Commentary

Real Emergencies and Farm “Emergencies”

The major farm bill pending in Congress is providing an interesting battleground for post-September 11 budget policy. This year’s budget resolution allowed for $74 billion of increased farm subsidies in the bill over ten years. Will Congress follow through with such a huge increase in pork, or will it defy the farm lobby and shift money to higher priority areas, such as national defense?

In early September, the economic slowdown and falling budget surpluses were causing some farm subsidy supporters to have second thoughts about expanding already record high levels of farm payments. House Agriculture Committee ranking member, Charles Stenholm (D-Tex.), called his committee’s big-spending version of the farm bill “dead.”

That all changed after 9/11. Now, some members of Congress are responding to the new spending fervor on Capitol Hill and suggesting that farm subsidies are vital. After the attack, Stenholm said, “the need for a new agriculture policy … may have been enhanced.” Agriculture Committee member Mike Pence (R-Ind.) noted, “What happened makes the [farm] bill more important.”

The farm subsidy habit is hard to break. Back in July, Congress passed its fourth “emergency” farm-spending bill in as many years, providing a total of $30 billion in extra subsidies beyond the level agreed to in the 1996 “freedom to farm” reform law. These bills have pushed farm subsidies up to more than $20 billion per year the past three years from an average $9 billion per year in the early 1990s. Farm subsidy supporters are now pushing to permanently enshrine such high emergency level subsidies as they work to reauthorize the 1996 law.

The reality is that farming is not in an emergency, and subsidies simply enhance middle class farm lifestyles at the taxpayers’ expense. The most recent figures from the U.S. Department of Agriculture (USDA) show that the average farm household income was $64,347 in 1999 — 17 percent higher than the average U.S. household income of $54,842. Commercial farms, which get about half of all farm subsidies, had an average household income of $135,397 and received an average subsidy of $41,218.

Unlike the airlines, which are losing millions or dollars, or the high-tech industry, which is suffering from hundreds of bankruptcies, the nation’s farms have been financially stable in recent years. USDA figures show that less than 3 percent of farms go out of business each year. By contrast, the annual failure rate of non-farm businesses averages more than 13 percent. And USDA figures show that just 5 percent of farms are in a “vulnerable” financial situation.

While farms face financial challenges from the swings in prices that occur in commodity markets, most farm households earn the bulk of their income from non-farm sources. Of the $64,347 in average farm household income, $57,988 came from off-farm sources in 1999, thus providing a great deal of stability for farm households. In fact, USDA figures show that only 38 percent of farm households consider farming to be their primary occupation.

Nonetheless, Congress has been using “emergency” budget procedures for the past four years to pass huge farm subsidy bills. The vast bulk of this money was not aimed at legitimate farm emergencies such as droughts, but simply went to boost farm incomes. With defense and national security budget demands rising, these giveaways can’t continue. The farm pork barrel should be the first place Congress goes to find budget savings to fund these new priorities.

Some politicians do seem to appreciate the need for new trade-offs in the budget. The ranking member of the Senate Agriculture Committee, Richard Lugar (R-Ind.), called the House’s bid to rush through the new farm bill “irresponsible” in the wake of the current national security debate. The administration has yet to let Congress know whether it supports spending reform or business as usual at the farm subsidy trough. Rather than using recent tragic events as an excuse to ram through higher farm subsidies, the federal government should phase out subsidies to free up money for higher national security priorities.

Chris Edwards is director of fiscal policy studies and Tad DeHaven is a fiscal policy research assistant at the Cato Institute.