Washington, Jan. 28 - The new "Freedom to Farm" subsidy contract payments that many farmers believe are guaranteed for the next 7 years will probably be slashed if Congress approves a balanced budget amendment to the U.S. Constitution, according to a new study. Conservation Reserve Program contract payments will also be vulnerable to cuts under the amendment, which will also make it much harder for Congress to provide farm disaster aid.
"If you've got a 'Freedom to Farm' contract, you've got a contract with politicians and all the security that goes with it," said Kenneth A. Cook, president of the Environmental Working Group and author of the new study on the budget amendment's implications for agriculture.
"If farmers read the fine print in the contract they may be in for an unpleasant surprise," he added. "The very last item on the very last page says that Uncle Sam has full authority to reduce or terminate contract payments if Congress enacts a law that requires it," Cook said. "And no matter what USDA wants to do, very harsh budget cuts definitely will be required if the balanced budget amendment becomes law, given the current budget situation. When that happens, existing contracts give farmers 10 days to decide if they want a new contract with lower payments or no contract at all," Cook added.
The EWG review is the first detailed examination of the potential implications of the balanced budget amendment on farm and rural assistance programs. Overall, the review concludes that the balanced budget amendment will tend to magnify the risk and duration of agricultural slowdowns, recessions and disaster-related emergencies because the amendment will add formidable new constraints to federal assistance above and beyond the significant limitations ushered in by the 1996 Farm Bill and 1994 crop insurance reforms.
The report says that, unlike other sectors, agriculture faces a triple threat from the budget amendment: a high degree of economic volatility, recent elimination of an automatic safety net, and the potential of deep and sudden amendment-driven spending cuts.
"Many farm state politicians are pushing the balanced budget amendment just a year after they voted to eliminate the agricultural safety net. We assumed that they would have analyzed the consequence of these two actions on farmers and farm programs," Cook said.
"We found no such analysis. And even though you see many in Congress refusing to support the amendment unless Social Security or defense funds are protected, no farm belt legislators are insisting that farm and rural spending be protected," Cook said.
"If I were a farmer I'd get on the phone and ask my representative and senators if they can guarantee that farm and conservation supports will be protected after they vote for the balanced budget amendment," Cook observed.
According to the study, proponents of the balanced budget amendment are disingenuous when they argue that the amendment simply requires the government to do what families do - live within means. In fact, families living by the amendment's rules would have to pay for all long term investments like homes or college education from a single year of earnings alone, with no borrowing. The "family budget" comparison is especially inappropriate for most commercial-sized farm families. One out of seven (14 percent) has extreme debt repayment problems, with average debts of $309,000 and current incomes sufficient to support a debt of only $49,000.
The EWG study also says that agriculture should heed the "wake up call" from Treasury Secretary Robert Rubin, who warned in recent Senate testimony that the amendment will erect major new budget and procedural barriers to timely disaster aid. "Over the past decade or so, farmers have been the single biggest and most frequent recipients of federal disaster relief. Farmers get almost 60 percent out of every federal disaster aid dollar," Cook said. "That automatically makes agriculture the biggest potential loser if politicians play government shut-down 'chicken' with regional disaster aid," Cook added.
The report points out that the Environmental Working Group supported neither the pre-1996 farm policy and programs or of the new "Freedom to Farm" program introduced by the 1996 Farm Bill. EWG instead made the case for farm and rural policy that provided a reliable safety net for working family farmers, and significant federal investment in conservation, clean water, research, education, health care and other programs to strengthen and diversify rural economies and give greater opportunity to rural Americans.
The study observes that the continued pursuit of sustained deficit reduction and a balanced budget will help rural America. But the balanced budget amendment poses as great of a threat to any sensible investment agenda for rural America as it poses to the status quo in farm and rural policy.
"It doesn't really matter if you believe in a return to parity prices, freedom to farm, green payments or something in between, the balanced budget amendment is still bad policy for agriculture and rural America," Cook said.
The Environmental Working Group is a nonprofit research organization that has produced numerous reports on farm subsidy programs.