Pundits claim that partisanship is creating gridlock in Washington. But in the Senate, the two parties still know how to make bipartisan deals on big government subsidy legislation. That chamber may move ahead with a massive agriculture bill that would spend almost $1 trillion over the next decade. Supporters are calling it a "reform" bill because it would trim a measly two percent from projected spending over the period.
Most of the bill's spending is for food programs, such as food stamps. Those subsidies ought to be cut, but the farm subsidy spending in the bill is even more absurd. Farm subsidies distort agriculture, damage the environment, and harm our international trade relations.
Worst of all, farm subsidies are welfare for the well-to-do. Farm businesses have thrived in recent years due to high crop prices. In 2011 real farm incomes were the third highest in the last 50 years. And Census data for 2010 show that average farm household income was $84,400, or 25 percent higher than the $67,530 average of all U.S. households. Farmers simply don't need tens of billions of dollars a year of taxpayer hand-outs.
Despite what politicians say, most farm subsidies don't go to small family farms. The largest 10 percent of recipients receive more than two-thirds of all farm subsidies, according to the Environmental Working Group. Numerous large corporations and even some wealthy celebrities receive farm subsidies because they are the owners of farmland.
The politics of farm subsidies are laced with hypocrisy. The Democrats claim to be concerned about the disparity between the haves and have-nots and the Republicans argue that the welfare state has grown too large. Yet every five years or so, Congress passes a giant farm subsidy bill that expands the lavish welfare system enjoyed by well-off farm businesses.
The big question this year is whether the more conservative House will go along with the taxpayer-funded farm pig out? Thus far, Speaker John Boehner (R-Ohio) and his lieutenants have been silent on the Senate version of the Farm bill. That's curious because the House leadership has made its intentions clear on other major bills that the Senate wants to pass before the November elections. President Obama says that he supports the Senate Farm Bill.
Perhaps the House leadership is hoping that the Senate bill goes down in flames before they have to make any decisions on it. After all, House Republicans that favor major cuts to farm subsidies will face internal opposition. The House Agriculture Committee chairman, for example, is Rep. Frank Lucas of Oklahoma, who is a National Association of Wheat Growers "Wheat Champion." For the passage of the last major Farm Bill in 2008, 100 House Republicans helped the Democrats override President Bush's veto of that spending monstrosity.
This year, Farm Bill supporters are claiming that their bill represents major "reform." It is true that the Senate bill would end some types of subsidies, such as "direct payments." However, it would replace them with new subsidies, such as a "shallow loss" program to deliver more aid if farm revenues fell below the high levels of recent years. This new program could end up costing as much or more than direct payments, and may cause more distortions to agricultural markets.
Real reform would entail abolishing farm subsidy programs and not replacing them with anything—except with the natural entrepreneurial skills of farm businesses. That's what happened in New Zealand in the 1980s, and it worked. New Zealand abolished virtually all of its farm subsidies, and after an adjustment period, farm productivity, profitability, and output from that country's agriculture industry rose substantially. New Zealand farmers cut costs, diversified their land use, sought nonfarm income, and developed new markets.
The Senate needs to go back to the drawing board with its legislation. With today's massive budget deficits, we simply cannot afford to continue handing out tens of billions of dollars of subsidies to wealthy farm businesses anymore. Let's stop coddling American farmers, and allow them to compete and prosper the unsubsidized Kiwi way.