Stuck on the Farm

Sunday, March 9, 2008

AS CONGRESS and the administration wrangle over a new farm bill before the current version expires next Saturday, here are two numbers that may help clarify the issues: $5.74 and $92.3 billion. The former is the price of a bushel of corn on Wednesday, a historic high. The latter is the Agriculture Department's estimate for farm income; it is 4.1 percent above the $88.7 billion farmers made in 2007 and 51 percent above the average for the past 10 years.

Yet in this flush time for farmers, House and Senate conferees are contemplating a farm bill that might cost $10 billion more over the next decade than the current law would have. The tentative $280 billion-plus price tag includes needed spending on nutrition and soil conservation programs -- but also about $5 billion a year in cash transfers to corn, soybean, wheat, cotton and rice farmers over the next five years. So far, there are no meaningful limits on the amount each farm enterprise can receive. Thus, plenty of this federal largess will be showered on people much richer than the average American, who is struggling with higher food costs.

The current discussion among the House, the Senate and the Bush administration centers on how to finance the 10-year spending increase. Reported proposals range from tightening Internal Revenue Service rules on listing certain business expenses to tweaks in Medicare reimbursements for medical equipment. Presumably, negotiators think that they can sell such changes as neither tax increases -- which the administration has said it will not allow -- nor Medicare cuts. Agreement has so far proven elusive, and the bill, for the moment, is stalled.

The real point is that there is no justification whatsoever for spending billions more on agriculture, no matter how it's paid for. Instead, the bill should have been redrafted to reflect new economic realities. Congress should cut crop subsidies and cap payments to well-to-do farmers, devoting the savings to deficit reduction and increases in food stamps, so that the poor can afford higher grocery prices. Rep. Ron Kind (D-Wis.) recently circulated a letter among his colleagues showing how this could be done, through 10 modest changes to the law, among them a means test for subsidies that would still let farm households making up to $200,000 a year get federal help. But cotton interests, represented powerfully in the Senate by Blanche Lincoln (D-Ark.), have historically resisted any serious limitation on federal payments to growers of those crops. Meanwhile, the Bush administration is insisting on at least some form of means-testing. Hence the current standoff.

What goes up must come down; crop prices will moderate sooner or later. But growing food demand in developing countries such as India and China strongly suggests that grain commodities will stay relatively expensive for the near future, buoying farm income in the United States. This is the time to slash these wasteful and expensive subsidies, not lock them into law. Both reformers in Congress and the Bush administration must stand their ground.

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