By RICK A. RICHARDS
Indiana Correspondent

WASHINGTON, D.C. — There is an air of familiarity to discussion on the 2012 farm bill; given the political and economic climate, the discussion isn’t so much about continuing current programs as about saving as much as possible from being cut.

Dave Schweikhardt, an ag economist at Michigan State University, said the debate on the farm bill is a microcosm of the debate on the federal budget. “It would be quite naïve not to recognize that we’re in a different era in the budget and economics,” he said. “In the environment of cross-cutting currents of economics, there are very different political views to consider.”

One of those viewpoints was laid out in a teleconference July 11. The American Enterprise Institute (AEI) presented a series of papers on a variety of ag-related issues, and its message was clear: Now is the time to implement drastic cuts in the farm budget.

Under the Title I provisions of the farm bill – which include traditional farm programs for commodity subsidies and crop insurance – Dan Sumner, director of the University of California Agricultural Issues Center, summed up AEI’s position: “Among the traditional crops of corn, wheat, cotton, rice and soybeans, there simply is no reason for subsidy programs to be there. The subsidy program is an artifact of an earlier era. Supporters claim they are used to transfer income to the poor and create development in rural areas, but that simply doesn’t work.

“There is no public policy rationale for crop subsidies. Now is a good time to get rid of them. Farm income is at record levels. Farming is a cyclical business and income might be less in the future, but not any less so than other businesses.”
The AEI report also favored eliminating tax incentives for ethanol production and turning crop insurance over to the private sector. The goal, according to AEI, is to create a market-based economy for agriculture that is less dependent on government subsidies.

Bruce Babcock, an agricultural economist at Iowa State University, contributed one of the key reports, Something for Nothing? Direct Payments and Title I Farm Programs. He wrote: “A farm program should not duplicate a service that can be provided by the private sector. An efficient farm program is one that has no or minimal effect on farmers’ production decisions, makes payments only when they are needed and does not duplicate what farmers could purchase from the private sector.”

He called for the elimination of direct payments to farmers and elimination of countercyclical payments and marketing loans. “Current farm programs are not an efficient use of taxpayer money because they duplicate price protection that the private sector can provide and they make payments when the farm sector is highly profitable,” wrote Babcock.

“The one positive aspect of current farm programs is that they do no harm, in that they do not cause farmers to significantly change the crops they plant or how they grow their crops. But do no harm is insufficient justification for continuing to spend more than $5 billion on farm bill programs.”

Schweikhardt said while that sounds good, no one should “underestimate the ability of farm groups to defend what they have.” Even so, he recognized there is a much different environment in Washington today than in recent farm bill debates. “From 1933 to today, there has been a growing coalition that has expanded the farm bill, allowing it to pass. It wouldn’t pass with only farm subsidies,” said Schweikhardt, who explained that’s why things such as food stamps, school lunch and breakfast and other nutrition programs are part of the farm bill.

It’s also the reason, he said, why conservation programs have been included. “It’s made for a much more resilient coalition for the farm bill. It’s a very smart political strategy.”

Barry K. Goodwin, an agricultural economist at North Carolina State University, wrote an analysis of farm subsidies for AEI. Goodwin noted the various expansions of the farm bill to include programs not directly related to crop production. “In the 2008 farm bill, 68 percent of the total budgetary commitment applies to food and nutrition assistance,” he said. “Commodity programs account for only 11 percent and conservation makes up about 8 percent.

“Five programs account for about 95 percent of total U.S. spending on food and nutrition support. These include the Supplemental Nutrition Assistance Program, also known as the food stamp program; the National School Lunch Program; the Special Supplemental Nutrition Program for Women, Infants and Children; the Adult Care Food Program; and the School Breakfast Program.”

Not the first call for cuts

Don Villwock, president of the Indiana Farm Bureau, said this isn’t the first time agriculture has dealt with this kind of discussion. He said this debate has taken place since the 1930s, although then there were more regional differences that took center stage over which crops and programs would be a priority.

“If we thought prices would stay at the current level, it probably wouldn’t matter,” said Villwock. “But we will not stay at this level. This debate is as much about the budget as it is the farm bill and farm policy. This debate is about finding a map to show the way to slash and bring the budget in line.
“For farmers, it’s about maintaining the safety net. From what I hear from farmers across Indiana I’ve met is that they want a safety net.”

Villwock said the key issue for Hoosier farmers is maintaining crop insurance, more than direct payments. He said the other key is maintaining ag research in order to keep up with the growing world population that is going to demand even more out of the land.

For Carl Zulauf, an agricultural economist at The Ohio State University, the economic and political pressure surrounding the 2012 farm bill is different.
“Some structural questions about farm programs have emerged in the last 10 to 20 years. Safety net issues in the farm bill have been around since the 1930s and it’s time to look at those,” he said. “The structure of U.S. farming has changed so much we really need to be asking if these are the programs that are best for 21st century farming.”

At the same time, Zulauf said the country is asking about its debt level and what is sustainable.

“These are difficult questions to answer and it goes to the larger questions of how society wants to orient itself for the future,” Zulauf explained.
In the end, he doesn’t expect subsidies to end, but they could be changed.
“I don’t see spending as totally disappearing, but we’re going to have to answer the question of what are we trying to accomplish with this farm policy,” he said.