Farm subsidies face most serious threat yet
KANSAS CITY, Mo. – Liberals and conservatives aiming to close trillion-dollar federal budget gaps may soon reach a rare consensus on a common target for spending cuts: the American farmer.
“Agriculture is clearly in the cross hairs for significant reductions,” said Sen. Jerry Moran, a Kansas Republican and a longtime champion of farm interests in Washington.
The nation’s creaking, decades-old system of farm subsidies, crop insurance, conservation programs and disaster relief is controversial even in good budget times.
But with federal deficits and debt at unheard-of levels, the $10 billion to $25 billion spent each year on farm supports is attracting new scrutiny from the right and the left.
And their budget-cutting scythes are out.
“Most people who do not directly benefit from farm subsidies seem to recognize that these programs have been an absolute failure and make virtually no economic sense,” said Brian Riedl, an economist with the Heritage Foundation, a conservative think tank.
Liberal groups aren’t any happier. Farm subsidies aren’t needed, they argue, because farm income is going up, while some food prices – driven in part by federal support for ethanol production – are also higher, hurting families at the grocery store.
What’s more, they point out that most federal spending for farmers actually goes to corporations, which don’t need help, rather than family farms.
In Kansas, Tom Boehm, a farmer in Johnson County, said he understands why budget-cutters are looking at agriculture.
“We’re taxpayers, too,” Boehm acknowledged, but he noted that price supports provide a safety net when crops don’t come in.
The federal government sends roughly $5 billion annually in direct cash payments to farmers of 10 different crops such as wheat, corn, and rice, payments that are made regardless of crop prices. Other farm spending – loans, subsidized insurance, conservation incentives, disaster payments – can cost an additional $5 billion to $20 billion annually.
“Direct payments seem the least defensible,” said David DeGennaro of the Environmental Working Group, a liberal organization long opposed to most farm spending. “It’s just a cash handout for landowners and farmers, who get it whether they need it or not.”
Farmers, and farm-state lawmakers, are nervously watching all the budget-cutting zeal. The farm bill, which establishes the broad outline for agriculture programs and spending, is tentatively up for renewal next year.
Farm advocates argue that while agriculture is ready to do its part to reduce the deficit, farm programs – cobbled together over many decades since the Great Depression – protect a system that delivers high-quality, safe food at a relatively low cost.
“Certainly agriculture is part of the (budget-cutting) mix,” Moran said. “Most farmers are pretty conservative when it comes to the federal government and spending, and they recognize that the debt is unsustainable. … Having said that, there is plenty of evidence agriculture has given already, so we’re looking for some fairness.”
Indeed, some farmers contend federal payments provide an essential safety net for neighbors facing drought, floods, and near-record fuel prices, not to mention an inevitable downturn in the farm economy.
“This is a balloon,” said Donn Teske, a farmer from Wheaton, Kan., and president of the Kansas Farmers Union. “I don’t know how many balloons I’ve been through in my farming career. In two years we’ll be at rock bottom again, and we’ll all be going broke.”
Sen. Claire McCaskill, a Missouri Democrat facing a tough re-election campaign, maintains that a rapid cut in taxpayer spending for agriculture could backfire, costing urban consumers more at the market.
“We pay very little for our food in this country compared to other nations,” McCaskill said. “I don’t want to get in a situation where all of a sudden people are seeing the same thing at the grocery store that they are at the gas pump.”
Even with current farm programs that are in place, the price consumers pay for food is creeping up. The Agriculture Department projects food inflation this year will be between 3 and 4 percent, much higher than the 2010 food inflation rate of less than 1 percent.
And farmland values continue rising, leaving farmers as a group as well off as they’ve been in many years. Late last year, the Congressional Research Service projected a 24 percent jump in net farm income in 2010, based largely on export demand and higher prices.
As a result, farm household income – aided in part by money earned off the farm – exceeded the average non-farm household income by 17 percent in 2008, according to the Research Service.
Earlier this month, the Heritage Foundation proposed eliminating most farm support in exchange for tax-deductible farm savings accounts, which would allow farmers to bank income in better years to tide them over in poorer years.
“Farm subsidy reform has to be included in any real deficit reduction plan,” said Riedl, the Heritage economist. “There’s no reason Social Security and Medicare should be reformed, but (that) farmers should be let completely off the hook.”
U.S. Rep. Sam Graves, whose 6th Congressional District in Missouri will soon represent nearly half of the state, said he’s ready to battle for farm price supports – despite his recent vote for U.S. Rep. Paul Ryan’s budget, which quietly cut $30 billion in farm spending over a 10-year period.
“Every single producer would rather get a check from the market than the government,” Graves said, but “simply eliminating these programs could put our ability to feed ourselves at risk.”