Subsidizing food consumption
US Rep. E. (Kika) de la Garza, the chairman of the House Agriculture Committee, recently defended the government's subsidies paid to farmers, responding to an article in a national newspaper that had been critical of these payments. Mr. de la Garza's arguments were correct, for government helps subsidize food consumption to the less affluent in the United States through some of its farm support payments. The funds it uses are, of course, from the taxpayers. De la Garza did not, however, indicate that much of the current expenditures for agriculture are now necessary to reimburse the farmer for government negligence and the institution of government policies that have harmed US agriculture and reduced farmer incomes.
About 10 years ago US consumers were also enjoying subsidized food prices, but it was the foreign export customers who were, in effect, paying the subsidies. The high level of US exports, coupled with high levels of production in the US, kept farm income at satisfactory levels and prevented strong rises in food prices. Farmers were deriving increased income through their ability to sell more units into the market for both domestic consumption and for export.
I am referring, of course, to the period after the early 1970s, when the US outlays from the Treasury to support agriculture were virtually nothing, whereas the export of agricultural products showed a large positive balance. The agricultural resources of the US were better used, as was its manpower, and all of agribusiness was prospering. Food prices were then certainly lower than they are now. At the present time food prices are higher, but the farmers are also complaining bitterly about low commodity prices. Many farmers are losing or have already lost their farms, and the budget expenditures for agriculture are high enough to shock taxpayers. The US is encountering a negative balance, not only in its overall trade, but in its agricultural trade.
This phenomenon, which could hardly have been expected 10 years ago, can be traced back to the beginnings of the strong government intervention in the market, which has now resulted in almost a complete takeover. The government now controls, or attempts to control, the amount of acreage the farmers plant, and it also very effectively controls the US exports through its ``targeted'' Export Enhancement Program. In this program the US determines which commodities it will subsidize for export, and the countries that may receive them. Some 40 percent of this year's wheat exports were made under Export Enhancement Program grants, which were as much as $42 a ton.
More recently the press has begun to speak of having seen the bottoming out of agricultural prices, indicating that agricultural income is on the upswing. Land prices have increased, and farmers have more money to spend. The farmer need not look far to see the source from which his money is coming, however, and it is the government. The government is now paying farmers to decrease their acreage; that is, not to plant. It is also paying the farmers indirectly through the subsidies it pays for its exports.
The taxpayer is ultimately paying the agricultural supports and subsidies, and de la Garza is clear about this. But the taxpayer is also paying more for his food, for the lower commodity prices do not mean that food prices have also dropped. The consumer is now paying more for his food than he did in the mid-1970s. He is also suffering from the inefficient use of American farmland, from the depression that has hit the Midwest, and through the poor use of manpower.
It is a tragedy that the administration that continues to speak of having a ``market driven'' agricultural policy, that is, one in which the farmer derives his income from the marketplace, is now operating the most stringent government control over agriculture. It is this government control that is causing the higher government payments to and for agriculture.
Joseph Halow is executive director of the North American Export Grain Association Inc.
