THE ESTIMATES are shaky, but under the bills now pending in Congress farm support costs over the next three years are likely to be between $40 billion and $55 billion. Of this amount, quite high by historical standards, $15 billion to $20 billion would be distributed through what are called deficiency payments. These are a relatively new device; they were introduced in the Carter administration. Farm supports have traditionally been achieved by the propping-up of prices, through programs in which the government in effect steps into markets and buys when prices threaten to fall below specified floors. But propped- up farm prices tend to result in higher food prices and fewer farm exports. The deficiency payments were meant to ease these side effects. They come ontop of price supports, which they allow to be lower than otherwise, and there is no indirection about them. They are out-and-out income supplements of a kind few other groups get from government. They are also one of the leading points of dispute in the farm debate between the administration, which wants to reduce the cost, and congressional Democrats and many farm state Republicans, who want to preserve support levels.
The main issue in the dispute is need. Remarkably little is known about the income levels of the persons to whom deficiency payments go. The program tends to be justified in the name of the hurting family farmer: there is a cap of $50,000 per year on deficiency payments to any one producer. But the program is tilted toward larger producers even so. The payments are made through a system of target prices for the covered crops, the main ones of which are wheat, corn, rice and cotton. Up to the cap, the farmer is given the difference per bushel or pound or bale between the target price for his product and the market price. By definition the more he produces, the more he gets. "Under these circumstances," the Congressional Budget Office said in a study earlier this year, "income support tends to benefit farmers with relatively high incomes while providing little if any help to low-income farmers." The Agriculture Department found in a study, also earlier this year, that about half of the payments were going to the 12 percent of farmers with sales in excess of $100,000 a year.
The administration and Jesse Helms, chairman of the Senate Agriculture Committee, have both proposed putting a lower cap on deficiency payments. The administration would take it to $10,000 eventually; Mr. Helms has suggested $25,000. The House and Senate farm bills are both some billions of dollars beyond the congressional budget resolution. The White House and Mr. Helms say a lower cap, which would be felt most in the rice and cotton programs, is an equitable way to save about $1 billion a year. They would also lower target prices.
The Democrats and those Republicans voting with them would freeze target prices instead. They say, among many other things, that size is an uneven measure of need, that a family farm can easily have sales well beyond $100,000 a year and be in deep trouble these days, and that a cut in sustenance will only deepen the farm credit crisis. If Congress does not support farmers now, this side of the argument goes, it only increases the chances it will have to bail out the farm credit system later.
Our own view is that the credit crisis ought to be dealt with directly, and that a good deal of trimming can be done in deficiency payments without bringing needy family farmers to their knees. A program this large ought to be better aimed than this one is now.