Don't bail out farm banks that wreck the environment
IN a period of declining federal support for environmental protection, the federal government has made an extraordinary investment in soil conservation in the last 18 months. Under the new conservation reserve program, the United States Department of Agriculture will pay farmers to take nearly 23 million acres of the country's most erodible cropland out of production for 10 years. Through 1997, the program will cost about $13 billion. But if environmental safeguards are not attached to the bailout of farm lenders now pending in Congress, taxpayers may see that $13 billion soil conservation investment blow and wash away by the turn of the century.
It wouldn't be the first time a major agricultural program of this sort went gully-up. At its peak in 1960, the old soil bank program paid farmers to idle an area roughly the size of Pennsylvania (more than 28 million acres) for 10 years. Along came the world food crisis in the mid-1970s. Credit flowed from farm lenders; millions of acres of fragile grasslands and ecologically valuable wetlands were put to the plow; the soil bank was shamelessly robbed. Before long, agriculture's boom went bust for farmers and farm lenders; it was an environmental bust from the start.
Congress finally began to deal with the problem in 1985. The new conservation reserve is reducing erosion by over 400 million tons annually. A ``sodbuster'' policy makes farmers ineligible for most USDA programs - including crop subsidies and farm loans - if they plant crops on fragile land currently in grass or trees without following approved conservation practices. By 1990, farmers must begin following conservation plans on 118 million erodible acres already in production - nearly one-third of all land in crops - to remain eligible for those same programs. The ``swampbuster'' policy cuts off program benefits to farmers who drain more wetlands to grow crops.
Agriculture is expected to need heavy government aid through 1990, so the vast majority of crop farmers will be enrolled in USDA price-support programs or the popular conservation reserve. Farmers who want the aid will have to abide by sodbuster and swampbuster policies.
The problem is that major farm subsidy programs are countercyclical: Payments, participation, and costs rise ($25 billion last year) in hard times, but drop when prices strengthen, as happened during the 1970s and early '80s. So if grain markets recover, as everyone hopes, farmers won't need USDA price support programs, and sodbuster and swampbuster may be empty threats. Farmers financed by USDA's lending agency, the Farmers Home Administration, will face conservation requirements if boom times return. But FmHA accounts for only about 16 percent of farm lending and, ironically, serves the poorer farmers.
No conservation policies have been broadly adopted by the lenders that dominate farm finance. These lenders and their borrowers are the beneficiaries of the bailout (approved Oct. 6 by the House of Representatives). The ailing Farm Credit System will receive $2.5 billion this year - and more in years to come - to keep the system intact. Banks and insurance companies will boost their profits and their share of farm lending through a new, federally backed secondary market for real estate loans. Should that market fail, taxpayers could shoulder up to 90 percent of the loss. (The Senate Agriculture Committee is now working on its own version of a bailout.)
Why should taxpayers provide this generous aid to lenders whose environmental record is notoriously bad? These are the lenders whose bad policies during the 1970s set the stage for farm subsidies and this year's bailout. Given the chance, they'll do it again. What's worse, the House-passed bill does nothing to stop the lenders it assists from making loans to bring conservation reserve acreage back into production, with no erosion control practices at all, after the 10-year contracts expire - and erosion rates will be as high as ever. By the year 2000, taxpayers may have little to show for billions invested. Will another conservation reserve and bailout be far behind?
The Senate should act to break this cycle, so harmful to farmers, taxpayers, and the environment. In return for generous federal aid, assisted lenders could require their borrowers to follow conservation plans similar to ones the FmHA requires to protect erodible land and wetlands.
Farmers and farm banks are asking taxpayers to help them stay afloat. But if they expect public aid that promotes more overproduction and environmental damage, they're asking too much.
Kenneth A. Cook is a senior associate with the Conservation Foundation, an environmental research organization based in Washington.