Every five years, Congress must reconsider billions of dollars in farm subsidies. This is one of those years. Perhaps this time, though, it will realize that what began as a New Deal program has since become an old deal that needs an overhaul.
Originally, federal payments were meant to protect millions of small, poor farms from sudden economic ruin. Today, they go disproportionately to large farms and wealthy farmers. Just five crops (corn, cotton, rice, soybeans, and wheat) receive 93 percent of payments for commodities, which have averaged about $20 billion a year.
The subsidies have encouraged farm consolidation. That has its benefits (especially technological ones) – when determined by market forces. This artificial "gigantification," though, has encouraged dependency, pushed out small farmers, and raised land prices such that new farmers are finding it hard to get started.
The subsidies also distort global agricultural markets, putting the US at odds with its trading partners and hurting poor farmers abroad.
Certain farm interests in a few states have traditionally held great sway over key lawmakers in Congress, blocking attempts at reform. But several forces are now converging that could change that.
For starters, farm wealth has increased substantially since the 2002 farm bill was being debated. In the years preceding that bill, US net farm income (minus government payments) averaged just over $30 billion. Last year, it was twice as high.
The income picture looks good for the near term, too. Climate change and energy security concerns have sparked a demand for biofuels (helped by government support for ethanol). As a result, corn prices are as high as an elephant's eye, and profitability in corn and other commodities has surged.
Meanwhile, groups outside the traditional agriculture lobby are pressing for change. Growers of fruits, vegetables, and nuts – i.e., the folks who don't get subsidies – are arguing for equal treatment. Environmentalists are demanding a greater emphasis on conservation. Latinos, the fastest-growing group of new farmers, are mobilizing.
Pressure is coming from outside the US, too. Agricultural disputes over subsidies between the US, the European Union, and other countries have stalled the crucial Doha international trade talks. The US share of agriculture exports is declining.
The US needs access to markets. The way to encourage other countries to reduce subsidies is to take such steps in the US. If Congress fails to do so, it will face piecemeal reform through the World Trade Organization, where the US lost a case over cotton subsidies to Brazil in 2004.
Congress has a good place to start in the Bush administration's proposed 2007 farm bill. It moves in the right directions: cutting subsidies, spending more on conservation, encouraging renewable fuels, and assisting small farms and young farmers. One of its most promising ideas is to shift part of the farm "safety net" from price-related subsidies (which distort markets) to less distorting income supports. It would eliminate subsidies for farmers earning more than $200,000 – taking about 80,000 farmers off the agri-welfare roles.
Some suggest this is the year for Congress to do for agriculture what it did for welfare reform in 1996. The reasons are there, if it can find the courage to stand up for them.