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Yes, AEI, the sky is falling if you’re on the wrong end of a disaster

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  • American Enterprise Institute economists think 'sky is falling' is good analogy for farm group efforts to get new farm bill passed.
  • Maybe they should try telling that to the farmers and ranchers who are trying to deal with the effects of the second drought year in a row for many.

For all of you who have used direct payments to help secure your operating loans over the last few years, here’s a news flash: You didn’t need those. They’re just a drain on the Treasury and shouldn’t have been made.

For those of you who received marketing loan payments when prices dropped below the cost of production a few years back: Return those to the government. What were you thinking; that the government should help make sure you continue to produce abundant amounts of food, fuel, feed and fiber?

For those of you who took out federal crop insurance, which you could not have afforded if you had had to pay the full premium, either turn the policy back in or pay the government the premium subsidy. That was all a mistake Congress should have avoided.

Sound nonsensical? Well, meet Vincent Smith, a fellow at the American Enterprise Institute, who also apparently works (sometimes) as an agricultural economist at Montana State University. Dr. Smith and his associates think the recent farm programs were all a mistake and that you and the country would have been better off without them.

In recent weeks, AEI has sent out a series of press releases attacking the farm bill versions written by the House and Senate. Some of those have been picked up and printed in full by ag media outlets such as Farmers Hotline.

In one, Smith asked what would happen if Congress failed to pass a farm bill by Oct. 1. “Not much,” Smith answered. “The sky won’t fall, Chicken Little will mend the bump on his head from the acorn, and U.S. agricultural (sector), which the USDA predicts will earn record revenues and profits from its 2012 crops, livestock sales and government subsidies, will continue to enjoy a banner year.”

Smith says farm organizations have been claiming the sky is falling because Congress failed to pass a new farm bill before it recessed for the Nov. 6 elections. The truth is, he said, many farm programs have their own funding mechanisms and will continue unaffected.

Farmers know that isn’t the case, and that some programs have already ended because the funding expired at the end of the government’s fiscal year on Sept. 30. But little details like that don’t matter to the American Enterprise Institute scholars.

Unfortunately, members of Congress who oppose farm programs will use such rhetoric for political cover when they face the voters over the next few days. And farmers who suffered losses due to this year’s drought and other weather disasters will just have to “do the best they can.” 

Discuss this Blog Entry 3

Anonymous (not verified)
on Oct 10, 2012

I think it is more like our chickens coming home to roost. Ag subsidies are just a small part of it. The so called farm bill is 80% food aid to the "poor" most of the rest is directed to smaller size farmers that produce grain that is only indirectly, through animal agriculture, used by the consumer. It is going to hurt and people will have to help each other in ways they haven't in a long time but we as a nation are to retain anything that resembles the personal and economic freedom. We had better get started unwinding the the bloated DC monster.

Anonymous (not verified)
on Oct 10, 2012

His statement is based on two principles. The first, agreed to by most ag economists, is that because over time input costs rise to capture the value of government subsidies, over time their value is lost to the producer, meaning that in the long run farmers would be better off without them. The second principle is that government is an inefficient provider of services that have free market equivalents, such as crop insurance. Most politicians don't want people to understand these principles because this lack of understanding generates campaign funding from special interests. Two good books - "Plowshares & Pork Barrels: The political economy of agriculture" and "Common Sense Economics: What everyone should know about wealth and prosperity." Both have websites explaining the economic principles briefly. Or ask an extension ag economics specialist. Quite eye opening!

Anonymous (not verified)
on Oct 10, 2012

When input costs have risen to capture the value of government subsidies time and time again and the farmers suddenly lose those subsidies, can the ag economists tell us what happens to their cost of living at that point? The already very slim profit margin suddenly goes underwater! THAT is commen sense....

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