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Politicians and Pundits Weigh Changes in Farm Subsidies

posted on August 11, 2006

Once every five years, Congress undertakes the monumental task of determining how the U.S. will dole out billions of dollars in farm subsidies. The current law, commonly known as the Farm Bill, is scheduled to expire in the fall of 2007. But the rhetoric has already begun in earnest. Last month, Environmental Working Group president Ken Cook challenged former House Agriculture Committee Chairman Larry Combest of Texas to a series of debates on U.S. farm policy. And it seems that everyone from the American Farm Bureau to rock star Bono has something to say about the impact of U.S. farm programs -- both domestically and oversees. Andrew Batt reports on what's at stake.

Politicians and Pundits Weigh Changes in Farm Subsidies

In the 1930's, a combination of poor land management and severe drought led to a devastating phenomenon known as the Dust Bowl. As citizens of the Southern Plains watched their livelihoods blow away, the Great Depression impoverished millions and forced the federal government to reform farm policy.

A "limited safety net" of government subsidies was offered to the 25% of Americans that lived and worked on the farm. Seventy years later, farmers account for less than 2% of the population. But the operations and government payments have expanded in size. Increasingly though, the dilemma of tying subsidies to production has drawn criticism from both urban and rural citizens.

Earlier this summer, Mark Leonard campaigned for Iowa's Secretary of Agriculture. A farmer himself, Leonard is part of a growing movement to reform America's agricultural policy.

Mark Leonard "…how does any American say that my government owes me $250,000 a year simply because I farm? And that is an argument that really becomes hard to justify when you put it into those simple terms."

Leonard blasts what he sees as a broken agricultural system. A system that according to the Environmental Working Group, gives the top 10% of recipients over 70% of the overall farm payments.

Mark Leonard "…it's not fair, it's not right. It has, in fact, especially with this last farm bill it is inadvertent, it wasn't intended but it has been a government sponsored farm consolidation program."

Criticism of farm programs is especially significant in Iowa. Over the past ten years, the Hawkeye state received $12.5 billion in government farm subsidies. While Iowa typically is among the nation's most subsidized states, it may be just the tip of the iceberg. In 2005, the federal government provided a record $23 billion in nationwide farm aid....almost 50 percent more than the U.S. spends on welfare.

Prior to Congress beginning it's work on the 2007 Farm Bill, USDA hosted a series of listening sessions across the country.

Mike Johanns "I'm here to say the entire agricultural community should have a say in this process."

The information and opinions gathered during the listening sessions where compiled and released in May 2006.

The report questioned the "equity of program benefits" and criticized government payments as lacking "even distribution across the country"... by both farm size and type.

USDA provided three plans to overhaul existing programs, including one scenario that might appeal to members of the World Trade Organization. Under this plan, payments would be targeted to producers in the greatest need of assistance – including small and mid-sized farms.

While Johanns did not endorse any of the alternatives, the Bush Administration favors greater WTO consistency.

Developing countries in the WTO want farm subsidies eliminated in wealthy nations like the United States. They claim the subsidies are trade-distorting because they allow cheap farm goods to flood the world market at the expense of their own non-subsidized commodities.

In exchange for eliminating farm subsidies U.S. trade negotiators want developing nations to remove import tariffs and other trade barriers.

But the most recent WTO talks in Geneva, Switzerland, were scrapped after negotiators failed to break the current deadlock over farm subsidies.

Susan Schwab, U.S. Trade Representative "The U.S. is simply not going to negotiate with itself over cuts in domestic support in agriculture."

Trade Representative Susan Schwab claims U.S. negotiators offered to slash subsidies but foreign nations refused to reach a consensus on trade barriers.

The deadlock is especially problematic for U.S. lawmakers as they prepare to draft the 2007 farm bill.

Craig Hill, Iowa Farm Bureau Federation "…the perfect vision of agriculture would include a level playing field, a chance to compete in open markets where there are no such thing as tariff barriers, export subsidies, currency manipulations and perhaps even without domestic supports. This seems like a perfect goal for the 21st century, however, the reality is this concept is just beginning to materialize."

Policy makers are emphasizing the need for a safety net in the next farm bill and some are issuing warnings.

Mark Leonard "…at what point do we decide that it's no longer a safety net but in fact the true source of somebody's entire income. That is when I have a problem with it."

Last November, Iowa Senator Charles Grassley introduced an amendment that would cap government farm payments below current levels.

Charles Grassley (R – Iowa) "My amendment will put a hard cap on farm payments at $250,000. That's the same as what's in the president's budget."

Grassley's amendment faced stern opposition not on party lines but along the Mason-Dixon line.

Sen. Blanche Lincoln (D – Arkansas) "…on the issue of size, farmers of commodities are not getting larger to receive more payments. They get larger in an attempt to create an economy of scale, to remain competitive internationally."

Arkansas Democrat Blanche Lincoln hails from a state that contains two of the nation's top 5 subsidy recipients....including the top U.S. payment beneficiary Riceland Foods...a 9,000 member rice cooperative that earned $14 million in 2004 alone.

In the end, Grassley's amendment to cap farm payments failed by seven votes. More than six months later, Mark Leonard lost his bid for the Iowa Secretary of Agriculture nomination.

While the losses may not be tied directly to farm policy reforms, they could reinforce the sentiment of some who see farm subsidies as the third rail of politics in the Heartland.

For Market to Market, I'm Andrew Batt.


Tags: agriculture government news politics trade