(Archived document, may contain errors)
10/30/85 99
THE FARM BILL: BEGGING FOR A VETO
C ongressmen of all political persuasions have joined Farm-Aid rock
groups and farmers themselves in com plaining that federal farm
programs have failed to solve the chronic problems of America's
farming community. Most even would agree that the programs have
aggravated these problems--encouraging too much production, while
hurting U.S. farm exports. It woul d seem, then, that Congress
would be ready to reform federal farm programs. No such luck. This
week the Senate began debating a new farm bill, S. 1714;
legislation already has been passed by the House of
Representatives. The Senate bill, for the most part, would continue
costly and ineffective federal farm policies for another four
years. In response to troubles on the farm, therefore, Congress is
proceeding with business as usual. It is producing a farm bill
begging for Ronald Reagan's veto.
The costs to U .S. taxpayers of the Senate bill would be enormous.
According to the latest U.S. Department of Agriculture estimates,
the bill's price tag would be $60 billion to $70 billion over the
next three years. This shatters the $34.8 billion three-year limits
set by the congressional budget resolution only a few months ago.
The final cost could be even greater. After all, the final cost of
the 1981 farm bill was approximately $63 billion, about four times
the initial estimate.
The high price of the Senate bill may be justified were it to solve
the problems of struggling farmers once and for all. But it will
not. For the past half century, the federal government has been
spending millions of dollars on similar strategies without success.
And over the past four year s , more has been spent on farmers than
in any four-year period in history. Yet, during this time, the farm
situation has deteriorated. Foreign customers have refused to pay
the artificially high prices for U.S. commodities; farmers have
been encouraged to grow more crops despite increasing surpluses;
and the U.S. taxpayer has been stuck with the tab. The lesson:
Simply spending more money will not solve the farm crisis.
As important, most money spent on farmers does not go to those in
need. Despite Hollywoo d's myths, most U.S. farmers are simply not
poor. The average net income of farmers in 1982, for example, was
$25,618., compared with the average U.S. family income for that
year of $27,391. Many
farmers make much more. Last year, farmers with total sales of
$100,000 to $250,000 averaged $36,273 in net income. Those selling
over $250,000 averaged $96,889 in net income. These figures do not
reflect the significant financial cushion most farmers hav e in the
equity value of their land--which can total hundreds of thousands
of dollars even for small farms. The average.Americain who is taxed
to pay for farm programs does not enjoy such a cushion.
This is not to say that no farmers are financially troubl ed.
About 30 percent are suffering significant credit problems this
year; some are in desperate straits. The trouble is that they are
not the main beneficiaries of farm programs. In fact, according to
the Agriculture Department, only 17 percent of federal farm
subsidies go to full-time farmers in financial distress. The lion's
share of benefits goes to the largest U.S. farms, many of which are
owned by large agricultural corporations. In 1983, for example, 45
percent of direct government farm benefits went to the largest 12
percent of U.S. farms. In terms of farm acreage, the disparity is
even greater. While only 6.1 percent of U.S. farms are over 1,000
acres in size, these farms in 1982 enjoyed 32.3 percent of direct
federal benefits. While farms of 2,000 acres or more comprise only
1.4 percent of U.S. farms, they consumed 10.4 percent of direct
federal benefits.
This subsidy to large farms could be reduced simply by lowering
the cap on the aid each farm can receive from the government. This
has been propos ed by the Reagan Administration and Senate
Agriculture Committee Chairman Jesse Helms (R-NC). Currently, a
single farm may receive as much as $50,000 annually in direct
federal subsidies, and a limitless amount in price support loans.
The Administration p r oposes lowering the cap on direct loans to
$10,000 and possibly less and placing a cap on price support loans.
This would cut the cost of the program dramatically without
imposing a hardship on farmers. The Senate Agriculture Committee,
however, has balke d at any change in the benefit cap.
To its credit, the Senate farm bill gradually reduces crop price
supports. This eventually will make American crop prices
competitive with foreign competitors. The Senate also wisely
resisted some of the wild schemes pas sed by the House.
Nevertheless, by failing to reform the basic programs
significantly, the bill will continue to foster surplus production,
enrich the largest agricultural corporations and do little to help
struggling small farmers. If the Senate really w ants to help the
farm economy,-it should restrict subsidies only to those in need
and examine alternative approaches to begin weaning farmers from
dependence on Washington. If Congress refuses, Ronald Reagan should
veto the bill.
James L. Gattuso Policy Analyst
For further information:
James Gattuso, "The 1985 Agricultural Bill: Still Time to Treat the
Farm Crisis," Heritage Foundation Issue Bulletin No. 119, September
3, 1985
Gregg Eastcrbrook, "Making Sense of Agriculture," The Atlantic
Monthly, July 1985, p. 63.
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