I think I've been asleep for the last week. Somehow I missed the 2007 U.S. Farm Bill passing the House of Representatives. Here's a fairly lengthy description of the bill from the environment news service. Before I offer some comments, I should state up front, I'm not a fan of farm policy. If for no other reason, farm policy ruins a perfectly good textbook example of competitive markets (large numbers of identical price taking producers) I could use to illustrate market efficiency in my introductory econ classes. Anyway, here are some of the highlights of the latest farm bill...
The House farm bill is a good bill,"said Tom Buis, president of the National Farmers Union, with a membership of 250,000 farm and ranch families.
OK, bad news right from the start. If the Farmers' Union is on board it means we're inefficiently raising farm incomes at the expense of food consumers. That's right, if we artificially inflate farm incomes through price support programs then we're artificially raising the price of agricultural products--otherwise known as food.
"Conservation spending is increased by $4.6 billion, nutrition program spending by $4 billion, renewable energy efforts by $2.5 billion and, for the first time ever, provides $1.6 billion for fruit and vegetable growers."
Oh goody, we're adding fruit and vegetable growers to the union. Now for some good news.
American Farm Bureau Federation President Bob Stallman said, "For the first time in recent history, no additional funding is provided for commodity programs. At the same time, the bill meets the needs of more of America's farmers by providing $1.6 billion in new funding for specialty crop research, conservation, pest and disease programs, and nutrition.
In the world of farm policy, no additional funds is as close to a funding decrease as we can hope.
One of the more controversial measures in the new bill is a last-minute provision for taxing U.S. subsidiaries of foreign companies. It's probably obvious to say Republicans weren't happy:
Republicans from farm states became angry after the measure increasing taxes by $4 billion on U.S. subsidiaries of foreign companies was added to the bill at the last minute, in part to pay for nutrition for impoverished families.
And each year, it seems like more and more groups are willing to make bad economic arguments to justify putting their hand in the ever expanding cookie jar of entitlements.
"The House version of the Farm Bill is a positive step in the right direction," said Steve Ela, a certified organic farmer and president of the Organic Farming Research Foundation. "However, we now must turn to the Senate and advocate that a fair share of funding resources be allocated to organic research and education initiatives. The investment in research, certification cost sharing and education is vital to assist U.S. farmers to develop the knowledge base to meet the demand for organics."
Wait, if there is that big of a demand for organics, shouldn't there be some mechanism for farmers to recover their investment costs? Oh I don't know, some rationing mechanism that serves to adjust the amount consumers want to buy and the amount producers want to sell? Hmmmm...like a PRICE. Sheesh...I better wrap this up, I'm getting angry.
I know I'm in the minority here, but U.S. farm policy should serve one purpose and one purpose only: correct market failures. Unfortunately, strong farm lobbies have overtaken the process and created economically inefficient farm policy that at this point is impossible to correct. Which presidential candidate is going to be the first to say "When I'm elected I am going to scrap the farm bill and start over."? My guess is the one who doesn't want to get elected.
