Tag: usda

Senate Spares Rural Development Subsidies

An amendment to a Senate appropriations bill introduced by Sen. Tom Coburn (R-OK) that would have reduced funding for rural development subsidies at the Department of Agriculture by $1 billion was easily voted down today. Only 13 Republicans voted to cut the program. Thirty-two Republicans joined all Democrats in voting to spare it, including minority leader Mitch McConnell (R-KY), ranking budget committee member Jeff Sessions (R-AL), and tea party favorite Marco Rubio (R-FL).

This was a business-as-usual vote that will receive virtually no media attention. However, it is a vote that symbolizes just how unserious most policymakers are when it comes to making specific spending cuts. That’s to be expected with the Democrats. On the other hand, Republicans generally talk a good game about the need to cut spending and they rarely miss an opportunity to criticize the Obama administration for its reckless profligacy. Republicans instead fall back on their support of a Balanced Budget Amendment and other reforms like biennial budgeting.

I think most Republicans are in favor of a BBA because they believe it gets them off the hook of having to name exactly what they’d cut. There are several reasons why Republican policymakers won’t get specific: 1) they really don’t want to cut spending; 2) they’re afraid of cheesing off special interests and constituents who benefit from government programs; 3) they’re more concerned with being in power and getting reelected; 4) they’re just plain ignorant of, or disinterested in, the particulars of government programs.

As for biennial budgeting, Republicans would have us believe that appropriating money every other year will give policymakers more time to conduct oversight of government programs. I think it’s another cop-out. Coburn’s office put out plenty of information on the problems associated with USDA rural development subsidies (see here). A Cato essay on rural development subsidies provides more information, including findings from the Government Accountability Office that are readily available to policymakers.

(Note: I worked for both Jeff Sessions and Tom Coburn.)

The Ratchet Effect, Agriculture Edition

Between the lines of a front-page Wall Street Journal article about farm subsidies [$] is an instructive example of the ratchet effect:

Land prices are way up and so are bank deposits, as high corn and soybean prices mean local farmers are making the most money in their lives…An exception to the boom is the local office of the U.S. Agriculture Department, the dispensary of federal payments to farmers from an array of arcane programs with names like ‘loan deficiency’ and ‘milk income loss.’ On a recent afternoon, the parking lot in front of the squat brick building behind a Chinese restaurant was nearly empty.

The reason: Payments from America’s primary farm-subsidy program, dating from the 1930s, have stopped here. Grain prices are far too high to trigger payouts under the program’s ‘price support’ formula. The market, in other words, has done what decades of political wrangling couldn’t: slash farm subsidies.

Though the subsidy payments always ebbed and flowed with crop prices, many economists are convinced that what is happening now is different. A fundamental upward shift in crop prices is creating the real possibility that Midwestern farmers won’t ever again qualify for the primary form of farm subsidy.

There remain other types of subsidies, which continue to pay out because they aren’t linked to market prices. But high prices are undermining political support for those programs…

Well, there’s some good news. Maybe we can start downsizing the USDA, including by closing some of those local offices? Not so fast. The last two paragraphs of the article (on page A10) leave us with this cheery thought [emphasis added]:

Meanwhile, workers in the USDA’s county offices, seeing the handwriting on the wall, are campaigning for new things to do, now that there aren’t any price-support payments to dispense. One idea is to give them responsibility for federally subsidized crop insurance, currently handled by private companies.

Heck, why not? Heaven knows the federal government is flush with cash.

Ryan’s Plan for Farm Subsidies

I thought I would add some detail to the posts my colleagues have already written on Congressman Paul Ryan’s (R-Wisc.) 2012 budget resolution.

Interestingly – and, I would argue, appropriately – the agriculture stuff appears in the “Ending Corporate Welfare” section of the plan, most of  it on page 36. After outlining the ways that farming America is doing well, Ryan’s plan would cut almost $30 billion (or 20 percent of projected outlays) over the next 10 years from farm subsidies (direct payments, currently costing about $5 billion per year) and crop insurance subsidies. Cuts will also reportedly fall on nutrition and conservation programs, but I will let my colleagues weigh in on those.

The focus on crop insurance is encouraging, because crop insurance is an increasingly important part of U.S. farm policy, especially in recent years when commodity prices have been high: high prices reduce the amount of money taxpayers spend on commodity payments, but increases crop insurance premiums, which we all subsidize. They now cost about $6 billion, or more than commodity payments.  And, as the blueprint points out, surely farmers “should assume the same kind of responsibility for assuming risk that other businesses do.” Well played, Congressman.

One point on where the cuts fall on the commodity payments side: As a free-marketeer, I acknowledge that direct payments are less market-distorting than price-linked payments, and they are less (although not fully) questionable under World Trade Organization rules.  If we are going to shovel money to farmers, in other words, sending unconditional welfare checks is the least distorting way to do it. But there is no money to raid from the price-linked programs because of high prices, so if savings are to be found, we need to raid the direct payment cookie jar. And, really, with $7 corn and red ink from here to eternity, surely this is an ideal time to wean farmers off of the government teat.

Reactions from the farmers’ friends, by the way? Predictable. The Chairman of the House Agriculture Committee dismissed the blueprint’s plans for agriculture as “simply suggestions” and that the Agriculture Committee will write the 2012 Farm Bill, thankyouverymuch. (Ryan himself said that the cuts should start in 2012, implying that the Farm Bill schedule should go ahead as planned).

The National Farmers Union spoke the usual blather about Americans spending less of their income on food than in other nations (perhaps because we are, you know, richer?) for the “safest, most abundant, most affordable food supply in the world,” which has been the favorite line of the farm lobby for years now.  The Corn Growers and the National Cotton Council joined them in trotting out variations of the new favorite talking point, about how agriculture has already taken a hit from cuts to crop insurance and that cuts to agriculture’s budget should be no larger than cuts to other areas. 

The blueprint is not my ideal plan, to be sure. That plan would have a line in it about removing the federal government once and for all from all aspects of the agricultural market, including by disbanding the U.S. Department of Agriculture.  It would at least include something about disbanding the production- and price-determined subsidies, so we’re not all on the hook again if prices fall. But it is a good start.

Ezra Klein vs. the Secretary of Agriculture

It seems that Secretary of Agriculture Tom Vilsack took exception to Ezra Klein’s recent blog post on “Why we still need cities”. Someone at the USDA emailed Ezra, outlining the Secretary’s concerns and to set up a time for the two of them to talk. Ezra took notes during their discussion and, yesterday, posted a “lightly edited” transcript of their conversation.

The Secretary had plenty of the standard talking points on hand – and some new ones, like the fact that we should support farm subsidies because rural America has good values and farmers don’t feel appreciated – but Ezra expertly took him to task, deftly pushing back on the non-sequiturs, questionable assumptions and enduring myths about the need for farm subsidies.  He even gets in a worthy swipe at sugar tariffs and the “need” to produce all our food in America. Read the entire thing; it is worth your time.

(HT: Justin Logan)

The Real Scandal of Farm Subsidies

When the Washington Post published a story in 2007 about how dead farmers had received farm subsidies to the tune of over $1bn, most people were horrified (even “farm subsidy moderate” Rand Paul thought they should go!). Although the article made clear that “most estates are allowed to collect farm payments for up to two years after an owner’s death,” and that the payments weren’t necessarily fraudulent, outrage ensued.

But a follow-up investigation by the USDA has found that all but about $1 million of the payments were completely above board. From the Associated Press:

A 2007 report that the federal government had paid $1.1 billion in subsidies to dead farmers sparked an outcry and has been frequently cited by critics who considered the payments a blatant example of wasteful spending. But a follow-up that found no fraud and determined nearly all the subsidies paid on behalf of dead farmers in recent years were proper has received little attention.

According to the U.S. Department of Agriculture’s Farm Service Agency, just a little over $1 million out of the billions of dollars paid in subsidies in 2009 went to estates or business entities that weren’t entitled to them.

Very little money is going to individuals who have not earned that money. Very little is being paid in error because a farmer has passed away,” FSA Administrator Jonathan Coppess told The Associated Press. [emphasis mine]

Don’t you just love how Mr Coppess uses the word “earned” there?

That’s the real scandal of farm subsidies, readers. Not that they are fraudulent (although that is of course an outrage), but that they are, for the most part, perfectly legal.

Why Government Should Not Give Nutrition Advice

There are plenty of reasons why politicians and government bureaucrats have no business telling you what you should eat.  The Constitution grants the federal government no authority to do so, for one thing.  Even if it did, it is simply wrong to force people to pay taxes so that other people can hand down nutritional advice or – God forbid – mandates.

A terrific article by Jane Black in The Washington Post illustrates why, furthermore, the government’s advice isn’t likely to be very good:

[H]istorically, the government has shied away from offering controversial advice. And with food, everything is controversial: A boost for one type of food in the guidelines can be viewed as a threat by providers of competing products. The result, critics say, is a nutritional education system so politically influenced that it is ineffective.

This year’s process appears to be no exception. In public comments, the meat lobby has opposed strict warnings on sodium that could cast a negative light on lunch meats. The milk lobby has expressed concerns about warnings to cut back on added sugars, lest chocolate- and strawberry-flavored milks fall from favor. Several members of the Massachusetts congressional delegation also weighed in against added-sugar restrictions in defense of the cranberry…

In 1977, a Senate select committee led by Sen. George McGovern (D-S.D.) was forced to beat a hasty retreat after it initially recommended that Americans could cut their intake of saturated fat by reducing their consumption of red meat and dairy products. Its revised guidelines suggested choosing “meat, poultry and fish that will reduce saturated-fat intake.”

McGovern, whose constituents included many cattle ranchers, lost his seat in 1980. Since then, in case after case, the guidelines have refrained from suggesting that Americans eat less of just about anything.

Public health advocates say that kind of vacuum is precisely the problem: By avoiding blunt messages about what not to eat, the government has spoken in a way that baffles consumers.

“The only time they talk about food is if it’s an ‘eat more’ message,” said Marion Nestle, a professor of nutrition at New York University and a longtime critic of the food industry. “If it’s a question of eating less, then they talk about nutrients.”…

[A]s in the past, translating scientific data into clear and useful recommendations poses political pitfalls. The advisory committee’s emphasis on a “plant-based” diet, for example, has caused much consternation among the powerful egg and meat lobbies who say the term might be misunderstood as advocating a vegetarian diet.

This problem trips up all big-government schemes.  Right-wing and left-wing statists think they have a terrific idea: give the government power to do this or that, and Experts will use that power to improve mankind.  But then the people with a financial stake get involved, and the effort ends up serving them more than mankind.  See also health care, national defense, etc..

Food Stamps = Economic Driver?

It’s become standard fare for senior government leaders to declare that any and all subsidies are good for economic growth. Two weeks ago it was the Economic Development Administration’s John Fernandez. This week it’s USDA Secretary Tom Vilsack in a speech to the U.S. Conference of Mayors.

From GovExec.com:

In his speech, Vilsack called the increase in supplemental nutrition assistance program benefits “an economic driver” that helps truckers, grocery stores and farmers. Those benefits, which used to be known as food stamps, have gotten the most funding of any USDA program.

Vilsack also cited increased funding to bring high-speed Internet service to rural America; accelerated implementation of the energy title of the farm bill; and USDA investments in small, local processing and slaughtering plants for “creating a framework for a 21st century America.

Food stamps are an economic driver? Extending Vilsack’s logic, if the government put all citizens on food stamps it would create the economic equivalent of heaven on earth. There’s just one tiny problem: what the government gives with one hand it takes with the other.

Whether it is food stamps, high-speed internet, or slaughter houses, the government has to tax or borrow the resources to pay for these programs out of the private sector economy. One can debate the merits of these programs, but one cannot deny that they come at a cost. And with history and practical experience as a guide, it is clear that the private sector is more effective than the government when it comes to feeding the poor, fostering technology, and processing animals.

See here for information and essays on how to downsize the USDA.