Nothing better symbolizes the collapse of Republican principles than the multiple farm bailouts that Congress enacted late last year. Agricultural subsidies are skyrocketing, and the 1996 “Freedom to Farm Act” – ritually invoked as a triumph of the Republican Revolution – is as much in ruins as a Sudanese pharmaceutical factory.
The 1996 act, which supposedly set the following seven years’ policy, did reduce regulatory burdens on farmers and ended requirements that farmers idle land to qualify for crop subsidies. However, the core of the act consisted of “market transition payments” – money that Congress gives farmers to compensate them for the possibility that farm subsidies might end sometime in the next century. Federal farm spending traditionally was inversely related to crop prices: the higher the prices, the lower the spending. Crop prices were near historic highs when the Freedom to Farm Act was enacted; without the new law, farm subsidies would have fallen to their lowest levels in decades.
Instead, farmers received more than three times as much in cash subsidies in 1996 and 1997 than they would have received under the previous five-year farm bill. Wheat farmers got 50 times more subsidies for their 1996 crop than they would have gotten under previous law, as George Anthan of the Des Moines Register reported. The 1996 law should have been known as the Freedom to Farm Washington Act.
Some aspects of the 1996 act balkanize the nation. The act authorized six New England states to create a “dairy compact” by which politicians could further inflate milk prices and prohibit the import of cheaper milk from Wisconsin and elsewhere into their domain. Milk prices have jumped sharply in those states as a result. House Speaker Newt Gingrich almost single-handedly derailed efforts to fix the peanut program – a feudal system in which farmers need a federal license for each pound of peanuts that they grow for fellow Americans, which drives U.S. peanut prices to be double that of world prices.
Farm income declined in 1998 from near-record levels – and Congress panicked. In July, it voted for $500 million in “disaster payments” to farmers, and for early payment – just before the November 1998 election – of $5 billion in agricultural handouts originally due next year. Republicans claimed that the premature payout had no net cost, since farmers were going to get the money anyhow. But the next Congress will almost certainly enact new handouts to take their place. In September, Gingrich and other Republicans rushed to pass a second farm bailout. The Republicans sought another $4 billion in aid; Clinton upped the ante by demanding $7 billion; a bipartisan agreement was reached to fleece taxpayers for another $6 billion for ag relief.
Congressmen justified giving “emergency” aid to crop farmers because of low wheat and corn prices. In contrast, dairy prices are at all-time highs. However, Rep. David Obey (D-Wis.) explained to fellow congressmen that dairy prices could fall in the future, so a $200 million dairy bailout was railroaded through – with no hearings and no examination. The bailout could mean $2,000 checks for each of the nation’s 100,000 largest dairy producers. Congress also tossed $27 million to mohair, wool, and honey producers. Congress abolished those programs in 1993, but, as long as everyone was getting money this year, it only seemed fair to dig up the ag boondoggle graveyard.
Farmers collected roughly $15 billion in federal handouts in the period just before and after the November election. Direct subsidies to farmers in 1998 could be more than double the level of 1995 – the year before “Freedom to Farm” was enacted.
Most farm products in this nation receive no subsidy, but a handful – including wheat, corn, cotton, sugar, and dairy products – have perennially enjoyed huge windfalls. The only difference between the subsidized and unsubsidized crops is the political pull of those who raise them. A mere 24 percent of all farmers – those with a history of receiving government handouts – are harvesting Freedom to Farm payments.
Champions of the Freedom to Farm Act promoted the illusion that the act ended farm subsidies. In reality, the act merely phased down subsidies over a six-year period. Any decision on ending farm subsidies was delayed until the next century. Farmers got their handouts and congressmen could pretend they fixed one of Uncle Sam’s biggest boondoggles.
When the act became law in 1996, farm-state congressmen talked of its being a “contract” between farmers and taxpayers. Obviously, this contract contained a secret clause that permits politicians to inflate subsidies whenever they need to buy votes. This complete lack of good faith by Congress is another reminder why it is absurd to trust congressmen to abolish farm subsidies in the distant future.
The collapse of the Freedom to Farm Act was predestined by its fine print. The longer the abolition of farm subsidies is delayed, the less likely it is to occur – and the more likely that farmers will again become entangled in government restrictions. The 1996 act also contained a provision mandating that, unless Congress acts decisively to abolish subsidies by 2002, agricultural policies will revert to the 1949 Farm Act – a law that would impose severe production cutbacks and compel USDA to boost price supports for major crops to the stratosphere, thereby destroying U.S. exports. The only reason the 1996 law contained this provision was to allow the farm-welfare lobby to extort more benefits in the next century.
The Republican collapse on farm policy is symbolized by Gingrich, who now believes that average Americans must compensate farmers for each raindrop that doesn’t fall. At a July 17 press conference endorsing more farm aid, Gingrich revealed: “I think we have to be practical about the impact of rain” on farmers. The Speaker also declared that “you can’t just be hidebound or rigid but” must find a “pragmatic way of helping solve the problem” of drought. As usual, “pragmatism” in Washington means squandering new billions on old boondoggles.
Gingrich announced on September 17: “We in this Congress are determined to provide the kind of relief that will help family farmers survive.” But, if congressmen truly wanted to help worthy farmers, Freedom to Farm is a miserable failure. A 1998 USDA study found that most of the benefits of the act are going to landowners – often absentee landowners – not to the people who actually sow and harvest. Landowners responded to new subsidies by raising the rent farmers paid. The USDA report noted, “In most cases … the resulting [higher] rents that were paid essentially passed on much if not all of the [subsidies] to the landlords even though technically the renters received the check.” By inflating both rents and farmland values, the act boosts the cost of crop production and undermines American competitiveness on world markets.
President Clinton and congressional Democrats have consistently offered worse ideas on farm policy than have the Republicans. However, in looking at the various efforts to “reform” ag policy, one is reminded of the efforts of competing factions of reformers to fine-tune the Hungarian economy in the 1980s. The government cannot continue throwing money at farmers without disrupting and undermining American agriculture.
The underlying principle of “Freedom to Farm” is that farmers are still a Brahmin class, morally and politically superior to other Americans – and thus entitled to other people’s paychecks. Over the last three years, full-time farmers, on average, have had far higher incomes than have average taxpayers. Yet, politicians feel obliged to guarantee farmers a good income every single year – especially every election year.
The “Freedom to Farm” act is a model of how not to reduce government power. The Republicans claimed that by reducing government regulation, they had solved the “farm problem.” Some GOP apologists have shrugged off the latest deluge of subsidies, claiming that, as long as production controls were not reimposed, the core of Freedom to Farm remains. However, most taxpayers also consider it a problem when politicians pilfer their paychecks to buy votes from wealthy landowners. (The average full-time farmer has a net worth of more than $1 million).
It will take more than clever bill titles to roll back big government. If the Republicans’ idea of freedom is more regulation and bigger welfare checks for landowners, it is no wonder that Gingrich & Co. have lost credibility with the people who brought them to power. Perhaps Republicans should forthrightly admit their socialist concept of freedom – that the more handouts government gives, the more freedom farmers will have. Worst of all, such double-crosses as the “Freedom to Farm” act may actually turn some citizens into cynics.