Fall Showdown Looms for U.S. Farm Bill

Published October 1, 2007

The U.S. Senate and House of Representatives are at odds over the outlines of a comprehensive farm bill, and an extension of the five-year-old law currently in effect may be necessary.

Earlier this year, the Democrat-controlled House passed a $284 billion, five-year farm bill on a largely party-line vote, 231-191. More than half the funding would go toward food stamps and other nutrition programs, with 25 percent going toward price supports for crops grown by U.S. farmers.

President George W. Bush has threatened to veto the bill, which is pending in the Senate.

The last farm bill was passed in 2002 and expires September 30.

‘Benefits All Sectors’

The July House vote followed closely the mark-up by the House Agriculture Committee. That mark-up was quickly supported by the largest farm lobby in Washington, DC.

“The American Farm Bureau Federation commends the House Agriculture Committee for passing Chairman Collin Peterson’s [D-MN] farm bill proposal,” said Farm Bureau President Bob Stallman, a rice producer from Texas. “The committee bill is a balanced proposal that addresses the needs of a broader core of U.S. farmers, expanding benefits to literally all sectors of agriculture.”

Upon passage, House Speaker Nancy Pelosi (D-CA) said on the House floor the farm bill “will create a rural renaissance that will re-energize farm country and create jobs in small towns across America.”

Pelosi added, “To aid in this effort, the farm bill, which is also a food bill, strengthens nutrition assistance that helps low-income families. For the first time in 30 years, this bill increases the minimum food stamp benefit and indexes it to inflation, so rising food costs do not erode a family’s purchasing power.”

New $3.2 Billion Tax

To pay for the expanded food stamp program, the bill imposes a $3.2 billion tax on international companies with U.S. subsidiaries. Most Republicans opposed this provision, and Bush quickly threatened to veto the bill.

“The House bill would invite possible retaliation by trading partners, jeopardizing $78 billion in U.S. agriculture exports,” Agriculture Secretary Mike Johanns said in a speech shortly before the House vote. “This tax measure has polarized the entire debate.”

“We urge the Senate to take a different course,’ Johanns told an audience at the National Press Club in Washington after the vote. “This administration doesn’t intend to pull the rug out from under farmers who depend on the world market.”

Possible Extension

Sen. Tom Harkin (D-IA) said he plans to draft a six-year farm bill. “The Senate can do a better job,” he said shortly after the House vote.

“It’s likely Congress will temporarily extend the current farm bill,” said Mark McMinimy, an analyst with the Stanford Group in Washington, in a note to investors in late July. “A short-term continuation appears highly likely, and the possibility of a longer extension cannot be ruled out.”

While farmers maintain they need crop programs to assure the nation’s food security, many public policy groups argue such subsidies are out of date and wasteful.

Little Sense Today

“Most farm programs originated in the Great Depression of the 1930s, but they make little sense in today’s more prosperous and dynamic economy,” said Chris Edwards, director of tax policy at the Cato Institute. “Congress should end subsidies for well-off farmers, remove agricultural trade barriers to cut food costs for families, and reduce the debt load being imposed on young Americans.”

“I didn’t think we could find a farm program worse than the traditional subsidies, but now we have,” said Dennis Avery, senior fellow of the Hudson Institute and director of its Center for Global Food Issues.

“Payments are being made on the basis of what farm land was producing in 1932,” Avery said. “Net incomes of farm families are higher than those of non-farm families. It’s purely and simply an effort to buy the farm vote, and it’s being done by both parties simultaneously. Neither party dares to try cutting subsidies because the Iowa caucuses could bring retribution.”

Avery said the billions of dollars of food program spending in the farm bill “is how they get the urban votes to pass it. The new thing in this bill is we’re going to hand out the same subsidies to fruit and vegetable producers and organic farmers [that have been handed out to corn, soybean, and other producers], so everyone will have a stake in it.”

John W. Skorburg ([email protected]) is a visiting lecturer in economics and finance at the University of Illinois at Chicago and associate editor of Budget & Tax News. He was formerly a senior economist with the American Farm Bureau.