Congress' efforts to shore up the farm economy with large infusions of cash appear to be drawing a backlash that may not bode well for future assistance.
The reaction has been slowly building as Congress wrote successive disaster bills. Last summer, Sen. Pat Roberts, R-Kan., and Rep. Charles Stenholm, D-Texas, warned that it would become increasingly difficult to pass such legislation.
But, with farm organizations asking for disaster aid for a fourth straight year before a seed was planted in 2001, the long simmering backlash has begun to take on a more public form.
In remarks to last month's Southern Agribusiness Forum, Mark Keenum, a Senate aide who was heavily involved in writing the last three disaster bills, cautioned that members are beginning to say Congress has spent too much on agriculture; that the money should go to address other needs.
Keith Collins, USDA's chief economist, said the decoupling of farm payments under the 1996 farm bill has had the opposite effect from what was intended — farmers have become more dependent on Agricultural Marketing Transition Act payments. “When we dump the amount of aid we do, of course we insulate farmers from market realities,” Collins said at a House Agriculture Committee hearing.
At the USDA Outlook Conference, several speakers took aim at farm spending, with one, David Orden, an economist with Virginia Tech, saying that the current combination of AMTA payments and marketing loan gains had led to “policy overshooting.”
“The current policies of direct payments, insurance subsidies and marketing loan payments have expanded 1998-2000 program crop output by 1.1 to 5.7 percent,” he said. “This may seem modest, but with generally inelastic demand for agricultural commodities, this expansion reduces gross market revenue by $3 billion to $15 billion.”
Another Outlook Conference speaker said U.S. agriculture seems to be caught in a circle in which lower prices are used as justification for more federal assistance, which leads to more production, which leads to lower prices.
“That is the quandary as we begin this process of writing a new farm bill,” said J.B. Penn, senior vice president with Memphis, Tenn.-based Sparks Companies. “How do we end this cycle? How do we dismount this tiger?”
Orden acknowledged that any reductions must be done carefully. “With farm payments, they eventually get captured in the value of the land,” he noted in a question and answer session. “Once you begin to disengage, how do you let them down easy without bursting the balloon?”
The Bush administration has begun dropping not-too-subtle hints that it may try to shift spending away from farm programs to provide funding for education, defense and tax cuts. Officials have alerted USDA to expect possible cuts in market promotion funds such as those for Cotton Council International.
Meanwhile, industry sources say the White House Office of Management and Budget's review of the new disaster program regulations is taking longer because analysts are seeking savings to apply to other spending priorities.