U. S. Farm Policy 2013: The Good, the Bad and the Ugly
Global Emerging Markets (GEMs)

Syndication

Have You Seen This?

Emerginvest

Emerginvest is a global finance portal connecting investors worldwide with high-quality investment research, data, and tools covering 125 stock markets globally.

In the wake of the current global financial crisis, not all markets have been affected the same way. Emerginvest points you to the international markets and sectors that have already begun growing, so that you can build a strong, globally diversified portfolio.

In principle, the decision by House Republicans to strip the food stamp program out of the current farm bill is not a bad thing. In practice, it may not be so bad either.

For the past 40 years or so, agricultural subsidies and supplemental nutrition programs (food stamps) for poor people have been joined at the hip, the idea being that combining the two, otherwise unrelated, initiatives could help win bipartisan support for an omnibus bill that contained something for every constituency: farmers, agribusiness, advocates for the poor, etc. The problem with such an approach is that it embodied the worst of interest-group politics, legislative back scratching, and pork barrel giveaways. No liberal legislator would vote against subsidies for rich sugar or cotton or tobacco farmers for example, if it meant cuts to the food stamp program. No Florida conservative would vote to cut food stamps if it also meant cuts to subsidies for his or her rich, sugar-growing constituents. Everyone got pretty much everything they wanted, and no serious policy debate ever occurred. So separating the two makes profound sense. But encouraging a serious policy debate is the last thing on House Republicans’ minds.

In drafting and voting on a pure farm bill, House Republicans have laid bare their hypocrisy by showing, in black and white, the hollowness of their claims to budget-cutting rigor. It turns out that it’s not government spending per se they object to: as long as it benefits the wealthy, they are quite okay with it. Indeed, in drafting the new farm bill the House Republicans rejected all calls to cap or eliminate subsidies to wealthy individuals and corporations.

Even The Heritage Foundation found this hard to swallow: writing on the Heritage blog, Daren Bakst remarked, “With the passage of this bill, the House has gone even further to the left than the Senate bill. It would spend more money than Obama on the largest farm program, crop insurance…[and] by making sneaky changes to the bill text… some of the costliest and most indefensible programs no longer expire after five years, but live on indefinitely.” Blogging for the New York Times, conservative columnist Ross Douthat referred to the House action as “cutting welfare for the poor but not for the rich,” and castigated “a Republican Party that doesn’t seem to think about the common good at all.” In an editorial calling the bill “a perfect disgrace,” the Washington Post observed, “Though billed as a reform measure, the $196 billion legislation would reduce 10-year projected agriculture subsidies by a mere $12.8 billion, compared with current law. President Obama’s proposed budget would have trimmed $38 billion; House Budget Committee chairman Paul Ryan (R-Wis.) would have cut $31 billion.”

What exactly are these indefensible programs the House Republicans have endorsed with such enthusiasm?

According to the Environmental Working Group farm subsidy database, the United States spent $292.5 billion in agricultural subsidies between 1995 and 2012, which included $177.6 billion in commodity subsidies, $53.6 billion in crop insurance subsidies, $38.9 billion in conservation subsidies (this is the famous program that pays farmers not to grow anything), and $22.5 billion in disaster subsidies (a program in which beneficiaries get paid twice: once in subsidized crop insurance and again when they receive direct federal payments in addition to the insurance payouts whenever Congress declares a disaster in the wake of drought or flood damage).

The new farm bill has shuffled some of these subsidies around, increasing subsidized crop insurance and reducing some direct payments, but the net effect is much the same. According to the EWG, in 2012 the top 4% of recipients received 53% of total commodity payments, with an average of $805,000 per recipient, while 77% of payments, worth an average of $463,000, went to the top 10% of recipients. Corn and cotton farmers reaped the largest share, but soy, rice, tobacco, wheat, peanut, sugar, and mohair producers also did well.

The largest beneficiary of crop payments from 1995 through 2012, receiving a staggering $554 million, was Riceland Foods, Inc., of Stuttgart, Arkansas, a co-op owned by 9,000 rice growers in Arkansas, Louisiana, Mississippi, Missouri and Texas, which bills itself as the world’s largest rice miller and marketer, with. The number two recipient, Producers Rice Mill, Inc., also based in Stuttgart, Arkansas, got $314 million. Tyler Farms of Helena, Arkansas, 70 miles east of Stuttgart, is home to Tyler Farms, the largest recipient of cotton subsidies, which were worth $37 million from 1995 through 2012. There are a few more familiar names on the list – Cargill, the largest privately held corporation in the U.S. and a global agribusiness giant, got $17.6 million between 1995 and 2012 – but most appear to be large family-owned farms or farmers’ cooperatives, often with multiple locations. Various members of the Odom family own O & E Farms of Arizona, recipients of $10.5 million in subsidies for cotton ($7.6 million) and other commodities, while the McCarthy family, owners of Dublin Farms of California, raked in $24.6 million, also mostly for cotton. Still, a long list of wealthy celebrities not known for their green thumbs, including Ted Turner, David Rockefeller, Bruce Springsteen, Jon Bon Jovi, basketball star Scottie Pippen, and pornographer Larry Flynt, have also received substantial federal farm subsidies.

If farm subsidies were about preserving family farms – the way they are presented to an unsuspecting public – they might somehow be justified. But subsidies have produced precisely the opposite effect. Since the 1930s, when farm subsidies began, the number of farms in the U.S. has shrunk by 70%, while the average farm size has increased dramatically. This is not a coincidence. Although technological improvements in agriculture have accounted for much of the change, subsidies based on acreage will always benefit large farms disproportionately and lead to further concentration.

In the frantic jostling to feed at the Federal trough, our legislators together with the members of the Executive branch of government, which implements the farm programs, seem never to have asked why we need farm subsidies at all and whether the benefits, if any, are worth the cost. With the exception of dairy products, which were subsidized to the tune of about $5.3 billion from 1995 to 2012, most farm subsidies go to cereal and oilseed crops. Meat, fruits, and vegetables do fine without subsidies, though corn and soy subsidies do provide a huge indirect benefit to meat producers.

Many countries have eliminated farm subsidies entirely with highly positive results. New Zealand, which in 1984 removed a dense web of protections and subsidies for its farmers, emerged as one of the most competitive agricultural exporters in the world. The wider fiscal reforms undertaken at the same time also spurred development of a huge export-oriented agro-industrial sector, producing butter, cheese, value-added meat products, and woolen goods, which now accounts for around 15% of GDP. New Zealand is not alone. Australia and Chile have also drastically cut subsidies to less than 5% of total farm income, versus about 9% for the U.S. But the United States is by no means the worst offender when it comes to subsidies.  According to The Economist, subsidies account for 19% of total farm income among members of the OECD club of rich countries, and in Norway, Switzerland and Japan they amount to more than half.

The farm bill is harmful not only to U.S. taxpayers and consumers but also to many of our allies overseas. The new bill retains, unchanged, the $147.3 million in annual bribes – there is really no other word – the U.S. Government pays to the Brazilian Government to prevent the latter from imposing countervailing duties against a wide range of U.S. products – or flouting U.S. patent- and copyright-protected items – in retaliation for U.S. cotton subsidies, which the WTO ruled illegal in 2009. Apart from a handful of wealthy cotton farmers, this subsidy benefits no one, while inflicting substantial harm on poor countries like Chad, Burkina Faso, Mali, and Benin, which are large and relatively efficient producers of cotton but which can’t compete against U.S. subsidies that drive down world prices. These countries, unlike Brazil, have no leverage, given their infinitesimal imports from the U.S.

U.S. food crop subsidies are even more harmful, since they drastically affect poor countries’ ability to feed themselves. Evan as we impose tariffs that drive up the domestic price of imported rice, our subsidies enable U.S. producers to sell in international markets at a price substantially below that of locally produced grain. According to a 2006 report by the Cato Institute’s Daniel Griswold, U.S. rice subsidies depress world prices by four to six percent. That may not sound like a lot, but when combined with U.S. producers’ greater efficiency and a reduction in many countries’ import tariffs (often under U.S. pressure), it is enough to drive a lot of farmers in poor countries off the land or back to pure subsistence farming.  Bill Clinton in 2010 apologized to the Haitian people for the rice subsidies enacted while he was President in the 1990s. “It may have been good for some of my farmers in Arkansas, but it has not worked,” he said. “I have to live every day with the consequences of the lost capacity to produce a rice crop in Haiti to feed those people, because of what I did.”

Other U.S. policies such as import tariffs and quotas on rice, sugar, ethanol, and other commodities; and ethanol subsidies and federal minimum ethanol content requirements serve only to amplify the harmful effects, at home and abroad, of our existing agricultural subsidies.

Subsidizing wealthy Americans at the expense of the poor, maintaining wasteful government spending, driving up domestic food prices for food and fiber, and contributing to hunger and economic hardship in vulnerable countries: it sounds like the makings of a perfect storm. There is something in this farm bill for everyone to hate, liberal Democrats and Tea Party Republicans alike. The House Republicans may have done the rest of us a huge favor, putting into sharp relief the moral and intellectual bankruptcy of their position and, just possibly, sparking a popular revolt.





Posted 07-14-2013 1:13 AM by Charles Krakoff
Filed under: