farm bill

Bill in Brief

What's up

If you are tired of left against right, Republocrats vs. Demicans partisanship in Washington, the farm bill might be just the legislation for you. In fact, some would argue that that is the problem with the farm bill—it has something for everybody, and too much of it.

The farm bill, the most recent incarnation of which is officially titled the Farm Security and Rural Investment Act of 2002 (USDA), isn’t really one bill, but is actually a package of laws covering everything from farm credit assistance (the farm and commodity subsidies typically associated with the farm bill), welfare provisions like food stamps and school lunch programs, and conservation measures including renewable energy (biomass fuels such as ethanol). The bill’s many rationales range from national security (according to some home-grown-food proponents) to bread price stability. All of that must fit into the larger US budgetary framework (HPJ) and jive within the legal contours of World Trade Organization agreements and other international trade provisions (DFP). It is, above all, a complex bill.

The 2002 version of the farm bill sunsetted in September 2007. Congress extended the old bill a couple of times until it passed a final bill in May '08 (kinda, sorta: because of a clerical error that left out one of the bill's 15 titles when it was sent to the president, Congress will walk through the steps - vote, veto and override - to make sure the entire bill becomes law).

What exactly is in the 2002 Farm Act?

It’s a crazy casserole. Some of its main ingredients – in order of price:

Domestic Nutrition Assistance – aka food stamps. Over $50 billion of the farm bill goes to food stamps (95%) and other food assistance programs.
Farm Income and Commodity Price Support – aka farm subsidies that fill in the financial holes for farmers when either their income dips or prices, likewise, take a dive. These supports come in many shapes and sizes – “direct payments,” “counter-cyclical payments,” “marketing assistance loans” and “loan deficiency payments” and add up to about $13 billion a year (average over last four years).
Conservation and Environment – aka paying farmers to retire land and/or use eco-friendly farming techniques. Cost $5.6 billion in 2005.
Crop Insurance and Disaster Assistance.
We know all these subsidies are beginning to sound alike, but they are different. Crop insurance is what farmers buy in case their crop fails.
The feds subsidize farmers’ premiums at about $3 billion a year.
Disaster Assistance is what Congress can choose to pay out directly when hurricanes, droughts or other natural disasters hit; they usually dole out less than $2 billion a year.
Trade and Export Promotion
aka, yes, more subsidies. Grains headed abroad get an extra boost – to the tune of $3.7 billion a year (average over last five years).
Agricultural Credit
– aka loans. Farmers have over $200 billion in debt. They mostly borrow from private banks and other private entities, but about 37% of their loans are covered by the government’s Farm Credit System or Farm Service Agency. It costs the feds about $0.5 billion to subsidize those loans.
Specialty Crops – aka fruits and veggies. The subsidies above only apply to bread-basket kinds of food (wheat, corn, soy); “specialty crops” get the short end of the support stick, with small grants for things like research and marketing promotion. The farm bill also covers regs for making sure our fruits and vegetables are pest and disease free.
Animal Agriculture. Ranchers and poultry farmers likewise get few subsidies (although some get bad weather insurance from the gov) at the same time that they get a lot of regs for safety.
Energy. You’ve no doubt heard our energy problems will be solved by corn. Okay, that’s an exaggeration, but agriculture is playing an increasing role in the energy industry. But although subsidies for biofuels may be as much as $7 billion a year, the farm bill only plays a small role, with only itty bitty research grants.
Other stuff. Okay, we’re running out of steam – and are guessing we’ve lost most of y’all, but for those still reading: the farm bill also drops about $2.5 billion for agriculture research, $2 billion for foreign food aid, less than $0.5 billion for forestry stuff and some cash (we’re not sure how much) to rural development.

The Debate

Because the farm bill covers so many areas, it is hard to schematize the politics in a simple “for or against” partisan split. Rather, each politician, each state, and each interest group has a particular hobby horse or two that they hope to feed at the legislative trough. So, for instance, the National Sorghum Producers take keen interest in getting more dough for that crop (HPJ), while Arkansas rice growers (DFP) fret over the complexities of “counter-cyclical payments”—government subsidies made to farmers when prices dip based on calculations using the average national price of a commodity (not for the weak of math)—and the rest of the policyspeak in the bill.

The idea behind the farm bill seems sensible enough: farming is risky business, with a year's income depending on a lot of unpredictable factors like roller coaster commodity prices and the weather, but unlike other industries that involve risk a) the agriculture industry doesn't readjust as easily when the market throws it a curve and b) the ag business produces something we can't afford to mess with, that is, food. For those reasons, safety nets that minimize risk for farmers keeps our farms chugging and our food coming. Food stamps, which account for over half the price of the bill, also seem to be a straight forward way to help the poorest Americans eat.

The problem with safety nets, according to critics, is they tend to get out of control. As noted above, the handouts-for-everyone nature of the farm bill is a problem in many minds. Put billions in a legislative pot luck and you can just about ensure that lawyers and lobbyists will come a-runnin’—people will work harder divvying up the benefits of the bill than at real productive activities. Farm subsidies are also viewed, by some economists, as not making much economic sense; instead of propping up the agriculture industry, they distort it, weakening competition and so making us lose out on the world market. (See farm subsidies).

Some of the debates within the debate

  • Foreign food aid: most agree that the US should go on providing food aid to the world's poorest nations, but there's rising disagreement over where that food aid should be bought. US farmers prefer that the feds keep buying from them (as US law requires), while the administration and a growing number of congresspeeps say it'd be cheaper to feed the poor by buying food closer to their home. (NYT & GAO)

  • Disaster aid: some lawmakers would like to make farmer disaster aid (which follows floods, droughts, winds, etc.) to be a little less random. Funds for disaster aid aren't factored into yearly planning, but are voted on by Congress in "emergency" bills as needed. Congress may tinker with a way for the USDA to tinker with funds without going to Congress for emergency pay packages.

USDA's proposal

Mike Johanns, the Secretary of the US Department of Agriculture, proposed to update the farm bill by beefing up conservation programs and trim subsidies to mega-farms.

The two most significant shifts in the farm bill proposal are an increase of $7.8 billion for conservation programs and a $1.6 billion boost in funding for renewable energy research, especially bio-energy studies. Other notable components of the proposal include increased funds for special nutrition crops, more direct payments for beginning farmers and ranchers, and disaster relief payments.

The proposal has some other specific criticisms (Hill).
At the top of the list, a gripe from an erstwhile ally of the administration—the American Farm Bureau Federation. The AFBF opposes the proposal’s income-testing and payment limitations; as it stands, the proposal would eliminate subsidies to those whose adjusted gross income tops $200,000. The two sides debate how many people this limitation would affect.

Other topics of contention include the proposal’s smaller loan “safety nets” that link to crop price. The USDA claims that farmers often game the system by withholding crops when prices are low, but sell when prices rebound. Johanns’s proposal would also change the “counter-cyclical payments” to correspond to annual farm revenue rather than the current crop price threshold.
And it only gets more complex after that, as the arguments slide into WTO compliance and negotiation strategy.

The House Bill

While some medium-to-big-sized reform ideas were batted around Congress, the bill the House eventually passed in July '07 is about as business-as-usual as you can get. We hate to bore you, but to convince you how little "there" there is there, we list some of the changes that are being reported on:

  • Adds funding to a cotton program to make up for losses that came from a World Trade Organization dispute - but doesn't do enough to settle that dispute, according to the WTO (NYT);

  • Starts a sugar-to-ethanol program, where the feds buy sugar to convert to ethanol, making up for predicted losses to the sugar industry when NAFTA opens up the market to Mexican sugar - for a price of $1.4 over ten years (WP);

  • Ups the minimum benefit for food stamps and sets food stamps to meet the rise of inflation, which will be paid for by a $4 billion tax increase (or closing of tax loophole) on foreign companies doing business in the US (WP);

  • Requires meat get country-of-origin labeling by 2008 (WP);

  • Adds funding for nature preservation (WP);

  • Adds $840 million to foreign food aid (WP);

  • Tacks on about $1.8 billion in subsidies over the next five years for specialty crops (NYT);

  • Lowers the income ceiling over which farmers can't get subsidies - from $2.5 million to $1 million, saving about $226 million in five years (WP).

The Senate bill

The Agriculture Chair in the Senate also tried to take a thwack at subsidies, but the bill that was passed in December '07 ended up with minimal changes (WP, NYT). A number of senators tried to tack on amendments to limit subsidies to big-time ag businesses, but none stuck. What the bill would do:

  • it would let farmers opt in to an alternative crop insurance program that could save the governmen $4b over five years (although according to some, it could cost the feds $4 billion over 10 years - WP)
  • it would add on a $5b disaster relief fund (normally when weather disasters hit, Congress has to pass separate emergency funding bills to help out farmers)
  • many other farm bill programs would get a hike in funding, including $4b for nutrition and $4b for conservation

Some of the amendments that didn't make it on include:

  • farm households would be limited to a total of $250,000 in subsidies, including $50thou in direct payments, $50thou in countercyclical payments and $150,000 in marketing loan gains,
  • farms that netted $750,000 in a year wouldn't be eligible for subsidies,
  • it would rearrange how "countercyclical" payments are calculated, presumably to avoid farmers milking the system,
  • alternative fuel mandates that would require gas companies increase their biofuel use six fold by 2022,
  • an immigration bill for migrant workers,
  • conservation subsidies would be limited to only farms that make under $2.5m - and to only $450,000 to each farm "over the life of the farm bill." (CongressDaily)

The Final Bill

Both chambers hashed out a final farm bill in early '08 which they passed in May '08 - overriding a presidential veto (WP). The final bill:

  • adds $10 billion (over 10 years) above Bush's baseline,
  • increases funding for food stamps by $10 billion (WP) by easing up eligibility criteria,
  • places a cap on who can get direct payments to those with a gross income of $750,000 or less (farmers who bring in over $500,000 in nonfarm income are ineligible for any farm subsidies)
  • includes a $4 billion disaster fund
  • nailfiles down direct payments to farmers by 2% a year for the next four years.

The president objected to the bill for a number of reasons. He would have preferred that: all tax increases were clipped out; farmers whose income is above $200,000 were not be
eligible for income subsidies; loan rates for crops aren't increased;
and direct payments be increased in spite of how high or low crop
prices are. The last two stipulations are meant to keep the US kosher
with World Trade Organization rules.

Other good reads

updated June 2, 2008

Did we miss something, let some slant slip in, lose a link - or do you just have something to say? Drop a line below! In the spirit of open dialogue, cJ asks you keep it civil, keep it real and keep it focused on the message, not the messenger. See our policy page for more on what that all means.

Oil Subsidies

How can I find more information on how much each oil company is receiving and the total amount?

Bill Miller (not verified) | April 3, 2008 - 12:03pm
talker's picture

not sure...

But you may want to start with two government watch-dog groups that are anti any kind of government hand out - www.cagw.org and www.taxpayer.net.

Let us know if you find any good info.

talker | April 4, 2008 - 7:44am