FarmPolicy

November 14, 2018

Farm Bill: Pelosi’s Role

Categories: Farm Bill

Sebastian Mallaby, writing in the opinion section of today’s Washington Post, noted that, “In leading the House Democrats to victory last year, Rep. Nancy Pelosi demonstrated political effectiveness. She perfected the art of saying nyet, stomping on President Bush’s attempt to reform entitlements. The question she left open was whether she could be a constructive speaker of the House. That will involve saying nyet to two Democratic committee chairs who discredit their own party.”

After a brief discussion regarding energy policy, Mr. Mallaby stated that, “The next challenge is farm policy. Again, Pelosi faces an entrenched committee chair, this time Rep. Collin Peterson of Minnesota. A decade ago, Peterson came to prominence by co-founding the ‘Blue Dog’ Democrats to support budget discipline. Now he wants to spray taxpayers’ money at farmers, even though farm country is already high on ethanol.

“The ethanol effect is staggering. Congress passed an ethanol mandate in 2005, and this central-plan edict has encouraged distilleries to sprout all over the Midwest: a Moscow on the Mississippi. Helped along by high gas prices, corn prices have roughly doubled in two years, boosting producers’ incomes and land values. Fields that once grew other crops such as soybeans or wheat have been switched over to corn, adding an area twice the size of Maryland to the ethanol-industrial complex. The result is that soybeans and wheat are relatively scarce, driving up their value and generating a further windfall for farmers.

“The Agriculture Department just released numbers for farm income in 2004. These show that, even before the ethanol boom, the average income for a farm household stood at $82,000 and the average net worth was $740,000. In other words, these people are no more deserving of federal aid than are lawyers. But Peterson’s committee is about to mark up a bill that would preserve the existing system of subsidies. Half of these subsidies go to around 20 congressional districts — including, you’ll be surprised to hear, Peterson’s.”

(FarmPolicy assumes Mr. Mallaby is referring to this Economic Research Service (ERS) publication, which was released on June 1 and stated on page 22 and 24 that, “Average principal operator household income was $81,600 in 2004 (table 7), up from $68,500 in 2003, with farming and off-farm income each contributing about half of the $13,100 increase. Households operating large and very large farms experienced substantial increases—$22,700 and $58,300, respectively—mostly from farming. Average farm household income was about 35 percent higher than the average for all U.S. house-holds in 2004, as measured by the Current Population Survey.” For more information on Farm Income and Cost forecasts for the farm sector in 2007, see this ERS webpage.)

Mr. Mallaby concluded his column by stating that, “Moreover, a large chunk of this largess takes the form of ‘transition’ payments. Transition from what? Well, in 1996 Congress abolished production-linked subsidies on the grounds that they encourage excess planting. As a temporary measure, Congress provided farmers with transitional ‘direct payments’ — money they would get without having to produce anything. Then, in a stroke of genius, Congress resurrected the production-linked payments while not killing the direct ones. Now Peterson wants to stretch the definition of transition by a further five years, even though the ethanol boom has made subsidies to farm fat cats more obscene than ever.

“There are plenty of better things to spend tax money on, and most House Democrats know this. In the last farm debate, five years ago, a reformist amendment written by Rep. Ron Kind attracted 200 votes, including Pelosi’s. But the question is whether Pelosi will give Peterson the Sister Souljah treatment he deserves or will bury Kind’s latest reform proposal to please the porkers on the ag committee.

“The job of House speaker is admittedly not an enviable one. The absurdly short two-year election cycle encourages the Beltway disease of putting special interests ahead of the national interest. But climate and agriculture are two issues on which Democrats want to move in the right direction. The question is whether Pelosi will lead them there.”

Meanwhile, Jill Schramm reported recently at The Minot Daily News webpage (North Dakota) that, “[Sen. Kent Conrad, D-N.D] said his strategy for writing the next five-year farm bill has changed in the last two weeks because of a new threat raised with legislation introduced by Reps. Ron Kind, D-Wis., and Jeff Flake, R-Ariz. The proposed House bill would gut the existing farm program, he said.

“‘We have run the numbers on what it would mean in North Dakota, and it would be a body blow to the economy of North Dakota. It would have a devastating impact on farm income in our state. It is a radical proposal that, unfortunately in a House that’s dominated by urban interests, could conceivably carry. This is an enormous threat,’ Conrad said.

“‘It’s very clear that the rest of agriculture is going to have to rally, and if we don’t pull together, we could wind up in a very serious situation going forward. That means we are going to have to make agreements we were not prepared to make two weeks ago. That means we are going to have to deal with our southern colleagues in a more close alignment than we had anticipated.’”

The article noted that, “One of the items in jeopardy is a permanent disaster program that would preclude the need for Congress to consider disaster aid every year.”

In addition, the item indicated that, “Currently, southern crops are supported in the farm program to a greater extent than northern crops, and one of Conrad’s goals was to rebalance payments to eliminate some of the inequity. However, to rebalance the inequity would mean a 40 percent cut in payments to southern farmers.

“‘There’s no way the South is going to take a cut of 40 percent and be on board, and if they are not on board, we are not going to get a farm bill because of this threat from the more urban parts of the country,’ Conrad said. Conrad said there will be a push for some rebalancing, but it looks as if the savings might be just $1 billion.’

“‘I was very much hopeful that we would get a much more substantial rebalancing that could have paid for a disaster title,’ he said.”

Near the article’s conclusion, Ms. Schramm stated that, “Another challenge farm-state legislators face is opposition from urban residents whose understanding of agriculture is based on media headlines about farmers getting rich from subsidies, Conrad said.”

With respect to how crops are supported in the current Farm Bill, a recent Congressional Research Service (CRS) report written by Jasper Womach and Randy Schnepf entitled, “Measuring Equity in Farm Support Levels” shed more light on the issue.

The CRS report stated that, “Federal farm law mandates support for, among others, 18 ‘covered commodities.’ Support for these agricultural commodities, as specified in the 2002 farm bill (P.L. 107-171) includes direct payments, counter-cyclical payments, and marketing loans. Large disparities in the relative levels of benefit among these commodities have led to questions of equity.

“This report compares support rates per unit, total payments, payments per harvested acre, payments as a share of the value of production, and payments as a share of the total cost of production. In addition, price and income support levels are compared to market prices. By all of these measures there has been little equity across commodities. However, farmers often have argued for equity based on cost of production. Economists, on the other hand, would use trend market prices as the basis for setting support prices in order to avoid market distortions and resource misallocations.”

Although filled with a variety of helpful illustrations and data resources, charts on pages 11 and 12 of the CRS report regarding loan rates and target prices are particularly interesting.

In other farm policy related opinion, Senator Richard Lugar (R-Indiana) and Representative Ron Kind (D-Wisconsin) penned an item that was posted on Saturday at the Modesto Bee webpage in which they provided arguments in support of their Farm Bill proposal- FARM 21.

In part, the lawmaker’s column stated that, “Moreover, parts of this protectionist scheme violate world trading rules and represent a key issue in the troubled Doha round of global trade talks, which recently faltered again in Potsdam, Germany. The Doha agenda is specifically aimed to help the least developed nations get more benefit from trade liberalization.

“America is not the only, or even the worst, protectionist culprit. The European Union and Japan also lavish subsidies on their farmers, protect them with quotas and high tariffs, and depress world market prices to the detriment of lesser-developed countries.

“This charade must stop. With the Farm Bill now up for renewal by Congress, we have proposed a new system that ends trade-distorting commodity payments, saves taxpayers billions of dollars and treats farmers like entrepreneurs instead of supplicants. Called FARM21, the legislation would end incentives to overproduce and bring America into compliance with world trading rules.

“It would replace direct payments to farmers with ‘risk management accounts,’ government-backed, and initially government-funded, accounts which farmers could use to smooth over the normal cycles of farming life, make investments and buy subsidized crop and revenue insurance to protect themselves from extraordinary loss. It would give farmers the responsibility, and the means, to manage their own assets.”

Keith Good

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