US Farmers May Face A Drought Of Federal Funding
They May Not Harvest The Usual Bumper Crop Of Government Cash In The Years Ahead
January 12, 2001
by Dennis T. Avery
THE BridgeNews FORUM: Viewpoints on farming, farm policy and related agricultural issues, December 29, 2000.
CHURCHVILLE, Va.--For the New Year, farmers looking to Washington will see a new president, George W. Bush, the first female secretary of agriculture, Ann Veneman--and a huge, bipartisan farm problem.
If farmers are expecting the next Congress to wave its magic wand and create more farm income, they're likely to be disappointed. Congress has no magic wand, and farmers will almost certainly get less government cash in the years ahead.
Farmers have recently been getting Freedom to Farm phase-out payments plus "emergency assistance." Together, the two put 32 billion Washington dollars into farmers' pockets last year.
That's why U.S. farmland values and cash rents have been rising rapidly. But phase out payments are dwindling down to nothing, and it's hard to claim that farmers have an "emergency" every year.
When Larry Combest, the new House agriculture committee chairman, goes to the appropriations committee with a request for a longer-term obligation to farmers, he'll likely be told that $5 billion to $7 billion a year is the limit. The optimists think farm payments could be worked up to $15 billion. Nobody thinks they can stay at $30 billion.
The agriculture committees face a rapidly worsening cash shortage, even though both parties will be desperate to protect marginal seats for another ultra-close election in 2002.
The economy is far more likely to slow than to stay in high gear, and that will mean fewer tax dollars flowing to Washington. If Bush manages to cut taxes, that could stimulate the economy--but reduce the discretionary funds Congress has to spend on farmers.
The biggest constraint on congressional spending could be the Social Security reform Bush has declared as one of his highest priorities. Even Democrats realize that D-Day for paying off the $12 trillion owed to the baby boomer retirees is rapidly approaching.
All of the recent federal budget "surplus" has been Social Security money, and reform will mean diverting a lot of that cash from the general fund to interest-earning investments.
Farmers are in particular trouble, because buying a commercial farmer's vote through commodity programs costs a lot more per vote than winning retiree votes with a prescription drug subsidy.
A renewed set of government entitlements might also have to be shared with livestock producers and horticulturists.
If Congress is going back to subsidies instead of pressing for freer farm trade, then the farmers who haven't gotten payments in recent decades won't want to be left in the cold.
Then there are the hard-to-solve realities that make being a farmer difficult:
Farmers can't sell more food to Americans. Even our pets are overfed.
Government price supports quickly produce surpluses. That's where Europe has been stuck for 30 years, and why they keep ruining the world market with export dumping. Even today's marketing loans are stimulating surpluses: Check soybeans right now.
Ethanol is an expensive substitute for coal, and we have lots of coal.
We're still blocked from selling more food to newly affluent Asians by trade barriers.
The Democrats can't move on freeing farm trade because of their political alliances with trade unions and environmental groups that oppose it. Nor do they want Republicans to get credit for freeing farm trade.
President-elect George W. Bush says his farm policy solution is farm trade liberalization.
If he can't get farm trade reform through Congress, however, he certainly won't want to let the Democrats "solve" the farm problem with farmer payments that will bust a newly retightened federal budget.
The environmental movement would support payments for reduced use of the farm inputs they hate, such as pesticides, chemical fertilizers and veterinary antibiotics.
But such "organic" payments wouldn't be a windfall for farmers. They would merely offset lower yields and higher production costs. Conservation tillage has made modern farming the most soil-safe in history, and anyway, we've already got a conservation reserve.
The Europeans are trying to unite behind a policy of "multiple use" income payments to farmers. In other words, farmers would be paid for their landscaping, in addition to their crops and livestock.
But Europe is a much more densely populated continent than North America, and its agriculture is much closer to its city-dwellers. European farms are also much more picturesque.
Because we are not an ancient land, North America concentrated on production, not peasant cottages or hedgerows. How many scarce tax dollars are city folks willing to spend on manicuring the landscape in Texas and North Dakota?
Some Democrats on Capitol Hill are actually relieved their party didn't gain control of Congress, simply because they expect a train wreck in agricultural policy.
Dennis T. Avery is based in Churchville, VA, and is director of the Hudson Institute's Center for Global Food Issues.