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Food Aid Reform in the Farm Bill
Simon Lester
A number of my Cato colleagues have offered good criticisms of developments related to the latest farm bill here, here, here, here, here, and here. (That’s a lot of “heres,” but farm subsidies deserve a lot of criticism!) But there is one possible element of the farm bill that would actually count as “reform”: a proposal to take some of the protectionism out of food aid.
I discussed this issue here and here. As I noted, the way these programs work is that when giving aid to help with food shortages abroad, ”[i]nstead of simply giving money to people to buy food from the cheapest source, the U.S. government buys food from U.S. producers and requires that it be sent overseas on U.S. ships.” Not surprisingly, that’s not a very efficient way of doing things. As noted in an article in the Guardian newspaper, “50% of the US food aid budget is currently spent on shipping costs.”
To address this problem, a food aid reform act has been introduced in the House, and would eliminate the requirements that food assistance be grown in the U.S. and transported on U.S.-flagged ships. Currently, this act is a separate bill, but the article says that “many observers assume that it will probably be tied into the House farm bill eventually.” So, while there’s still plenty not to like about the farm bill, a fix to this long-standing example of economic nationalism would be welcome.
View full post on Cato @ Liberty
Farm Bill: Is Today’s GOP to the Left of Bush?
Chris Edwards
It’s widely accepted that George W. Bush was a big-spending president. He was a social conservative, but not a fiscal one. To his credit, however, even Bush recognized how wasteful and unfair farm subsidies are, and he vetoed the last major farm bill in 2008.
That bill “would needlessly expand the size and scope of government,” he said in his veto message. Unfortunately, Congress overrode Bush’s veto and the 2008 farm bill became law at an estimated taxpayer cost of $640 billion over 10 years.
Congress is moving ahead on another farm bill this year, with the Senate recently passing its version and the House to take up a bill shortly. The Senate-passed bill would spend $955 billion over 10 years—49 percent more than the 2008 bill that was too expensive even for Bush.
Four-fifths of the spending in this year’s farm bill is for food stamps, yet 18 Republican senators still voted for it. Perhaps those members hadn’t noticed that the cost of food stamps has quadrupled over the last decade. Perhaps they hadn’t noticed that federal government debt has doubled since 2008. To members who see themselves as fiscal conservatives, it should be obvious that a less expensive bill this time around is appropriate, rather than one that is far more expensive.
The farm bill to be considered by the House would spend $940 billion over 10 years, and thus is almost as irresponsible as the Senate version. Despite what farm bill supporters are saying, this year’s bill represents a huge spending increase, not a cut.
In his 2008 veto message, Bush noted that the farm bill “continues subsidies for the wealthy,” and he pointed to the high and rising incomes enjoyed by farmers. Farmers are doing even better today, with their incomes soaring over the last five years.
Today’s Republicans often admit that federal spending got out of control under President Bush. But now John Boehner is saying that he will support the new House farm bill that spends 47 percent more than the one Bush vetoed.
View full post on Cato @ Liberty
Just Put Ernie in Charge of the Next Farm Bill
Tad DeHaven
Yesterday, the U.S. Senate passed a farm bill with a projected price tag of $955 billion over ten years. As my colleague Sallie James explains, neither the Senate farm bill nor the House version offer up much in the way of real “reform.” And as Chris Edwards notes, both the Senate and House versions would spend more than the previous farm bill.
One reason why taxpayers are about to get handed another _____ sandwich is because the politicians responsible for crafting the legislation are, well, politicians. And out of the mouths of politicians often come statements that indicate a softness of thought. Take, for instance, the following comments from Senate Agriculture Committee chairwoman Debbie Stabenow (D-MI) who just successfully shepherded a farm bill through the Senate:
“I don’t think you can have an economy unless you make things and grow things. This bill is about growing things. That’s what we need to do in this country,” said Sen. Debbie Stabenow (D-Mich.), who chairs the Senate Agriculture Committee.
The Senate just voted to take more money from average taxpayers and give it to higher-income farm households because we need to “grow things”? Things won’t grow unless the grower gets a check from the government? What in the world is Sen. Stabenow talking about? Grow things?
Apparently, one need only to have watched Sesame Street to be qualified to centrally plan the nation’s agricultural economy:
View full post on Cato @ Liberty
Agriculture • What’s in the $1 trillion farm bill?
What’s in the $1 trillion farm bill?
The Senate is back from recess and is expected to pass the farm bill this week, legislation that sets agricultural policy and funding levels for food stamps.
The Congressional Budget Office estimates that the bill will cost taxpayers $963 billion over the next 10 years. About 80 percent of this money will go to nutrition assistance programs, such as food stamps, for the needy. The rest of the money will pay for other provisions, primarily crop insurance subsidies for farmers as well as conservation, renewable energy and other agriculture programs.
The biggest change in this farm bill from years past is the elimination of the direct payments that the federal government gives to farmers, even during times of successful crop yields. This bill instead transitions to a risk management system that supports farmers only when they are hurt by weather disasters or fluctuating commodity prices.
In past years during the old direct payment system, the government would sometimes pay farmers not to grow crops. This new system would have the government step in only to keep farms afloat if they are suffering from losses due to events beyond the farmers control and will help subsidize crop insurance.
Some other changes in this year’s farm bill include increased support and funding for community farmers’ markets to promote Americans eating more locally grown food. It also includes programs designed to encourage younger Americans to enter into farming as a profession. The average farmer in the U.S. today is in his late 50s.
Senate Agriculture Committee Chairman Sen. Debbie Stabenow, D-Mich., who co-authored the bill, said that the farm bill will reduce the deficit while at the same time create jobs.
"Because the Agriculture Committee worked across party lines to cut unnecessary programs and streamline others, we were able to reduce the deficit while strengthening initiatives that boost exports, help family farmers sell locally and spur innovations in new bio-manufacturing and bio-energy industries," she said.
The Congressional Budget Office (CBO) estimates that this bill will lower spending at the Department of Agriculture by $13.1 billion mostly by eliminating direct payments to farmers. The bill also includes provisions aimed at eliminating waste and fraud in the food assistance programs. Senate Democrats expect these provisions to eliminate billions in spending, but the CBO estimates that there will be little to no reduction in the food assistance program.
The bill has bipartisan support, and was co-written by Sen. Thad Cochran, R-Miss., the top Republican on the Senate Agriculture Committee. Many Republican senators, and conservative groups, however, oppose the measure, because of the huge cost of the bill.
Sen. John Thune, R-S.D., voted against the bill in committee, saying: "The current climate of budgetary and fiscal restraint requires that we subject all areas of federal spending to close examination-no program can be exempt from reform, including the farm bill."
Many conservatives oppose all farm subsidies in principle, and the conservative-leaning think tank The Heritage Foundation released a study showing the family farms of high-profile names that have received subsidies since 1995, including farms owned by the families of former President Carter, Agriculture Secretary Tom Vilsack, Sen. Chuck Grassley, R-Iowa and the wife of House Agriculture Committee chairman Rep. Frank Lucas, R-Okla. Proponents of this bill say that ending direct payments to farmers will ameliorate this problem of rich farm owners receiving government subsidies.
The White House has declared its support for the Senate bill, and released a statement saying: "It is critical that the Congress pass legislation that provides certainty for rural America and includes needed reforms and savings."
The House Agriculture Committee passed a similar version of the bill, which included deeper cuts to food assistance programs. House Agriculture Committee chairman Lucas called the bill "a responsible and balanced bill that addresses Americans’ concerns about federal spending and reforms farm and nutrition policy to improve efficiency and accountability."
The full House is expected to vote on their bill sometime in June or July. Both the House and the Senate each hope to pass their respective farm bills and then push through a final bill for the president’s signature before the current farm bill expires at the end of September.
http://www.cbsnews.com/8301-250_162-575 … farm-bill/
Statistics: Posted by yoda — Tue Jun 04, 2013 12:52 pm
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Agriculture • What’s in the $1 trillion farm bill?
What’s in the $1 trillion farm bill?
The Senate is back from recess and is expected to pass the farm bill this week, legislation that sets agricultural policy and funding levels for food stamps.
The Congressional Budget Office estimates that the bill will cost taxpayers $963 billion over the next 10 years. About 80 percent of this money will go to nutrition assistance programs, such as food stamps, for the needy. The rest of the money will pay for other provisions, primarily crop insurance subsidies for farmers as well as conservation, renewable energy and other agriculture programs.
The biggest change in this farm bill from years past is the elimination of the direct payments that the federal government gives to farmers, even during times of successful crop yields. This bill instead transitions to a risk management system that supports farmers only when they are hurt by weather disasters or fluctuating commodity prices.
In past years during the old direct payment system, the government would sometimes pay farmers not to grow crops. This new system would have the government step in only to keep farms afloat if they are suffering from losses due to events beyond the farmers control and will help subsidize crop insurance.
Some other changes in this year’s farm bill include increased support and funding for community farmers’ markets to promote Americans eating more locally grown food. It also includes programs designed to encourage younger Americans to enter into farming as a profession. The average farmer in the U.S. today is in his late 50s.
Senate Agriculture Committee Chairman Sen. Debbie Stabenow, D-Mich., who co-authored the bill, said that the farm bill will reduce the deficit while at the same time create jobs.
"Because the Agriculture Committee worked across party lines to cut unnecessary programs and streamline others, we were able to reduce the deficit while strengthening initiatives that boost exports, help family farmers sell locally and spur innovations in new bio-manufacturing and bio-energy industries," she said.
The Congressional Budget Office (CBO) estimates that this bill will lower spending at the Department of Agriculture by $13.1 billion mostly by eliminating direct payments to farmers. The bill also includes provisions aimed at eliminating waste and fraud in the food assistance programs. Senate Democrats expect these provisions to eliminate billions in spending, but the CBO estimates that there will be little to no reduction in the food assistance program.
The bill has bipartisan support, and was co-written by Sen. Thad Cochran, R-Miss., the top Republican on the Senate Agriculture Committee. Many Republican senators, and conservative groups, however, oppose the measure, because of the huge cost of the bill.
Sen. John Thune, R-S.D., voted against the bill in committee, saying: "The current climate of budgetary and fiscal restraint requires that we subject all areas of federal spending to close examination-no program can be exempt from reform, including the farm bill."
Many conservatives oppose all farm subsidies in principle, and the conservative-leaning think tank The Heritage Foundation released a study showing the family farms of high-profile names that have received subsidies since 1995, including farms owned by the families of former President Carter, Agriculture Secretary Tom Vilsack, Sen. Chuck Grassley, R-Iowa and the wife of House Agriculture Committee chairman Rep. Frank Lucas, R-Okla. Proponents of this bill say that ending direct payments to farmers will ameliorate this problem of rich farm owners receiving government subsidies.
The White House has declared its support for the Senate bill, and released a statement saying: "It is critical that the Congress pass legislation that provides certainty for rural America and includes needed reforms and savings."
The House Agriculture Committee passed a similar version of the bill, which included deeper cuts to food assistance programs. House Agriculture Committee chairman Lucas called the bill "a responsible and balanced bill that addresses Americans’ concerns about federal spending and reforms farm and nutrition policy to improve efficiency and accountability."
The full House is expected to vote on their bill sometime in June or July. Both the House and the Senate each hope to pass their respective farm bills and then push through a final bill for the president’s signature before the current farm bill expires at the end of September.
http://www.cbsnews.com/8301-250_162-575 … farm-bill/
Statistics: Posted by yoda — Tue Jun 04, 2013 12:52 pm
View full post on opinions.caduceusx.com
About Farm Bill “Reform”
Sallie James
I have a new Free Trade Bulletin out today that pours all manner of scorn on the notion that the farm bills passed out of the House and Senate agriculture committees last week in any way represent decent reform. The FTB comes just in time for a farm-bill-themed Hill Briefing tomorrow. I cannot attend the briefing, unfortunately, but my colleague Chris Edwards will be there to give ‘em hell, as will our friends from the Environmental Working Group, Taxpayers for Common Sense, and the R Street Institute. Sterling fellows all.
Congress still – despite record deficits, high commodity and farmland prices, and a growing sense that the country is headed in the wrong direction – refuses to have a fundamental debate about the appropriate role of the federal government in farm and rural affairs (my two cents: none). They’re too busy squabbling about how to divide the spoils between North/Midwest and South, and rural vs. urban interests. America deserves better.
View full post on Cato @ Liberty
Food Stamps and the House Farm Bill
Tad DeHaven
Debate on the House Agriculture Committee’s version of the next farm bill will begin in the Republican-controlled chamber in June. One of the most contentious issues will be spending on the Supplemental Nutrition Assistance Program (SNAP, a.k.a, food stamps). The House Ag bill would cut SNAP spending by $20.5 billion over 10 years versus the Congressional Budget Office’s baseline. That’s too much for Democrats and it might be too little for conservative Republicans.
Earlier in the week I wrote that the federal government should not administer or fund anti-poverty programs. Unfortunately, both Republicans and Democrats support big government so that isn’t an option. So let’s put the proposed cuts in food stamps in perspective.
The first chart shows the dramatic increase in inflation-adjusted SNAP spending since 2000. (See here for a quick background on what caused SNAP spending to more than triple since 2000).
The second chart shows the projected amount of spending under the House Ag bill versus the CBO’s baseline. Sum up the difference and you get the $20.5 billion over 10 years in cuts. On an annualized basis, it becomes clear that we’re hardly talking about major cuts to the food stamps program. Moreover, as the first chart shows, spending would remain near the elevated levels of recent years.
The CBO’s baseline shows a downward trend in SNAP spending. That’s largely because the CBO assumes better economic growth going forward, which would mean lower unemployment and a reduction in the number of people using the program. However, if the CBO’s economic assumptions turn out to be optimistic, the actual outlays could be higher. The third chart shows what the CBO projected SNAP spending would be under the 2008 farm bill. Spending for food stamps this year will be almost twice what the CBO projected in 2008. The reason, of course, is the economic downturn and the Obama administration’s so-called “stimulus” efforts.
In sum, spending on food stamps has exploded and the House Ag bill would itself do little to reverse the situation. And if the economy struggles going forward, the price tag will be higher.
View full post on Cato @ Liberty
Five Reasons to Repeal Farm Subsidies
Chris Edwards
Cato held a packed forum on Capitol Hill examining major farm legislation that is moving through Congress. Our panelists included Andrew Moylan of R Street, Josh Sewell of Taxpayers for Common Sense, and Scott Faber of the Environmental Working Group.
I discussed five reasons why farm subsides make no sense.
1. Unfair Redistribution. Farm programs take from average taxpayers and give to higher-income farm households, which is a reverse Robin Hood scheme. In 2011 average incomes of farm households was $87,289, or 25 percent higher than the $69,677 average of all U.S. households.
2. Economic Distortions. Farm subsidies can induce excess production, an overuse of marginal farmland, and land price inflation. Subsidies can cause less efficient planting, induce excess borrowing by farmers, and cause insufficient attention to cost control. Farm businesses have less incentive to innovate and control their costs because they know that the government will always bail them out.
3. Environmental Damage. Farm subsidies tend to draw marginal farmland into production, lands that might otherwise be used for forests or wetlands. Subsidies can also induce excess use of fertilizers and pesticides in farm production.
4. Farming Not Unique. Why is farming so coddled by the government? It’s a risky business, but not uniquely so. Industries such as high technology, newspapers, and restaurants are very risky, yet they don’t rely on government handouts. Farming faces certain risks such as adverse weather. But high-tech companies are vulnerable to rapid innovations by competitors, and restaurants are vulnerable to changing consumer tastes and intense competition.
Farmers are supposed to be rugged individualists, so is it strange that they don’t feel more guilt and embarrassment about sponging off taxpayers decade after decade. Instead, farm organizations intensely lobby to keep and expand their welfare handouts from the government.
5. Farming Would Thrive Without Subsidies. If farm subsidies were ended, farming would go through a transition period, which would be tough on some farmers. But farmers would adjust by changing their mix of crops, altering their land use, cutting costs, innovating with new crops and new technologies. Some farms would go bankrupt. But a stronger and more innovative agriculture industry would emerge that would be more productive and more resilient in the long run.
Consider New Zealand’s reforms in the 1980s. That country eliminated nearly all its agriculture subsidies, which created challenges for the nation’s farmers. But New Zealand farmers turned out to be great entrepreneurs, and they made impressive changes to survive and thrive in the new free market environment. Today, New Zealand farmers generally don’t want subsidies, and they argue that we would be all better off without them.
More
- New Zealand Farming Thriving Without Subsidies
- Farm Bill Would Increase Spending 47%
- Sallie James on Farm Bill
- Farm Bill Forum on Capitol Hill
- Downsizing Government on farm subsidies
Photo credit: Sarah Gormley, Cato
View full post on Cato @ Liberty
Farm Bill Would Increase Spending 47%
Chris Edwards
House and Senate farm subsidy supporters are pushing to enact the first big farm bill since 2008. Democratic and Republican supporters say that this year’s legislation will be a reform bill that cuts spending. Hogwash.
Last year, House farm subsidy supporters proposed a bill that would spend $950 billion over the next 10 years, while the Senate proposed a bill that would spend $963 billion. By contrast, when the 2008 farm bill passed, it was projected to spend $640 billion over 10 years. Thus, the proposed House bill would represent a 48 percent spending increase over the last farm bill, while the Senate bill would represent a 50 percent increase.
A new estimate of the House bill finds that it would spend $940 billion over 10 years, which would be a 47 percent increase over the 2008 farm bill. This new estimate is shown in the chart alongside the estimate of the 2008 farm bill.
The CBO score of the 2008 farm bill is here. Scores for the 2012 farm bill proposals are reported in this CRS report. And the new score of the House bill is here.
Since the 2008 farm bill, we’ve had five years of moderate inflation, which has eroded the value of dollars by about 8 percent. Thus, the 2013 House farm bill would increase real spending by 39 percent compared to the 2008 farm bill.
The Republican-controlled House Agriculture Committee says that its bill “saves taxpayer’s money,” “reduces deficit spending,” and “repeals outdated government programs.” That sounds good, and the GOP bill is officially scored to “save” $33 billion over 10 years. But that savings is against the CBO baseline of $973 billion in farm bill spending over 10 years, so the House bill can be said to “cut” spending by 3 percent.
Given today’s huge federal deficits, a 3 percent “cut” by Republicans is a joke in itself. But that’s only a cut against baseline, and since baseline spending has soared in recent years it’s no cut at all.
Consider, for example, that in 2008 CBO estimated that farm bill spending in 2014 would be $67 billion. But CBO is now estimating that farm bill spending in 2014 will be $99 billion. Thus, spending in this single year is $32 billion or 48 percent higher than the politicians promised it would be back in 2008. So you can see that the proposed GOP “cut” of $33 billion over 10 years is incredibly lame.
Despite the fact that politicians are claiming that the proposed new farm bill cuts spending, it’s just a mirage created by rising baselines. The truth is that the House farm bill would spend 47 percent more over 10 years than the last farm bill, or 39 percent more in inflation-adjusted dollars.
For background, see this new study by Sallie James and this essay on the history and failures of farm subsidies. Also note that three-quarters of “farm bill” spending is for food subsidies, which you can read about here. And if you’re in D.C., come and hear about the farm bill at our Capitol Hill event at noon Thursday.
View full post on Cato @ Liberty
Agriculture • Payments by US Farm Safety Net Program: Differences by Crop
Payments by US Farm Safety Net Program: Differences by Crop
10 May 2013
US – An important aspect of the on-going debate over the new farm bill is the proposed elimination of direct payments. This proposal differentially impacts the program crops, prompting a debate among crops and geographical regions over the distribution of payments by farm safety net programs, writes Carl Zulauf and Gary Schnitkey.
The comparison begins with the 2003 crop year because the counter-cyclical program, an important price risk program, was initially enacted in the 2002 Farm Bill.
Distribution of Direct Payments among Crops
Direct payments ranged from 1.3 per cent and 2.0 per cent of crop sales for oats and soybeans, respectively, to 14.9 per cent and 16.2 per cent of sales for sorghum and rice, respectively (see Figure 1). Thus, the elimination of direct payments will have notably different impacts across the program crops. Figure 1 underscores that, while it is straightforward to note that society questions the appropriateness of making $5 billion in annual direct payments with near record crop income; it is less straightforward how to address the differential impact by crop of eliminating direct payments. Source of the data are the U.S. Department of Agriculture (USDA), Farm Service Agency (FSA). When interpreting this ratio, it is useful to keep in mind that sales are based on production and hence planted acres while direct payments are based on historical base acres.
Direct Payments vs. Net Crop Insurance Payments by Crop
Eliminating direct payments would make crop insurance the primary farm safety net program, culminating a 30-year trend toward an increasing role for crop insurance. Thus, it is important to compare the distribution of payments by these two programs by crop.
Figure 2 presents net crop insurance payments expressed as a percent of crop sales. Net crop insurance payment is calculated as crop insurance indemnity payments received by farms minus the premiums paid by farms. Figure 5 is also generated to facilitate comparison. It presents this difference: net crop insurance payments minus direct payments, both expressed as a percent of sales. Source of the data are USDA, Risk Management Agency (RMA). As can be seen, payments differ across crops, with a range of 8.4 per cent for cotton down to .7 per cent for rice.
The distribution of net crop insurance payments in Figure 2 differs from the distribution of direct payments in Figure 1. Net crop insurance payments and direct payments as a percent of crop sales are most similar for corn and soybeans, as well as oats. This similarity, together with the smaller size of direct payments relative to sales, is consistent with the generally=accepted observation that Midwest corn and soybeans are more willing to accept the shift to crop insurance than other crop-region combinations.
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Net crop insurance payments are only 0.7 per cent of rice crop sales while direct payments are 16.2 per cent of rice crop sales. The difference of -15.5 per cent is more than twice as large as the next biggest difference, -7.1 per cent for sorghum. Thus, Figure 5, together with the relatively large size of direct payments to rice (see Figure 1), illustrates why rice is so concerned with the shift from a direct payment to a crop insurance based farm safety net.
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http://www.thecropsite.com/news/13669/p … es-by-crop
Statistics: Posted by yoda — Sat May 11, 2013 11:27 am
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