Farm bill favors handouts, ignores market based agriculture
Posted by James Franko on Thursday, June 21, 2012

Government subsidies of one form or another have become as American as apple pie. Everyone goes to Washington with their hand out and politicians looking for votes are more than happy to oblige with other people’s money.

Too often, this practice becomes so entrenched that Americans can hardly be blamed for thinking this is the only way to do things. Can you imagine life without Social Security or the mortgage interest tax deduction? Probably not.

It should come as no surprise, then, that farmers throughout the U.S.  can’t get their mind around operating without federal farm subsidies. As the U.S. Congress debates a new “farm bill” – an all-encompassing legislative package they pass every five years dealing with agriculture and food policy – the debate will be less about whether rural America can exist without federal subsidies and more about how much Washington can throw at favored programs. In fact, the term “farm bill” is probably misleading because 80% of the funding cover in the bill went to things not ag related last year. The lion’s share of the bill is spent on food stamps and other non-ag programs.

FYI, the farm bill passed the U.S. Senate today by a vote of 64-35; committee action in the House is scheduled to begin on 11 July.

With federal spending and deficits driving the discussion in D.C., the Senate version is being hailed for "saving" $23 billion, compared to current policy. That may sound like a lot at first glance, but it pales in comparison to the projected federal deficit of $1.3 trillion or the total cost of the bill itself, $969 billion over ten years.

Pending any last minute amendments, it spends $193 million for farmers to grow crops for biofuels, extending a program that was previously cited by the USDA’s inspector general for extending unequal and improper benefits to farmers, and over $200 million to retro-fit refineries to produce biofuels. Biofuels are but one of numerous examples.

As currently written, this bill does little to help America tackle our budget deficits and does less in freeing Kansas farmers to capture the entrepreneurial and risk-taking heritage that saw our state  turn into the “World’s Breadbasket.” Fortunately, a modern example exists which shows what a subsidy-free agricultural sector can look like.

From the Cato Institute during the 2002 farm bill debate:

In 1984 New Zealand's Labor government took the dramatic step of ending all farm subsidies, which then consisted of 30 separate production payments and export incentives. This was a truly striking policy action, because New Zealand's economy is roughly five times more dependent on farming than is the U.S. economy, measured by either output or employment. Subsidies in New Zealand accounted for more than 30 percent of the value of production before reform, somewhat higher than U.S. subsidies today. And New Zealand farming was marred by the same problems caused by U.S. subsidies, including overproduction, environmental degradation and inflated land prices. New Zealand's plan was initially met with protest marches on parliament and organized resistance by farmers. Bolstering opposition was the government's own prediction that 10 percent of all the country's farms would go out of business. But the subsidies were ended, and New Zealand farming has never been healthier.

So, what does New Zealand’s agriculture sector look like nearly 20 years after they stopped subsidizing it? In a word, bountiful. According to the World Bank, in 1980 New Zealand’s ag sector produced $2.3 billion in value-added product. By 2009, that same number was $4.9 billion – a 111% increase (all numbers in 2000 dollars and are most recent available). Over the same time frame, the World Bank’s production indexes for both livestock and food have also showed tremendous gains in New Zealand. Maurice McTigue, a farmer by trade and member of the New Zealand Parliament when subsidies were kiboshed, has this to say about things in NZ...McTigue is also the vice president of the Mercatus Center at George Mason University in Virginia...

"In 1985 the [NZ]  government removed all subsidies form agriculture whether they were price support, subsidized insurance, input subsidies or production controls. This was a tough love approach with all the subsidies disappearing over the succeeding 9 months...[we] can look back on the last 25 years as probably the best in the history of New Zealand farming.

"Why would this be so? The major effect of subsidies is that they kill off or water down innovation...An example of this unfettered innovation is that the dairy industry in New Zealand in 1985 produced 35 products from milk by 2005 the dairy industry was producing 2200 products from milk and the dairy industry is the boom industry of New Zealand farming. The conclusion, subsidies keep farmers poor."

While the Kiwi’s were busy not subsidizing farmers their rural population grew by 11.6% (1980-2011), here at home our rural population decreased by 8.4%, once again from the World Bank. Certainly, more was at play than subsidies, but you get the point – the rural populations can thrive without government handouts.

The Federated Farmers of New Zealand (picture our National Farmers Union) might have said it best in that New Zealand has "thoroughly debunked the myth that the farming sector cannot prosper without government subsidies."

The 2012 farm bill, as currently written, is only the most recent example of someone in Washington saying one thing and doing something completely different. You’ll hear talk about helping family farms and supporting rural America, but the key thing to remember is that the farm bill is little more than a bunch handouts to politically connected industries (hello biofuels!) and an extension of federal food stamps. It isn’t about an individual farmer in Finney County and certainly isn’t about less government spending or intrusion in the market.

Listen to a good George Strait song as he extolls the virtues of the Heartland and hard work.  The people he is singing too aren’t asking for a government handout, but Washington has distorted the market for so long that it is hard to imagine farm life without subsidies and mandates. Farm profits continue to grow in spite of government manipulation - not because of it.

Pull off I-70 on your way to your next trip to Breckenridge or Estes Park and ask a farmer or rancher if they want more government involvement in their operation. The answer will almost certainly be no. Hopefully, someone in Washington is listening, but if the bipartisan comments following today’s Senate vote are any indication, I’m not holding my breath.