AFF Sentinel Vol.5#20-Circling

Like college kids who refused to get serious about a big paper until the last weekend, the Farm Bill conferees are making more progress after the bill was overdue than they did in the years they had to craft it. The difference is, the college students do have to turn their papers in, while Congress just keeps extending their own deadline.

More fascinating is the circling back to subsidy reform concepts hotly debated on the floor of both Houses but left out of the versions passed. Not enough Congressmen wanted to be the ones eliminating or cutting back on crop subsidies so they largely ignored them. Now, President Bush is holding their feet to the fire on subsidy reform he's called for all along.

For free marketers, direct payment subsidies to producers -- regardless of commodity prices - is something that needs cutting or phasing out. It is against free market principles and it often creates oversupply and low prices for grain farmers. Even livestock producers, while often benefiting from low feed costs in the past, frequently battled meat oversupplies and lower prices because of lower feed costs. Even ethanol aside, world demand alone will provide the opportunity for expanded crop production at profitable prices in the foreseeable future.

With the President hinting veto and food and fuel prices rising, the conferees find themselves discussing several approaches to some reform, either by cutting off subsidies to farmers above certain income levels or by eliminating subsidies to people with substantial off-farm income. But southern cotton and rice farmers, often the receivers of large subsidies, are not happy with the farm income discussions.

Media and political attention has been focused on a small percentage of celebrities or large farmers who have received subsidies. That was the sum and substance of much of the Congressional floor debate. Even President Bush jumped on that bandwagon this week, talking about multimillionaire farmers getting subsidies when taxpayers are hurting from higher food prices. That obscures the real issue: do we want taxpayers to subsidize farmers or not? Who gets the subsidies - playing class warfare one pundit put it - is beside the point.

Paying people not to raise crops when supplies are short and prices high is the other spin in Washington. They're coming at the Conservation Reserve -- really designed to prevent reoccurrences of the Dust Bowl days while simultaneously taking land out of production and lessen supply surpluses - from a different angle.

There really are two questions here. One, is conservation the proper use of government authority and taxpayer's money or should that be up to private companies and individuals? Could we see the Dust Bowl days again if government does not make sure we have substantial green belts in the country? Is that different than holding land in national parks? Will the decade-long drought predicted for the Southwest test our conservation preparation as it is?

The second question is whether taxpayer money should be used to cut commodity production?

With the economy soft and expenses most taxpayers feel, like fuel and food, on politician's minds, a new uncomfortable comparison is being discussed in Washington. Trying to stop the expansion of government funded health insurance, President Bush last year twice vetoed bills that would have extended government children's health care coverage (SCHIP) to families in the $80,000/year income range.

Yet Politico.com's David Rogers pointed out that the White House is proposing cutting off farm subsidies to anyone with an adjusted gross income (AGI) after deductions over $500,000, ("Farm Bill Must Clear Income Hurdle," politico.com, 05/01/08). Conferees, while moving that direction on off-farm individuals, discussed a plan that would not begin phasing out direct payments to farmers until AGI of $950,000. Please note, while they term them "non- farm" taxpayers, we used the term off-farm. People who invest in farms, especially family farm members, should not be treated differently from anyone investing in oil, telephone companies or auto companies.

So while Washington wrestles with voter food price discontent, large-scale cotton and rice producer fears and the SCHIP vetoes, farmers get over $5 billion in direct payments, regardless of market prices. That's not a "safety net."

Votes will be tallied and considered. Rogers noted that of two million taxpayers who filed a Schedule F reporting farm income or loss, only 71,800 or 3.6 percent exceeded the $200,000 AGI the White House proposed as a limit last year.

Look for more extensions but more shifting and, maybe, reform.

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