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Farmers reap profits while public pays the bill

This commentary from the Kansas City Star does not necessarily reflect the view of The Spokesman-Review’s editorial board.

While the U.S. economy as a whole remains sluggish, the farm sector has been doing well. Exceptionally well, in fact.

Last year, net farm income was a record $101 billion, and it’s expected to be only slightly off the pace in 2012. With the national debt ballooning and the federal deficit still well over $1 trillion, you’d think lawmakers would be determined to seriously scale back taxpayer support for agriculture.

But you’d be wrong. True, the farm bill endorsed recently by the Senate Agriculture Committee calls for a $23 billion drop in farm programs over 10 years. Yet that’s just $2.3 billion a year – a pittance relative to the deficit.

The bill does include a few welcome changes. It would do away with the fixed-payments program, which has doled out $5 billion a year to farmers whether or not they grew anything in that year. And it would eliminate a handful of other programs for more savings.

In exchange, however, the bill would create a “shallow loss” insurance program that could prove more expensive than the programs being scrapped. In recent years, insurance programs have become the principal means of shoveling money to growers of the big subsidized commodity crops – corn, cotton, wheat, soybeans and rice. Government crop insurance is heavily subsidized. The taxpayers supply 62 percent of the premium, an annual cost that has risen in constant dollars from $1.2 billion in 2000 to $7.3 billion last year. A big downside is the “moral hazard” problem: Insurance encourages producers to plant marginal land, knowing that if the crop fails they can collect on the insurance.

The Senate bill would add the shallow loss program on top of that. If a producer’s revenue fell below 89 percent of a baseline, the farmer could file a claim. A coalition of farm groups, including the American Farm Bureau Federation, supported the plan, calling insurance a “core risk management tool. …”

But under this bill, there wouldn’t be much risk left to manage. This isn’t “socialized” agriculture, strictly speaking; the government no longer tells farmers what to plant and how many acres to sow. If the taxpayer is picking up almost all the risk, however, it begins to look like the agricultural version of Fannie Mae’s business plan: privatized profits, socialized risk.

It’s a shame that in the current debate little has been said about overall income caps, which the Bush administration proposed but Congress rejected. Under that plan, if a farmer’s income exceeded a cap, say $250,000, then the farmer would “graduate” to self-sufficiency and would no longer be eligible for subsidies.

Pat Roberts, of Kansas, the ranking Republican on the Senate Agriculture Committee, said the Senate measure belonged in the familiar category of “not the best possible bill but the best bill possible.” If that discouraging evaluation proves correct, then the prospect of ever seeing real spending discipline in Washington seems pretty remote.


 

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