Is it good policy to promote cronyism, waste, central planning, dependency and a dislike for markets?
Of course not. However, the House Agriculture Committee didn’t get the memo.
The committee’s farm bill is a cornucopia of subsidies. Reported out of committee on April 18, it is expected to come up for House floor debate in May. As written, the bill should embarrass anyone who claims to be a conservative, believes in free markets or simply hates cronyism.
Major changes are needed.
First, the bill shouldn’t make the out-of-control farm handout system even worse. For example, non-farmers shouldn’t receive farm subsidies. They do under existing law, and this new bill would exacerbate the problem by expanding the number of non-farmers who can receive subsidies.
The bill also games a major commodity program. The Price Loss Coverage program is supposed to trigger payments to farmers only if there are steep price drops. The committee bill would turn it into a program that effectively guarantees payments for most commodities.
Should taxpayers provide handouts to cotton growers in Brazil? This farm bill would create a significant risk that taxpayers would again have to pay Brazil for our trade-distorting cotton subsidies.
Second, House members need to improve the existing law.
The Trump administration’s budgets have twice proposed significant reforms to the federal crop insurance program. Its fiscal year 2019 budget, for example, calls on reducing the premium subsidy rate for crop insurance.
Currently, taxpayers pay almost two-thirds (on average, 62 percent) of those premiums; farmers cover the rest. Is it really too much to ask farmers to pay at least half of the cost of their crop insurance policies?
The federal sugar program would make a Soviet central planner blush. This program limits how much sugar can be sold. Not surprisingly, this drives up prices, costing consumers about $3.7 billion a year. The federal sugar program should be eliminated or at least reformed, including eliminating these supply controls.
In the last farm bill, the House overwhelmingly passed an amendment that would cap the costs of the two new major commodity programs, the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs.
Unfortunately, this cap was removed when the House and Senate negotiated the final farm bill. That egregious mistake is costing taxpayers about $13 billion, based on the higher-than-projected costs for the first five years of these programs. A similar mistake should not be made this time; a cap needs to become law.
Agricultural special interests talk about the importance of the federal crop insurance program and then demand even more money from additional programs. Is it too much to ask for producers to choose just one anti-market handout scheme? They should be required to select between participating in ARC/PLC or crop insurance. Producers would still get billions of dollars, but taxpayers wouldn’t be forced to cover the same losses through more than one program.
As lawmakers consider these and other reforms, they should bear in mind that current law — and the committee’s draft bill — channel billions of taxpayer dollars to a small number of producers growing a small number of commodities. This is not a safety net for farmers; it’s a massive crony scheme.
According to the Congressional Research Service, 94 percent of farm program support went to just six commodities: corn, cotton, peanuts, rice, soybeans and wheat. These commodities represent only 28 percent of agricultural production.
If the vast majority of commodities can be produced profitably, with little to no government assistance, then so can these favored crops.
This next House farm bill is a big deal. But unless lawmakers make some major — and long-overdue — changes, it will be yet another big win for cronyism and another big loss for taxpayers and consumers.
• Daren Bakst is the senior research fellow for agricultural policy for The Heritage Foundation’s Roe Institute for Economic Policy Studies.