The Farm Bill: Where Are We Now

The House and Senate Agricultural Committee Leadership—Frank Lucas (R-Okla.), Colin Petersen (D-Minn.), Debbie Stabinow (D-Mich.), and Pat Roberts (R-Kan.)—are frustrated. Most House agricultural committee members want to keep farm subsidies as large as possible, but many other representatives are concerned about wasteful spending and unusually willing to interfere in the Committee’s business. So the current state of Farm Bill 2012 play is straightforward: everything up in the air.

In terms of new farm legislation, therefore, there is a nascent House Bill, which has gone through committee but not yet survived a floor vote, because the votes are not there. There is also the Senate’s version of a 2012 Farm Bill, which, in effect, only barely survived a contentious floor vote in May. The House and Senate Bills have dramatically different farm subsidy provisions, but both are potentially very expensive, perhaps more so in the House than the Senate version.

The House Bill has a new bait and switch “Price Loss Coverage” program that could involve taxpayer outlays in some years that are more than twice the $5 billion currently being on the Direct Payments program, which would be ended “to reduce the budget deficit.” It is also exceptionally generous to rice and peanut producers, who complained that they would not get enough subsidies from the Senate Bill. The Senate Bill has a “bait and switch” shallow loss program that could result in subsidy payments that exceed current federal spending on Direct Payments by 40%. Both initiatives give a healthy handout to cotton producers through a special insurance program called STAX, under which taxpayers would fund 80% of all premiums.

The proposed House bill has met strong resistance, partly because many members view proposed cuts to food stamp and other nutrition programs as too small while others view them as too large. The new farm program subsidies, about 80% of which would go to the largest farms and wealthiest farm households, are also viewed as wasteful and unreasonable by many House members. And the Bill contains a new dairy program that has been described as creating soviet style farming by the Speaker of the House. Representative Boehner’s view is not unreasonable; the House dairy program would discourage dairy farms from becoming more efficient and would protect inefficient operations from market forces.

In late July, the House leadership, faced with a situation in which votes for the agricultural committee’s House Bill were just not there, proposed a one year extension of the current (2008) farm bill, with additional funding for the livestock disaster programs. The proposal fell flat, largely because, for once, the agricultural lobbies united in condemning the idea. On the surface, the agricultural lobbies opposition to reauthorization is somewhat puzzling, as the CBO score for farm subsidies is higher for the current bill than the either the Senate or the House versions of a 2012 Farm Bill. However, they are likely concerned that a post-election Congress will be serious about deficit reduction, in which case a reauthorized $5 billion direct payments program that is widely viewed as welfare for the well-off would be transparently low hanging fruit for a budget cut.

From the perspective of the food industry, neither the House nor the Senate bill offers much joy. The House Bill’s dairy provisions would restrict growth in the dairy sector and adversely affect the competiveness of the dairy products industry. While the shallow loss provisions of the Senate Bill and the price/revenue program in the House Bill both would encourage increased crop production, the impacts would likely be modest. In addition, neither the House nor Senate agricultural committees are willing to increase public funding for on-farm productivity research by much, if anything, mainly because most farm lobbies want to maximize farm income subsidies. Finally, substantial cuts to nutrition programs will likely reduce food consumption and the demand for food industry products by low income households (by about 20–30% of the total cuts in nutrition subsidies to households).

Vincent Smith
Co-director of the American Enterprise Institute’s agricultural policy initiative
Professor at Montana State University

Read Vincent’s full post on the topic at AEI’s website.