Lost Opportunity for Farm Subsidy Reform
January 3, 2008
by: John Frydenlund

Government WasteWatch, Winter, 2007

When it comes to reforming antiquated farm programs, 2007 may go down in history as the year that could have been. Although the counterproductive farm policies that have plagued this country since the Great Depression cried out for significant change in the 2007 Farm Bill, the U.S. Congress completely failed to deliver any reform.  Incredibly, it is even worse than the farm bill passed in 2002.

Advocates of change, including Citizens Against Government Waste (CAGW), thought that taxpayers deserved a break from the excessively high cost of farm subsidies, particularly over the last decade. No time was better for reform than now, when agricultural income is at record highs and farm commodity prices are soaring and taxpayers have been paying an average of $20 billion annually since the mid-1990s for the most expensive farm subsidy payments in history.

These costs are particularly indefensible since the myths used to justify the continuation of farm subsidies - that they are needed to preserve small family farmers - are laughably far from the truth. The arguments that have been used to perpetuate these policies never held much water, but they are less valid now than they ever were.

The truth is that farm subsidies don’t help small farmers, but instead help the wealthiest farmers get richer, enabling them to expand their operations and gobble up more farmland, and turning the small towns of rural America into ghost towns. Subsidies hurt poor people in America and poor farmers in developing nations, all at an exceedingly high cost to U.S. taxpayers.

Currently, 60 percent of farms either receive less than $2,000 annually or no subsidies at all. In 2003, the top 10 percent of farm subsidy recipients collected 72 percent of total subsidies and the top 5 percent collected 55 percent of payments.

To make matters worse, the 2007 Farm Bill passed by Congress even increased subsidies for most crops, in addition to creating a costly permanent disaster assistance program. Efforts to reform the farm bill were thwarted in both the House and the Senate.

In the House, the major reform effort was led by Representatives Ron Kind (D-Wis.) and Jeff Flake (R-Ariz.). They offered an amendment that would have replaced depression-era price guarantees with a modern revenue-based safety net. This was the only reform amendment allowed to be offered under the closed rule orchestrated by the Democratic leadership of the House, particularly Speaker Nancy Pelosi (D-Calif.).

In collusion with the chairman of the House Agriculture Committee, Representative Collin Peterson (D-Minn.), Speaker Pelosi rammed a farm bill through the House last summer that killed any prospects for reform. Misleadingly, at the same time she was pulling out all the stops to kill reform, she claimed that the House-passed farm bill represented the greatest reform in history.

Before the farm bill began moving through the committee and onto the floor, the Speaker had indicated that the farm bill should provide payment limitations in order to mollify reform advocates on the House floor. The House-passed farm bill reduced the threshold from $2.5 million to $1 million in annual adjusted gross income (AGI) at which farmers would be barred from receiving subsidy payments and those earning between $500,000 and $1 million would lose eligibility if less than 67 percent of their income came from farming. It also purportedly eliminated the three-entity rule, which allows farmers to collect subsidies on up to three properties.

At the same time, however, the bill increased the cap on direct payments from $40,000 to $60,000 and eliminated the limits on marketing loan payments and loan deficiency payments. Without such limits, there is no need to create three entities. The $1 million AGI limit will impact only one-tenth of 1 percent of subsidy recipients. Instead of being the greatest reform bill in history, it was the greatest sham in history.

Although consideration of the farm bill in the Senate was delayed for many months, when the bill hit the floor in December, reform efforts met with a similar fate. The most comprehensive reform amendment was offered by Senators Frank Lautenberg (D-N.J.) and Richard Lugar (R-Ind.). It would have replaced Depression-era farm subsidy programs with an insurance program that would enable farmers to mitigate weather and market risks. It would have provided a safety net for farmers when they need it instead of simply doling out excessive payments to the wealthiest farmers while saving taxpayers $4 billion over 10 years. The amendment was defeated by vote of 37-58.

Other less-sweeping attempts to reform farm subsidy programs were aimed at imposing some sort of “means-testing” and real limitation of excessive payments. The Bush administration had proposed that payments should be eliminated for those individuals with an AGI of greater than $200,000. That proposal was not even considered by the Senate. An amendment was offered that would have set the AGI threshold at $750,000. Also, an amendment was offered to establish an enforceable payment limit of $250,000. Even if the Senate had accepted these payment limitation and means-testing reforms, a farm family making $749,999 a year could still receive a $250,000 handout from the taxpayers.

These amendments were expected to have significant support in the Senate, but Senator Blanche Lincoln (D-Ark.) threatened to filibuster the bill if any reform amendments were adopted. There are 26 farms in her state that received more than $250,000 in payments in 2005. Because the Democratic leadership of the Senate did not want to be blamed for further delay of the farm bill, they orchestrated a change in the rules requiring 60 votes for those amendments, rather than a simple majority to pass. This rules change required the unanimous consent of the Senate. The Senate Republican leadership went along with this because they didn’t want to take the blame for postponing passage of the farm bill either.

Had just one of the supposed reform advocates been willing to display the courage to object to this sham, at least some minimal reform would have been included in the farm bill. But, since no one stood up, while both amendments received the support of a majority of the Senators voting, they were defeated as they fell short of the manufactured 60-vote requirement.

There is only one hope left for taxpayers: the president has the backbone to veto the farm bill. If he did so, there is a chance that there would be enough votes in either the House or the Senate to sustain a veto, which would force Congress back to the drawing board. It is hard to believe that they could do worse the second time around. Unfortunately, there is virtually no reason to believe this lame duck president will have the courage to veto a farm bill, leaving taxpayers to face another six years of excessive costs and obsolete, ineffective programs.