Monday, May 19, 2008

"... a clinic on how to use the power of the purse ..."

Dan Morgan at the Farm Policy blog this morning:
Under House rules, the Agriculture panel is a “minor” committee that is not required to be geographically representative. (There are six members from North Carolina and Georgia, none from New England.) The result is a panel unified behind the interests of farmers growing staple crops that collect the bulk of subsidies. This year, dairy interests did particularly well, snagging an extra $410 million to help cover rising feed costs, and imposing a 7.5 cents a pound fee on all imported dairy products to help finance domestic dairy promotion activities. The poultry industry in Virginia and Georgia beat back an attempt to deny crop insurance to Prairie Pothole farmers who plow virgin prairie lands to plant corn.

In effect, the aggies held a clinic on how to use the power of the purse to silence opposition to current farm subsidies. They heaped new money on anti-hunger groups, certain conservation programs, the biofuels industry, West Coast salmon fishermen, and even a few hundred farmers in Alaska.
To understand the Farm Bill debate, it helps to distinguish between trade-distorting subsidies and "decoupled" subsidies (also called direct payments). Trade-distorting subsidies, such as deficiency payments that pay farmers when prices fall below a certain level, encourage over-production, hurt the interests of farmers overseas, and complicate trade negotiations. Decoupled subsidies, which simply pay farmers a check based on their history of farming a particular crop, do not distort trade, but they provide a welfare check to many prosperous farmers and hence are difficult to explain politically. Current farm programs include both kinds of subsidy.

U.S. Food Policy has noted that, compared to the bill passed by Congress, the Bush administration came out for stronger reforms to trade-distorting subsidies. Morgan gives the administration less credit than we did, in part because the administration didn't also call for stronger reductions in decoupled subsidies or direct payments.
But a larger share of the blame may go to the White House. For all the Bush administration’s rhetoric about the need for more subsidy reform, it insisted on keeping or expanding the biggest subsidy of all—the $5 billion in automatic payments. That stand cost it the high ground in the end game of negotiations over the farm bill.

Had the administration agreed to a significant cut in the automatic payments—say $1 billion a year—it might have come to the table with a farm bill that used those savings for all the things the nutrition, conservation and fruits and vegetables lobbies wanted.


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