Q: Is American Farm Reform Headed in the Right Direction?

(Two differing opinions) Pat Roberts; Victor Davis Hanson

News World Communications

Abstract: The Republican Chmn of the House Agriculture Committee is sanguine about the direction farm policy is taking, but a fifth-generation farmer believes that the new law favors big agribusiness and hurts family farmers. Subsidies and federal payments are discussed.

Yes: Farmers can now plant whatever they want and federal payments decline over seven years.

During the last year, I often have compared our efforts to reform outdated farm policies with the Texas-to-Montana cattle drive in the movie Lonesome Dove. We have fought off our share of hostile attacks and made it across more than one river full of snakes. But, like the gritty cowboys in the movie, we persevered and eventually reached our destiny.

The recently enacted farm bill represents the most sweeping change in federal farm programs since the Great Depression. Our “Freedom to Farm” bill saves taxpayers billions and gets the dead hand of government out of the business of farming. The bill eliminates obsolete mechanisms of farm policy that hinder international competitiveness and encourage poor soil stewardship. Farmers are set free to produce and compete in a growing global market. Predetermined annual payments are authorized to assist agricultural producers during the transition from an economy heavily dependent on government to one focused on markets.

On the strength of these arguments, the Freedom to Farm bill (renamed the Federal Agriculture Improvement and Reform Act) cruised to comfortable victories in both the House and Senate in late March. Nearly all Republicans and a good portion of Democrats supported the bill on final passage. In the House, we pulled off the unthinkable by producing a farm bill that was palatable to both House Majority Leader Dick Armey, a Texas Republican, and Rep. Bernie Sanders, a Vermont independent. With some reluctance, President Clinton signed the bill into law.

Still, a few critics remain. The populist left charges that we have eliminated the “safety net” for farmers; the purist right is unsatisfied with anything short of complete elimination of federal support to agriculture. To those critics who have not yet been baptized at the altar of Freedom to Farm, I once again will explain the policy rationale.

The original New Deal farm programs 60 years ago were based upon the principle of supply management. The thinking then was to control supply and raise prices. While this may have been possible a generation ago when our farm production was primarily for domestic consumption, it is sheer folly in today’s global market. For the last 20 years, farmers have received federal assistance in return for setting aside (that is, not planting) a portion of their acreage. That assistance was largely in the form of deficiency payments to compensate them for prices below the government’s target price for their production. That system has collapsed as an effective way to deliver assistance to farmers. Worldwide agricultural competition usurps markets when we reduce production. In short, the supply-management rationale not only fails under close scrutiny but also has enabled international competitors to increase their production by more than we “set aside.”

The doctrine of supply management tied federal subsidies to the production of specific commodities such as wheat, corn and rice, requiring farmers to plant the supported crops year after year regardless of environmental consequences. Planting the same crop continuously led to excessive use of fertilizer, chemicals and tillage to control pests and maintain crop yields.

The Freedom to Farm bill was born of an effort to create farm policy from an entirely new perspective. Acknowledging that budget cuts were inevitable, the bill set up three goals for farm policy: getting the government out of farmers’ fields; returning to farmers the ability to produce for markets, not government programs; and providing a predictable and guaranteed phasing-down of federal financial assistance.

By removing government controls on land use, the reform bill effectively eliminates farmers’ chief complaint about the programs — bureaucratic red tape and government interference. Endless waits at the county office of the Agriculture Department are over. Hassles about field sizes and whether the right crop was planted to the correct amount of acres are things of the past. A preliminary analysis by the General Accounting Office shows that $334 million will be saved just in Agriculture Department administrative expenses.

Benefits to the environment through deregulating agriculture cannot be overstated. Under this program, the government no longer forces the planting of surplus crops and monoculture agriculture. Farmers who want to rotate crops for agronomic and economical reasons are free of current restrictions. Good soil stewardship is good economics, since crop rotation produces higher yields and lower fertilizer and chemical costs. Farm-program participants still will be required to meet soil-conservation and wetlands-protection standards but otherwise will be free to manage their farm operations as they see fit.

American agriculture stands at a gateway of opportunity. Falling trade barriers under the North American Free Trade Agreement and the General Agreement on Tariffs and Trade, combined with population and income growth throughout the world, put U.S. agriculture on the brink of an export explosion the likes of which we have not seen in 30 years. Seizing this opportunity will mean sustained economic growth and jobs — not just in rural farm communities, but in the cities of the farm belt in which modern manufacturing turns the productivity of America’s farms and ranches into the food products lining grocery-store shelves worldwide. Failure to take advantage of this opportunity will further erode U.S. leadership in agricultural production.

The old federal farm program was a major barrier to participation in the booming world market. Under Freedom to Farm, farmers have the ability to respond to world demand. The restrictions on what they can plant virtually are eliminated.

The guarantee of a fixed (albeit declining) payment for seven years provides the predictability that farmers have wanted and the certainty creditors need. Under Freedom to Farm, the payments made to producers must be looked at from a new perspective. It transfers responsibility to farmers for their economic life. Just as farmers will need to look to the market for production and marketing signals, Freedom to Farm will require that farmers manage their finances to meet price swings.

True, even when prices are high farmers will receive a full market-transition payment for wheat, grain sorghum, corn, barley, oats, rice and cotton. For example, according to U.S. Department of Agriculture estimates, the corn payment for 1996 will be 37 cents per bushel, rising to 47 cents in 1997 and declining each year to 29 cents per bushel in 2002. It is equally true that if prices decline, farmers will receive no more than the fixed market-transition payment. That means farmers must manage all their income, both market and government, to account for weather and price fluctuations.

In short, Freedom to Farm authorizes market-transition payments to farmers — as opposed to the current program’s deficiency payments — to help them adjust as U.S. agriculture moves toward a market-driven economy.

Not surprisingly, critics have objected to the fixed-payment aspect of this farm bill. Supporters of the status quo have argued alternatively that the proposal is inadequate in protecting farmers when prices are low and too generous when prices are high. This criticism ignores the fact that farm prices rarely correlate with farm income. In fact, high prices often are the result of poor production and lower overall grain receipts. High prices do nothing for farmers if they do not have crops to sell. Instead of getting help to farmers when they needed it most, the old system cut off their deficiency payments and even demanded that they repay advance payments. This convoluted feature of the old program often led Congress to pass emergency disaster-assistance bills when droughts, floods or infestation took the crop.

Other critics argue that the reforms do not go far enough. To these folks I would point out that annual expenditures for commodity and export programs under Freedom to Farm will be 67 percent less than under the 1985 farm bill and 37 percent less than the 1990 farm bill. For the first time, farm spending is capped so that programs cannot be a runaway entitlement. The 1985 farm bill was supposed to cost $55 billion over five years; instead it cost nearly $80 billion. The 1990 farm bill was supposed to cost about $41 billion; instead it cost $56 billion. Under this farm bill, expenditures will not exceed $47 billion over seven years. Furthermore, the program reduces the maximum allowable payment to individuals by 20 percent.

Eliminating all farm programs immediately, as some of the purists suggest, not only would lead to economic chaos in farm country but also would revive the political strength of those who would like to turn back the clock on the reforms we have made. Instead, the reform bill provides an assisted transition to the free market after 60 years of government interference.

Is the bill perfect? No, but few are. Many folks in Congress wanted further reforms in the federal peanut and sugar programs. Those issues had a through discussion and floor votes in the House and Senate. Both programs survived, but critics vowed to revisit them during the appropriations process.

What happens after seven years? No one can say for sure. There is nothing we can do in this Congress that will ensure or prohibit specific action by future Congresses. However, Freedom to Farm sets up a commission to monitor the transition and make recommendations about the appropriate role the federal government should play in the agricultural sector’s future.

American agriculture is at a crossroads. Freedom to Farm offers us an opportunity to strike out in a direction that at least holds the prospect of an assisted transition to the marketplace. To many U.S. farmers, the transition payments provided in the new law will be the margin of income that keeps them afloat long enough to experience the beloved free market. It seems the least we can do for the men and women who provide us with the best quality food at the lowest prices in the history of the world.

No: The new law gives away the farm to agribusiness at the expense of the small farmer.

In the next few years the recently enacted farm legislation will provide billions of dollars in windfall payments from the federal government to growers of wheat, rice, corn, cotton and a few other select crops. Make no mistake about it: The new law is a radical step in the wrong direction at a time of budget crisis.

The legislation primarily will benefit large agribusiness concerns that have grown accustomed to receiving irrigation subsidies, export incentives and market support. But from now on these businesses will receive government largess regardless of the market price for their produce or the amount of acreage they plant.

Most farmers do not receive and do not want crop subsidies. In California’s San Joaquin Valley where I farm, our plum and nectarine crops recently were reduced by rain and frost during bloom. The apricots never did bloom. Thousands of acres of trees that were pruned, fertilized, cultivated and irrigated in the valley will bear little, if any, fruit this year. But even when the orchards did set fruit during the last five years, we often have received less per box than we did 15 years ago in absolute dollars. Our quince trees just died from fire blight. Welcome to family farming in America.

The wineries have not paid profitable prices for Thompson seedless grapes since 1982. The check just came on the last third of our 1993 raisin crop — after nearly a three-year delay. For this reserve payment we received about $160 a ton for the dried fruit, or about 8 cents a pound on about 40 tons of raisins. On the whole raisin crop, we did not average $900 a ton, far less than the $1,300 a ton we customarily received during the seventies — and costs have doubled or tripled since then. We are waiting for final payments on our 1994 and 1995 raisins. The raisin cooperative still owes families in our area thousands of dollars of retained capital from the seventies and eighties crops, moneys on which they paid taxes but never received. Some of our 100-year-old vines on this 120-acre farm now lie uprooted; their diminished harvests no longer are competitive at market prices that do not cover the cost of production. Half our persimmon crop this fall rotted on the tree for lack of a break-even return. Yet these are our losses alone — not yours, much less the government’s.

And 1996 is not an especially unusual year in agriculture, where small growers produce food in a world of rapidly changing domestic and international markets, hostile federal policy, subsidized foreign produce, free but not fair trade, changing dietary habits and unpredictable weather that can create surfeit or scarcity in a matter of hours, bringing ruin or profit without warning. And is this struggle not as it should be for the farmer? If the independent farmer believes that he still can hold onto his ancestors’ ground (a big if these days), then let him accept nature’s challenge and the reality that the world of commerce never was and is not completely fair. No true farmer asks the government for “freedom,” because he knows he already is free to succeed or fail on his own.

But again, this conservative agrarian culture, itself part of a noble tradition of rugged individualism in America, is a world away from the 1996 “Freedom to Farm” bill that has just passed Congress. Large, politically connected growers of a few targeted crops now will be paid $36 billion regardless of the acreage they plant; subsidies will flow irrespective of market prices (which at present are high). There is no ironclad guarantee that after seven years any assistance programs will be phased out as promised. Whatever lectures we are given about the uncertainty of future crop years, or assurances that many of these corporations are family operated, or promises that these subsidies will end at some future date, in the here and now this law simply means: Plant all you want of what you want and the government will guarantee you a profit on top of your profit and even call that gift freedom.

Here in California the beneficiaries of these payments are rarely yeomen. Nearly all are corporate farmers — about 16,000 individuals — who grow cotton, rice, wheat and corn. They are chiefly the prior collectors of federally subsidized water and some $2.4 billion in government largess between 1985 and 1994. When the government checks are mailed each year, we in Fresno County witness the strange ritual of federal money delivered to the most exclusive zip code in suburban Fresno — apparently the “farmhouses” of these rugged individuals. No wonder one farm agent is quoted in the local paper about the recipients of this federal money: “The payouts are high enough that it’s going to tickle their fancy.”

I wonder how much further America wishes to tax and spend to profit these wealthy growers? They are not the poor or the needy. Many do not even live on the land they own or do their own work. Nationwide, I percent of American farmers account for more than 50 percent of farm income while 88 percent of agrarians earn less than $20,000. Five percent of American landowners own 75 percent of our land; the bottom 78 percent own just 3 percent. In California, 5 percent of farm owners possess more than 80 percent of all the land in production. In other words, Congress is not giving entitlements to large corporate agribusinessmen because it is worried that they are a vanishing species.

Worse still, with the elimination of target prices and set-aside programs, federal farm policy abandons the Depression-era rationale that our nation’s growers needed help when prices were low and harvests unwanted. In short, the old pretense of a moral foundation to farm legislation is gone and a host of ethical paradoxes has arisen.

First, are we to assume that the market prices of subsidized produce are low, while other crops without federal support are profitable? No. Here in California the opposite more often is true. Grape, raisin and tree-fruit growers, for example, receive no direct government support — even though their returns in recent years have not covered production costs. Cotton, rice and wheat producers, in contrast, will be paid on top of their market profits.

Second, while recent reforms for government entitlements in health care and welfare mandate more government restrictions, just the opposite evolutionary trend is true of this farm legislation. For agribusinesses, the government abolishes nearly all regulations on how our government assistance is received and spent.

Third, the promise to end the program in seven years, far from being a “golden handshake” or a transition process to the free market, is itself an embarrassing admission of the very amorality of this legislation. The public is asked to stomach giving billions to the already prosperous on the promise it shall not go on forever. If the legislation aims to help those in agriculture who deserve it, why should it cease in seven years? If it does not, end it now.

Fourth, the “conservative” supporters of the farm bill have earned the wages of hypocrisy. A welfare recipient who votes for Democrats, on the other hand, can at least make the case for a handout on two grounds: He has little capital and is an honest believer in big, intrusive and paternal government. In contrast, the conservative agribusinessman who takes government money even as he profits from his cotton or rice suffers the charge of both greed and hypocrisy: He receives charity on top of market profits — even as he professes not to believe in government handouts for others.

A word of warning to both parties in Washington: The American people cannot be fooled all the time. No longer in times of budgetary crisis can the Republican reformist Congress decry entitlements, curtail welfare subsidies for the inner city and then tax their constituents to give $36 billion to America’s agribusiness owners without reference to either planting or market decisions. Here in California many of these same recipients complain about the Endangered Species Act and decry the government assault on property rights. Yet is their agricultural agenda really conservative? If so, they are capitalists of a most unusual sort who apparently neither believe in nor trust the role of the market and who take outright gifts from the very government they criticize.

Nor should we believe the Democrats’ avowal that these Depression-era programs were designed to keep farmers on the land. They were not. The rise in government payments through Democratic-sponsored legislation has hastened the destruction of the American yeoman. Federal water, federal crop subsidies and federal tax policies enjoyed by corporate agribusiness were, for the most part, designed or condoned by the Democrats. It matters little that the Democrats and President Clinton have adorned this bill with nutritional and environmental programs, all the while arguing that it aims to assist family farmers. It does none of that. It was not meant to. It never will.

The Orwellian-titled Freedom to Farm act is the work of politicians of both parties solely to reward those corporations making fat contributions to political campaigns. Our local congressman, Rep. Calvin Dooley, a Democrat, to his credit calls this bill “horrible policy” but, as a large grower himself of subsidized produce, will he refuse federal entitlements? I think not — he has not done so in the immediate past. No wonder he sighs, “It’s going to be tough for anyone in farming not to sign up for the program.” Another farmer of these environs agrees and is similarly quoted in our local paper: “I think many of us are somewhat leery of the connotations of this program. If I was a consumer or taxpayer, I’d be somewhat concerned.” Why somewhat?

If Democrats desire to save family farming and Republicans really want to balance the federal budget, let them join to abolish immediately all federal farm subsidies and apply the allotted $36 billion to deficit reduction. The remaining family farmers would welcome the challenge to see who is and who is not, in fact, the more efficient producer in the freedom of the marketplace.

The more federal dollars have been spent on subsidies, the fewer has become the number of American family farmers. With legislation like Freedom to Farm is it a wonder that neither party has a real understanding of the dramatic rise of reactionary populism, driven by a frustrated public’s mutual distrust of both Washington and corporate America? These latter-day populists realize that neither Democrats nor Republicans do what they say or say what they do: Republicans really do tax and spend and Democrats, whatever their denials, do favor the rich. Leaders of both parties seemingly are more like each other than either is like us.


©1996 Victor Davis Hanson

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