Cutting farm subsidies v. reform
Taking a whack at price-dependent farm subsidies could save taxpayers money later and make sure our farm programs don’t hurt poor farmers in developing countries.May 10th, 2011 | by Gawain Kripke
It’s a measure of how difficult things have gotten in Washington that cutting farm subsidies is now seen as something relatively easy that both Democrats and Republicans can agree on. Last week, the Washington Post reported that Republicans offered up farm subsidies as a ripe target for budget cutting.
It wasn’t so long ago that farm subsidies were considered invincible and the “iron triangle” of farm organizations, farm state legislators, and the behemoth US Agriculture Department had the situation on lock down.
Oxfam and a coalition of other disgruntled interests and pie-eyed idealists made case for reform of the Farm Bill in 2007. We rallied around an alternative proposal that would have cut commodity subsidies and shifted funds to other purposes, including reducing the federal debt. It was a great lobby effort, an innovative campaign, a reasonable objective, and quite unsuccessful. In the House, we lost on a vote of 309 to 117.
Times have changed. With the country facing a huge budget deficit, and a poor economy, the public tolerance has shrunk for billions of government payments that largely go to the biggest farmers.
The problem is that there isn’t that much money in cutting farm payments these days. Most farm subsidies are price-dependent, meaning they are bigger if prices are low and smaller if prices are high. Prices are hitting historic highs for many commodities, which means the bulk of these subsidies are not paying out very much money. Over time, the price-dependent subsidies have been the bulk of farm subsidies. They also distort agriculture markets by encouraging farmers to depend on payments from the government rather managing their business and hedging risks.
So – these days there’s only about $5b in farm payments being made, and these payments are not considered as damaging in international trade terms because they are not based on prices. Not nearly as juicy as when the government was regularly paying out $20-$25b a year when farm prices were lower. Corn subsidies were more than $10 billion in 2005. In 2009, they were less than $4b.
Still, Congress will probably make some cuts. But these cuts won’t really be reform and won’t produce much long-term savings unless they tackle the price-dependent subsidies. Taking a whack at those subsidies could save taxpayers money later and make sure our farm programs don’t hurt poor farmers in developing countries.
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