THE EMERGENCY farm aid on which the president and Congress will agree before the year is up will be a massive budget-buster, but that's not the main problem with it. The problem is that, instead of being spent in the pursuit of a coherent farm policy, the money will be spent in the absence of one.
The present disarray, masquerading as policy, dates from passage in 1996 of the so-called Freedom to Farm Act, which phased down and largely dismantled a system of farm price and income supports that had existed in this country since the New Deal. The Republican sponsors won applause at the time, including some from us, for having the courage of their free-market convictions to cut a program benefiting one of their own important constituencies. The step was a refreshing one on the merits as well. The programs had become not just too generous but too intrusive, as the government sought to protect itself from the cost through acreage limits and other production controls.
But the act went too far; it tossed out essential provisions along with excessive ones. It worked well enough in its first two years because prices were high and supports had yet to be reduced. Now, however, both prices and supports are down, and as the bidding wars between the parties to pass emergency legislation last year and this attest, not even the sponsors are prepared to stick by the 1996 legislation except in name. Democrats urge a return to the countercyclical support system of the past, in which government payments go up when prices come down. Republicans resist in favor of the declining fixed payments in the 1996 act; to abandon those in the face of Democratic taunts would be to concede major error not just in agricultural policy but in rolling back government programs generally.
The emergency legislation, however, is nothing more than a vast amount of sloppily given countercyclical aid by another name. This year, when the Freedom to Farm Act is supposed to be reducing aid, total aid may instead end up exceeding $20 billion. It will be the highest or second-highest figure on record and will constitute more than a third of net cash farm income. It busts the budget in part because it is excessive, but as an offset to the second year in a row of low prices for basic commodities compounded by bad weather, it may not be that excessive. Part of the problem is that the budget was artificially low, based as it had to be on the unrealistic expectation that the Freedom to Farm Act would be adhered to.
What ought to happen -- but for political reasons likely won't, at least until after next year's elections -- is a return to a moderate countercyclical policy. There is some of that even in current law, but not enough. The right plan would benefit consumers and producers alike by stabilizing price and supply, but without either raising price so high or involving the government so deeply in planting decisions as to cost U.S. producers sales abroad. It's a hard mix to find, but not impossible. As part of the moderation, aid should be capped so as not to provide excessive subsidies to large producers not in need, a principal defect of the indiscriminate emergency spending. Rather than subsidizing production, the government might also consider increasing the already considerable payments it makes for conservation, thereby supporting farmers and the environment in the same stroke.
No sensible policy is going to be put in place as long as the parties are competing for farm votes with taxpayer money. The competition is likely only to intensify next year. But at some point a better policy has to emerge. How many years in a row can the policymakers credibly cry emergency?