The Farm Bill Is a Bad Joke with a Good Punch Line
On Monday, President Bush, who will apparently sign absolutely any bill that reaches him, up to and possibly including a bill selling his family into slavery, picked up his pen, threw away his principles, and signed a farm bill that has been universally derided as an expensive monstrosity. Well, any legislation condemned by the editorial pages of The Washington Post, The New York Times, and The Wall Street Journal can't be all bad. Never one to shrink from a challenge, I set out to find something hopeful to say about the Farm Security and Rural Investment Act of 2002. This was not easy.
If it is true that as goes the farm bill, so goes Washington—and usually that is true—then Washington is in the mood to spend money, distort markets, and slam the door on its trading partners' toes. The new bill is expensive—very expensive. According to the Congressional Budget Office's projections, it will cost about 80 percent more than the policy set by the previous farm bill, which was enacted in 1996.
The new bill's defenders point out that the comparison with the 1996 bill is misleading, because every year Congress passed additional "emergency" aid for farmers, to the tune of $30.5 billion since 1998. The defenders are right, but they fail to mention that the 2002 bill will itself cost much more than projected if, as many people expect, farm prices fall instead of rise.
The reason is that the bill pegs government subsidies to market prices. If market prices sink, government spending automatically rises to make up the difference. Higher spending encourages production, thus driving down prices, thus increasing spending. Farm policy found itself caught in just such a spiral in the 1980s, with disastrous results; the new bill demonstrates that even those who remember history may be condemned to repeat it. "We're insulating farmers from market forces more than ever," says Keith Collins, the Agriculture Department's chief economist.
Interest groups are crowing about this bill, and with good reason. "Within rural development," boasts the National Association of Development Organizations, "the final bill earmarks $1.03 billion in new mandatory spending for seven programs, including a new $100 million rural strategic planning and investment program championed by NADO." The American Sheep Industry Association "expressed [its] gratitude to the U.S. Congress for completing the farm bill with all the provisions of the wool program the industry testified for."
On May 2, on the House floor, Agriculture Committee Chairman Larry Combest, R-Texas, listed 52 groups, from the National Milk Producers Federation to Ducks Unlimited, that "we have heard from just today in support of the bill." In case anyone was left wondering whose interests Congress sought to serve, Combest said: "Mr. Speaker, I heard concerns about how our trading partners to the south, our trading partners to the north, our trading partners in Europe may be looking at this. Mr. Speaker, this is a farm bill for rural America. This is not for rural Mexico, this is not for rural Canada, this is not for rural Europe." Take that, wretched foreigners!
In the current round of World Trade Organization talks, the Bush administration is attempting to negotiate reductions in agricultural trade barriers and subsidies. "Our early analysis indicates to us that this farm bill will be consistent with our WTO obligations," Agriculture Secretary Ann M. Veneman said in a speech this month. Maybe, but reducing farm subsidies while raising them will be a nice trick. Good luck, President Bush.
Given all this, the single best word for the 2002 farm bill is "reactionary." The bill is a throwback, an atavism; it is a defiant and desperate repudiation of two decades' efforts to reform what are certainly among the government's most creaky and anachronistic programs. The reformers have been many and brave, but also masochistic. David Stockman, President Reagan's first budget director, tried to chomp down on the 1981 farm bill and ended up spitting out all his teeth. In 1985, two senators—Rudy Boschwitz, R-Minn., and David Boren, D-Okla.—boldly proposed "decoupling" subsidies from production of particular crops. They got nowhere. For years, reformers went after the archaic subsidies for sugar, wool and mohair, honey, peanuts, and more. For years, they were deflected.
Yet gradually, painfully, the reformers made inroads. In his 1992 presidential campaign, Bill Clinton specifically proposed ending exactly one federal program: the honey subsidy. To everyone's surprise, in 1993 Congress actually killed that program, and the wool and mohair subsidy as well, in a cliff-hanging series of House-Senate confrontations. Those reforms were harbingers of the audacious farm bill of 1996. Picking up where Boschwitz and Boren had left off a decade earlier, the "freedom to farm" bill largely decoupled farm payments from crop production, and tried (but ultimately failed) to set the payments on a declining path.
The 2002 farm bill gleefully undoes all of that and more. It returns to dollars-per-bushel subsidies and big spending. It adds new programs for chickpeas and lentils and apples and onions. It continues the dysfunctional sugar program. It replaces a bizarre regional dairy cartel with a new national subsidy. (Collins notes that the scheme will encourage more production even as the government sits on a billion-pound, and growing, mountain of nonfat dry milk. The Agriculture Department buys the stuff, pays to store it until it expires, and then sells it as animal feed for pennies on the dollar.)
"It got to be one crop after another," says a House Democratic staff member. "You had no basis for denying anything to anybody." And then came one final, triumphant poke in reformers' eyes: The new bill reinstates permanent subsidies for honey and for wool and mohair, although on less generous terms than before. "If you can't get rid of this program," then-Sen. Dan Quayle said of the honey subsidy in 1985, "you can't get rid of anything." It's worse than that, Mr. Quayle: Even if you can get rid of a program, you still can't get rid of it.
But do not despair. There is good news. The peanut program was reformed.
Yes, it is true. Thanks to the 2002 farm bill, Americans will no longer need a federal license to grow peanuts for domestic consumption by human beings. After, count 'em, 68 years, the Depression-era controls on peanut production—enacted because of turbulence in commodity markets in 1934—will be replaced with a cash subsidy akin to those received by growers of wheat, corn, and most other crops. Hooray. Be happy. By the standards of the 107th Congress, this is a breakthrough.
Can things really be so bad? Yes and no. Yes today, no later on. The new farm bill, like all dinosaurs, is doomed. In its flaunting of trade liberalization, its desertion of fiscal discipline, and its disregard for the inexorable forces of the world market, it is potent with the seeds of its own destruction. "If this bill were sustainable," says Collins, "I would be surprised."
In Washington, good ideas are never adopted until all bad ideas have been tried. This takes time. It took more than a decade for the Boschwitz-Boren reform scheme to go from pie in the sky to law of the land. The 1996 farm bill was a good policy that was done in by bad luck. Like the 1996 welfare reform, it sought to push federal dependents (farmers, welfare recipients) back into the market while placing caps and time limits on federal aid. If the farm economy had gone north instead of south, the 1996 farm bill would have been as big a success as the 1996 welfare bill.
Now reformers are despondent and reactionaries are exultant. But the reactionaries have bought themselves only a brief and expensive respite from reality. A few years from now, the party will be over, fiscal and economic reality will be lashing Congress's back, and reform will be back on the table.
And then? Last October, Sen. Richard G. Lugar, R-Ind., proposed a different kind of farm program. The federal government would end crop subsidies and instead give each farmer a voucher, with which the farmer would buy "federally backed whole-farm income insurance that would guarantee 80 percent of the average income for that farm over the past five years." In other words, the government would support incomes instead of prices or production, an approach that would cause less economic mayhem while steering federal money to the neediest farmers rather than the biggest farms.
The Lugar idea flopped, not because it was wrongheaded but because it was premature. In five or 10 years, its time will come, even if Lugar himself has by then left the scene. Indeed, his suggestion went unheeded this year but not unnoticed. The Bush administration praised Lugar's farm bill—before the president signed its opposite.