoCal towns since Lockheed's bailout.

    If you don't think you live by *something* that has been bailed out or heavily subsidized by the federal government in the last 20-30 years, you probably don't live in the US.

    If, on the other hand, you just wanted to use this opportunity to slam the Midwest, go eat a dick.

  • EJM||

    As Otto von Bismarck quipped, "Laws are like sausage. It's better not to see them being made."

    Or, as Count Floyd put it (in describing "Tip O'Neill's 3D House of Representatives"), "You don't think that's scary? That bill could become law!"

  • ||

    Hmmmmm, subsidized dick.

  • TallDave||

    If you don't think you live by *something* that has been bailed out or heavily subsidized by the federal government in the last 20-30 years, you probably don't live in the US.

    Hell, you probably don't live on Earth.

  • ||

    In addition, the bill extends the tariff on imported ethanol until 2012.

    Thank goodness for that; at least we have a little breathing room before we have to worry about competing with the Haitians.

  • ||

    Ronald Bailey does what legislators hope that no one else does: Reads every bit of the farm bill, in all its ugliness.

    By the livin' Gawd that made you,
    You're a better man than I am, Gunga Ron.

  • ||

    2/3 goes to school nutrition? Has anyone seen the school meals? They're disgusting and almost everything is unhealthy. It's barely a step above fastfood. If we took away all that money, I doubt it could get much worse. Giving each kid a cheap head of lettuce would be an improvement.

  • ||

    Is there a solid, reliable calculation (i.e. not from some self-interested "aid" organization) of how many people will die of starvation because of the rising price of food attributable to the ethanol program.

  • T||

    Ahh, yes. I think "take it out back and beat it to death with an axe" is still the most appropriate response to US agricultural policy.

  • BakedPenguin||

    Between farm subsidies and the no-one-here-will-be-surprised-when-it-happens bailouts of the Big Three automakers, can we push the Midwest out of the country?



    Let's give it all to Canada. After they bail out the automakers, we can take them back. By that time, the farmers ought to be so sick of being Canadian they might accept not having subsidies. If not, let 'em stay there.

  • NeonCat||

    @ kinnath & Ryo

    Fricking crybabies!

    As a Southerner, I must note that we in fact did leave the Union (granted for not the best of reasons) and all your NE and Midwest forebears came down here and dragged us back in. So, gosh, I am SO sorry I upset you by suggesting that the Midwest was a giant vacuum for money misappropriated from productive people to buy votes.

    BTW, equating disaster relief with paying farmers not to grow food and corporations to not have to worry about being profitable IS dick.

    @ BakedPenguin

    What did Canada ever do to us?!?

  • ||

    Well, they burned the White House...

    And produced William Shatner!

  • ||


    RadicalChic | April 30, 2008, 3:39pm | #

    Well, they burned the White House...

    And produced William Shatner!



    In view of the former, will you forgive the latter? Kinda evens out, IMHO.

  • BakedPenguin||

    NeonCat - I just thought I'd take a page out of Lonewacko's book and develop an irrational dislike of a neighboring country. Since he's already latched on to Mexico hate, I figured I'd pick on our other neighbor.

    Damn maple sucking puck slappers need to get the hell back on their curling courts!

  • Ryo||

    NeonCat, I assumed you were someone on the coasts claiming flyover states were worthless. Now that I know you're a Southerner, I understand you were just looking for someone to pick on. Suggestion to eat a dick withdrawn.

    Still, being a Southerner, you should be less concerned about the Midwest taking more than its share:
    Federal Taxes Paid vs. Federal Spending Received by State, 1981-2005

    Also, I wasn't referring to disaster relief, which I am fine with, but to federal insurance programs and insurance company bailouts that encourage people to live in risky areas without assuming much risk themselves.

  • kinnath||

    Fricking crybabies!

    I wasn't crying, I was saying the feeling is mutual.

    As a Southerner, I must note that we in fact did leave the Union (granted for not the best of reasons) and all your NE and Midwest forebears came down here and dragged us back in.

    Too bad we left it in your hands after we went home.

    So, gosh, I am SO sorry I upset you by suggesting that the Midwest was a giant vacuum for money misappropriated from productive people to buy votes.

    There have been lots of studies that show my home state gets 90-some-odd cents for every dollar we send to Washington DC.

    The real money pits are those states that have large military installations or industries that produce military products.

    We are not the biggest part of the problem.

    As for Michigan, Canada can have it.

  • kinnath||

    Damn, Ryo was posting just before I did.

  • kinnath||

    Gee, my state broke into the top 20 twice in the last 20 years.

  • Andy||

    As a midwesterner, i feel threatened by this hate speech.

    Seriously though - as a secular hedonist who loves free markets in porn, drugs, and gambling, i'm glad someone finally has the balls to tell the "heartland" who's really the bigger threat.

  • ||

    Ryo, your Federal Taxes Paid vs. Federal Spending Received by State, 1981-2005 link contains much cool info. Danke, Salamat, Merci etc. It's going into my neat web address file.

  • ||

    As for Michigan, Canada can have it.

    Speaking only for myself, it works for me.

  • ||

    There won't be a repeal of those subsidies for the simple reason that the USA is one among many countries subsidizing some of its industries (i.e.: The European Union), not to mention the fear of a dependence on food import. If you think energy independence movement is horrendous, wait until we hear the food independence movement.
    I mean, not that I have anything against self-reliance on food and energy, but if it leads to lower level of production and/or government's interference, well it begs to the question as to why some people claim to be against communism while they endorse some of what I would call communism lite.

  • T||

    Damn, Ryo. That's depressing. Texas hasn't managed to break even.

  • Chad||

    How are school lunch programs and food stamps a "subsidy" to food producers, any more so than the government buying anything from anyone is a "subsidy"?

    What is more honest is to say that a whole lot of welfare is being disguised as a farm subsidy, which is slightly more palatable to the average voter.

    It is also interesting that again, Ron complains about biofuel subsidies without noting that their primary competition - fossil fuels - receive even larger subsidies. It is better to have approximately equal subsidies than subsidies for only one alterative.

  • ||

    Hell yeah!!!

    New Mexico = #1 for every year on record!!

    Must be the 2 Nat'l labs, Military installations, tons of Nat'l forest/wilderness, and truckloads of poor... but most importantly the vast number of nuclear warheads.

    It's like the rest of you suckers are paying us protection $$.

    I wonder how I can get me some of that action.

  • Bob Goodman||

    As for Michigan, Canada can have it.


    They did for a while. Twice, even.

    But the Northwest Territory (Territory Northwest Of The River Ohio) was never part of the North West Territories as I thought once, although it was at least theoretically part of Upper Canada.

    Still, some of Mich. was claimed by Ohio. They even fought, sort of, over it -- look up the Toledo War. It was a kinder, gentler version of war between the states.

    And while you're at it, look up the Cortina Wars.

  • ||

    "The U.S. Department of Agriculture estimates that the 2008 corn crop will be 14.6 billion bushels, of which 3.2 billion[*] bushels will be fermented into ethanol. In other words, about 22 percent of our corn crop will be floating out the tailpipes of our automobiles next year."

    It's much worse than that, Mr. Bailey.

    There are no recent USDA estimates on corn production for 2008 (next update May 9) but using a yield of 155 bu./acre (used by USDA in their February forecast)and acreage from USDA's March farmer survey you come up with about 12.1 bil. bu. of corn production in 2008. The USDA estimated in Feb. that about 4.1 bil. bu. would be used to make ethanol, so the actual portion corn production we intend to burn is an astounding 34%. Yeah, it's nutso.

  • Anastasia Bodnar||

    So, increased demand of grain to use for ethanol causes higher grain prices. Got it. What does increased demand of grain to feed to animals do? Could it possibly cause higher grain prices as well? I find it interesting that the meat industry in the US is happy to point the finger at biofuels, and everyone follows, ignoring the fatted calf in the room.

  • ||

    So I have to say that most all of you are off the mark. First of all producers do not "pass on" the cost of production to anyone. The farmer is at the mercy of the market which is controlled by supply and demand or in times like these, the weak U.S. Dollar which leads to more exports (other currencies can buy more product because the exchange rate is favorable when the dollar is weak), and of course the speculative investing on the commodities markets. That being said yes the farmers are making more money recently but their expenses are also going up mainly in fuel, fertilizer, and herbacids. The whole idea behind the farm subsidies is to provide the U.S. with a stable food production infrastructure, lets not forget how risky the busness is with the unpredictable nature of the weather and markets. It would not bode well with our stomachs if we had farmers going broke and production falling off track.

  • Jordan 6 Rings||

    perfect

  • Nike Dunk SB High||

    is good

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