Commentary

Congress’ Compromise on Farm Bill Falls Short

The current farm law expires on the Ides of March, and Congress has gridlocked over what should replace it. Lawmakers had hoped to finalize a deal on a budget for farm programs by last week, but terms are still uncertain, and none of the proposals would bring significant relief for taxpayers and consumers. No matter what happens, American taxpayers will still be expected to pay subsidies to people who earn more than 30 times the median individual income.

After consultation with the administration, the House Agriculture Committee proposed a bill recently that would spend $6 billion more over 10 years than a simple extension of current policy. That’s a slight savings from the House’s original proposal, which the president had threatened to veto. The agreement tightens eligibility requirements for farmers who receive subsidies, which would mean no payouts to farmers earning an adjusted gross income of more than $900,000 per year, or $500,000 if less than two-thirds of the income is derived from farming.

Congress can always find ways around proposed reforms, and has a habit of it.”

Those changes are welcome, but nowhere near the administration’s initial demand of a $200,000 cap. According to the U.S. Department of Agriculture, in 2005, farms with average household incomes of $200,000 per year accounted for 9 percent of all farms but received 54 percent of government payments.

Similarly, although the new House proposal makes no changes to programs that increase subsidies when prices fall, it proposes to pay for extra spending on conservation and nutrition programs by suspending payments that go to farmers regardless of prices or production. Suspending payments for one year, that is: 2017. But these subsidies - called direct payments - are the least senseless of the commodity programs, and until recently, they were the administration’s preferred method of supporting farmers’ incomes. It’s hard to see what the Bush team got for negotiating them away. How likely is it that a proposed cut in subsidies almost 10 years from now will stick? Congress can always find ways around proposed reforms, and has a habit of it.

For its part, the Senate has thrown a wrench in the House deal with the administration by insisting on programs costing an extra $12.3 billion over 10 years. Senators insist that they need more money for their pet projects if they are to avoid cutting into commodity subsidies (God forbid). One of those pet projects has become a major sticking point between the House and the Senate: a disaster assistance trust fund costing $5 billion over 10 years.

Senate Agriculture Committee members eager to find funds for extra goodies agreed to demands by powerful Senators Kent Conrad (D-N. D.), the chair of the Senate Budget Committee, and Max Baucus (D-Mont.), chair of the Senate Finance Committee, to establish the trust. Not by accident, the Environmental Working Group estimates that farmers from North Dakota and Montana, along with Kansas and Iowa, would collect more than half of the aid it would disburse. In any event, the Bush administration has rejected the Senate proposal as too expensive.

With the deadline looming, House and Senate negotiators seem to be closing in on a final compromise of $9 billion over the baseline.

In other words, the only possible compromise would cost taxpayers as much as two nuclear aircraft carriers in a year when the larger economy is slowing, and USDA forecasts that net farm income will amount to a record $92.3 billion.

It’s unclear how the congressional wranglings will work out, but one thing is for sure: The administration was wrong to agree to the House’s new deal, and it shouldn’t go along with the $9 billion compromise.

While marginally better than last year’s Senate farm bill, this is nowhere near the sort of change America needs. If Presidential Bush were to veto Congress’ compromise, he could put Congress in the uncomfortable position of defending its desire to give big payouts to the wealthy.

Sallie James is a trade policy analyst at the Cato Institute.