Politics & Policy

Handouts to the Agriculture Industry Are Out of Control

(Photo: Peter Elvidge/Dreamstime)
Congress should cap its subsidies to big agribusinesses.

Congress created two new massive handout programs in the 2014 farm bill. They are now projected to cost nearly double the original estimates — $32 billion over five years, instead of $18 billion.

But brace yourself for the big shock: Agricultural special interests are back, wanting these programs to pay out even more. The clamor for more agricultural handouts seems endless. The taxpayer doesn’t merely help farmers address the risks of farming their land. He also is forced to give handouts to large agribusinesses to address the ordinary risks of running their businesses.

For example, the 2014 farm bill’s two new major handout programs: Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) protect farmers — primarily large producers — if they don’t meet revenue targets or if prices are lower than anticipated. What business wouldn’t want such a sweet deal?

The cotton growers certainly do. Even though the farm bill created a special subsidy program just for them, they now want the U.S. Department of Agriculture (USDA) to make them eligible for ARC and PLC as well. Giving these extra goodies to cotton growers would cost taxpayers an estimated $1 billion a year.

Congress came up with the new cotton program because existing cotton subsidies were violating World Trade Organization rules. The “new and improved” special program was supposed to address this anti-trade effect of cotton subsidies. It failed.

As a result, U.S. taxpayers are now being forced to pay $300 million to the Brazilian cotton industry. That’s on top of the cost of subsidizing U.S. cotton, but that’s what it takes to resolve Brazil’s legitimate claim against our subsidy schemes. If cotton is made eligible for ARC and PLC, it could threaten the existing agreement with Brazil and expose the United States to trade retaliation or possibly even higher reparations to Brazil.

Last year, the Obama administration and Agriculture secretary Tom Vilsack rejected the cotton growers’ request to add them to ARC and PLC, correctly explaining that they had no authority to do so. But cotton interests are still trying to change the USDA’s mind, and now they’ve opened up a second front: asking congressional appropriators to cut them in for a piece of the ARC and PLC action.

This is not to pick on cotton (if you’ll pardon the expression). They’re just following the lead of the dairy industry, which also sought extra help from taxpayers beyond the existing farm-bill handouts.

Last year, the federal government bailed out the dairy industry by spending $20 million to purchase surplus cheese on two separate occasions. The point was to artificially raise milk prices, which had declined significantly since 2014, when they hit a record high. In 2016, the price of milk was just coming back down to the median price of the past 15 years. In effect, the big cheese buy forced taxpayers to bail out dairy producers because prices were returning to normal.

Congress needs to start considering the interests of taxpayers and not just those of big agribusinesses. But don’t expect that kind of behavior from the agriculture committees. Their current farm-bill hearings are devoted to listening to agricultural interests reel off their wish lists and then figuring out how to divert more taxpayer dollars to make the dreams of big agribusinesses come true.

There’s a better way: Get rid of these two programs. That should be a priority for the next farm bill, in 2018. In the interim, there’s a commonsense solution for appropriators and the Trump administration: Place a cap on the programs’ cost. Ensuring that ARC and PLC are not open-ended programs offers taxpayers at least a modicum of protection.

It can be done. An amendment to the original House farm bill that would have capped the ARC and PLC costs passed the House of Representatives overwhelmingly, 267–156, with bipartisan support. The cap, included in the final House farm bill, was set at $17 billion. It would have saved taxpayers an astonishing $15 billion dollars, based on current projections. Unfortunately, this modest amendment was removed in the closed-door dealings of the legislators who came up with the final 2014 farm bill.

Congress needs to stop fleecing American taxpayers to further enrich large agribusinesses. It can start immediately with ending bailouts and limiting the exposure that taxpayers have in connection with these massive new farm-handout programs. That $15 billion should be in the pockets of taxpayers, not large agribusinesses.

— Daren Bakst is a research fellow specializing in agricultural policy at the Heritage Foundation’s Center for Free Markets and Regulatory Reform.

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