Well-Fed Farm Bill Waddles On Despite Record Prices For Crops
Published May 7, 2008
If ever the time was ripe for reforming farm subsidies, this would be it.
Food prices are soaring, the farm economy is thriving and Washington faces large budget deficits.
But horse trading — both figuratively and literally — has largely preserved the $25 billion in direct payments aimed at giant farms.
The Senate-passed farm bill included a provision making it easier for horse breeders to qualify for the 15% long-term capital gains rate. Senate Minority Leader Mitch McConnell, R-Ky., and Sen. Blanche Lincoln, D-Ark., championed this tax break, along with faster depreciation for breeders.
Those provisions are small potatoes in the $300 billion farm bill, but they help explain why farm subsidies may survive in a hostile climate. Reform advocates now see a presidential veto as the only hope of altering the status quo.
Reformers Outmaneuvered
Last year, a broad coalition including small-government conservatives, environmental, anti-hunger and free-trade groups joined to fight for farm-bill reform. Since then, soaring food prices have strengthened the case for reform.
But with $300 billion at stake, farm-state lawmakers outmaneuvered the few reformers in Congress.
The bill now being finalized in a House-Senate conference committee promises an extra $10 billion for food stamps — a big help in winning over urban lawmakers.
"That's the coalition that holds the farm bill together," said Brian Riedl, budget analyst at the conservative Heritage Foundation.
Other members of Congress may be tempted by $4 billion in conservation funding or $1 billion for specialty crop farmers.
Farm state lawmakers also have a key ally in House Speaker Nancy Pelosi, who backed the House bill.
Pelosi has championed a $1-per-gallon tax credit for fuel producers who use cellulosic ethanol.
The losers in the farm bill derby have been "family farmers and taxpayers," said Sandra Schubert of the Environmental Working Group.
The group's database shows that under current law, 93% of direct subsidies go to just five crops: corn, wheat, cotton, soybeans and rice. Two-thirds of farmers get no payments, while large agribusinesses reap the benefits.
Rather than providing a safety net for small and midsize farmers, the bill promotes consolidation of farms into agribusinesses, Schubert says.
In 2007, corn growers got $2.1 billion in direct federal payments, even though the price of corn has jumped 169% since the 2002 farm bill passed, says Heritage's Riedl.
New federal ethanol mandates have helped fuel the price surge. Now one-fourth of the U.S. corn crop goes to make ethanol. Farmers are growing more corn at the expense of other crops.
Purdue University economists Corinne Alexander and Chris Hurt estimate that the growing use of crops for fuel raised U.S. food costs by $15 billion in 2007.
Rather than ending mandates and subsidies for ethanol production, Congress is responding to higher food prices mainly with more food-stamp funding.
New farm-bill spending seems aimed at repairing the damage from existing farm policies, Riedl says.
"United States farm policy is perhaps the most economically incoherent set of policies," Riedl said. "It can only be explained by political horse-trading."
Bush Threatens Veto
The White House expressed doubt Wednesday that President Bush will be able to sign any bill emerging from Congress. The biggest sticking point is over direct crop subsidies.
The White House wants to end payments to farmers with adjusted gross income of $200,000, but would settle for $500,000. Negotiators in Congress might go as low as $750,000, but no lower.
"Congress doesn't like taking back money it's been giving out to its constituents," said Taxpayers for Common Sense analyst Demian Moore.
Bush wants Congress to pass a one-year extension if it won't approve real reforms. That would mean no increases in food stamps, conservation or other pet programs. Lawmakers hope to gain a veto-proof majority.
