U.S. farm policy is on the ropes as we approach a new planting season and a presidential election. The maneuvering and point-scoring among presidential candidates in Iowa over the past few months have accomplished little more than to point up how inadequately farmers have been served by the politics of agriculture.
The highly touted Federal Agricultural Improvement and Reform (FAIR) Act of 1996 has been a disappointment. No one knows what to do, except to throw money at it.
As crop prices fell in 1998 and 1999, Congress, with support from the White House, pumped $16 billion in off-budget, emergency money into the farm sector. This was beyond the $42 billion authorized over seven years under the FAIR Act, and will be repeated in the three years ahead if farm prices remain low and budget surpluses high, and if the act is not amended. Anxiety over what to do is heightened by a consensus that the policies that FAIR replaced were largely obsolete. There is no road back.
Most federal farm subsidies go to some 200,000 farms: 10 percent of all farms, producing about 80 percent of our farm products. Grain and cotton producers get most of the money. A half-million mostly full-time family farmers--the people whom Congress pretends to help and who are struggling to hold on against the tide of low prices and technological change--see only a small slice of the farm-subsidy money.
Moreover, some 1.3 million small, mostly part-time and residential farms, which produce about 8 percent of farm output, get next to nothing from the subsidy pie. They earn, on average, no net income from farming but make about $50,000 a year from nonfarm sources.
U.S. farm policy has had three basic goals: (1) to ensure that there is plenty of food for consumption and export at reasonable prices, (2) to maintain a prosperous climate for farmers and rural towns and (3) to maintain the family farm structure of agriculture.
Goal 1 has been easy to reach. Surpluses have been more common than shortages. Food prices have not been a credible inflation threat for 20 years.
Goal 2 has seldom been achieved. As the number of farms fell from 7 million in 1930 to 1.9 million today, most rural towns declined, and many disappeared. Businesses failed as transport and communications technology brought farm people hours closer to cities with wider choices of farm supplies and consumer goods. Farmers and their towns prospered in wartime and during occasional export booms, but languished in between. The decline in farms and in towns has slowed, however, as nearly two-thirds of our farmers earned their living away from the farm, and as distant jobs became accessible to people on farms and in rural towns.
Goal 3 of federal farm policy never has been addressed seriously. Presidents, Congress and farm groups gave lip service to small and mid-sized family farms, while technology made big farms more efficient. Federal policies rewarded the most efficient farmers with the biggest payments, because most farm subsidies were linked to bushels and bales rather than to the financial needs of the farm family. Most of these big farmers consider themselves family farmers, but many are also partnerships and corporations. Only a few are giant corporate farms.
If we want to secure the future in farming of most of the half-million mid-sized farmers struggling to earn a living, we must help them compete in today's agricultural economy. They need restructured debt and "capped" income subsidies divorced from bushels and bales. A production history of corn, wheat, soybeans, rice or cotton should not be a permanent key to the federal treasury. Small farmers need intensive education and training to adapt to new marketing methods and to the electronic, mechanical, chemical and genetic opportunities that are raising productivity and reducing costs.
Congress should reduce the per-farm limit on direct federal subsidies from today's $460,000 to somewhere in the range of $25,000 to $50,000. This would require strong presidential leadership: Big farmers, cloaked with the moral force of traditional small farmers, are a powerful lobbying group.
Another needed reform would reestablish a payments system that is designed to supplement market returns only when farm prices are low. That would remedy the major flaw in the FAIR Act, which guaranteed payments averaging $6 billion a year for seven years regardless of farm prices. It could bring farm subsidies under the discipline of budget priorities, a principle that was set aside for the past two years.
If reforms such as these cannot be achieved, we need to end the national hypocrisy about saving small family farms. Present policies, in combination with technology, are driving us toward a more highly concentrated agriculture. If that is what Congress and the public want, let's admit it and stop pouring big money into giant farms under cover of saving traditional family farmers.
The writer, an agricultural economist, was undersecretary of agriculture from 1965 to 1969.