Farm Bill Prognostications

Every five years Congress produces the nation’s flagship legislation on farm policy. It’s no small undertaking. The Farm Bill contains something on just about everything—from nutrition to research, from energy to rural development and, of course, agriculture. Not surprisingly, it’s a big-ticket item. The last bill, passed in 2002, had a price tag of nearly $250 billion, $100 billion of that going out as payments of one kind or another to farmers. With the 2002 bill set to expire next September, the voices of those wanting to get, increase or just hold on to their piece of that generous pie are growing louder. That’s to be expected. What’s different this time around is the very real possibility of significant changes in the size and division of the pie. Indeed, the rationale for reform is stronger than ever—at least in the 18 years I’ve been tracking the issues.

For starters, current farm policy isn’t getting the job done. In a recent presentation at the Cato Institute, Dr. Robert Thompson (a man with a long list of credentials in the subject) reviewed five big objectives of farm policy--increase farm family income, decrease farm income variability, improve competitiveness, increase food security and promote rural development. He then showed how current programs “fail to contribute much to [their] achievement.”

Taking the other side of the same coin, Dr. Carl Zulauf of Ohio State testified last week before the House Agricultural Committee that two big historic needs targeted by farm programs have already been met. Specifically, farm income is up and food is cheap. Thus, it’s time to rethink what we need and how to get it.

A second force for change is the “unprecedented transparency,” as Thompson put it, in this Farm Bill debate. High-profile efforts like those of the Environmental Working Group and the Washington Post show just how misshapen farm programs have become, with massive benefits going in many cases to people with little to no connection to farming.

A third is the budget deficit and the need to reign in expenditures—admittedly a need that’s easily overlooked in Washington whenever dogma dictates.

A fourth, according to both Thompson and The Economist magazine, is jealousy. Sixty percent of farmers—including growers of fruit and vegetables, which account for half of U.S. ag sales--get no cash from Washington. They aren’t happy. Corn growers, who do get big subsidies, see lower payments coming their way thanks to ethanol and aren’t inclined to stick with the old programs. As a result, the once solid farm lobby is showing signs of fissure.

Fifth, and speaking of ethanol, the need to increase renewable energy production, reduce dependence on oil and protect the environment will all have huge impacts on farming and therefore on farm policy.

Finally, there is trade. Sometime back I wrote there was a new sheriff in town: the World Trade Organization, which would change the way farm policy is written. Capitol Hill folks objected to that characterization; but it’s true. Current U.S. farm policy is vulnerable to challenges under existing trade agreements, let alone what may or may not come of the stalled Doha round. Brazil’s successful action against U.S. cotton might well be replicated against other crops. There’s a strong desire to make the next Farm Bill “WTO-proof.”

As if all that weren’t enough, USDA Secretary Johanns along with former Secretaries Block, Yeutter and Glickman are all on record calling for significant reforms and rejecting pleas to extend the current legislation.

So what could possibly offset such compelling rationale delivered by such heavy weights?

Math.

In the calculus of Washington, money sent out in farm payments comes back as political support. Not surprisingly, beneficiaries of this equation (farmers and politicians alike) are loath to change it. Indeed, the American Farm Bureau and the National Farmers Union are calling for an extension of the 2002 bill.

Which will prevail--reform or status quo? At this point, it’s a toss-up.

As Thompson put it, “If I were a betting person, I would wager that the 2007 Farm Bill will look a lot like the 2002 Farm Bill. However, there are just enough forces for change that one should not rule out a bigger change…”