Tests for the Tea Party - Part 1: Crop Subsidies

Do the new Tea Party members of Congress mean what they say about reining in federal spending and special deals for special interests? I have two tests for them: crop subsidies and the 1872 Mining Law. This week, let's focus on crop subsidies.

Crop subsidies, as they are structured today, are the costly legacy of outdated farm policies. They distort markets, force up land values, drive out small producers, and enrich large growers. They ought to be a target-rich environment for Tea Party types sworn to shrink the size of government and put an end to federal favors for powerful interests.

The federal farm subsidy system is straight out of Alice in Wonderland. It's a world unto itself, a thicket of bewildering programs that comes with a deluxe package of jargon and acronyms that are opaque to anyone except the most dedicated and/or foolhardy farm policy geeks.

The basics: Five crops - corn, wheat, cotton, rice, and soybeans - scoop up the lion's share of crop payment subsidies, the largest subset in the universe of federal farm subsidies. Between 1995 and 2009, the Big Five crops received $170 billion in payments, out of nearly $247 billion in total farm subsidies paid during that period, according to the Environmental Working Group's fabulous farm subsidies data base.

Very briefly, crop payments include the following:

Direct Payments - paid every year, regardless of a farm's financial condition, whether farmers are getting good prices for their crops, bad prices, or even if they have planted nothing at all.

Counter-Cyclical Payments - paid when crop prices fall below a target set by Congress.

Loan Deficiency Payments - paid to make up the difference between crop loan target prices set by Congress and market prices, which has the perverse result of farmers hoping for prices to fall.

There is much, much more. Environmental Working Group has a good primer on the menagerie of crop and other subsidy programs available to farmers.

Anyway, a leading argument made for crop payments is that farmers face market dynamics that other industries don't, leading to recurring imbalances in supply and demand that can lead to hardship. Once seeds are in the ground, farmers can't switch their crops if market conditions change. Weather is another source of unpredictability.

The counter argument is that crop payments distort food markets, inflate land values, violate international trade rules, and hasten the concentration of farms into fewer and larger hands. Payments encourage overproduction, which lowers prices, which triggers price support payments. Like a breeder reactor, the subsidy system feeds on its own fuel, courtesy of the taxpayers.
 
Tea Party favorites in Congress ought to go after this mess of deficit-inflating pottage with a vengeance. A few of the newly elected TP'ers, however, have done the old soft shoe when faced with hard questions about crop subsidies.

Senator-elect Rand Paul of Kentucky - whose state received nearly $1.8 billion in Big Five subsidies between 1995 and 2009 - indulged in a bit of dancing during the election campaign. At first, he said he does not favor "giving welfare to business." Later, however, he backpedaled, claiming to be a moderate on farm subsidies and offering the consolation prize of pledging to root out waste and abuse in the program.

Representative-elect Vicky Hartzler of Missouri - her state received more than $5.7 billion in Big Five crop subsidies between 1995 and 2009 - claims that crop payments are needed to protect national security by guaranteeing the U.S. food supply. Agricultural economist Ed Lotterman says Hartzler's view doesn't pass the laugh test.

"Since subsidies are no longer tied to production, as they once were, and since we are large net exporters of most major crops and some livestock products, (Hartzler's argument) is far from credible. No respected agricultural economist endorses this view," Lotterman wrote recently.

Hartzler Farms received nearly $775,000 in farm subsidies between 1995 and 2009, of which nearly $659,000 were payments for corn, wheat, and soybeans. Draw your own conclusions.

Hartzler has tried to make an issue out of conservation payments that farmers receive for keeping erodible land fallow, protecting wetlands, and providing other ecosystem maintenance services. Conservation payments accounted for 13 percent of the 1995-2009 farm subsidies total. Her criticism raises broader questions: As a country, what do we want out of our farms? Certainly, we want good, healthy food at prices fair to producers and consumers. Are there other reasons to help farmers? Conserving and protecting natural resources? Boosting food exports? Keeping small, family farms in business? All, some, or none of the above?

Until we and our elected representatives have a serious, facts-based discussion about these root-level issues and are prepared to revise farm policies accordingly, we will go on spending taxpayer dollars in ways that bloat the federal debt and fail to deliver sufficient value in return.

That's a full plate of questions for Congress' Tea Party favorites to chew on. Time will tell whether they can deliver on their promises or contract a case of political indigestion.

Next week: The 1872 Mining Law.