Farming for Dollars
Wall Street Journal
July 6, 2007

As Sisyphean tasks go, a reduction in farm subsidies is the domestic version of Arab-Israeli peace. But as Congress writes another five-year farm bill, we're glad to see that a few brave Members are still willing to give it a try.

And if they ever have chance, it ought to be this year. Farmers have been pocketing about $20 billion a year in taxpayer handouts, even as they enjoy record crop prices. Thanks to the ethanol subsidy boom, corn has hit as high as $4 a bushel, more than double the 2005 price. Yet almost half of all farm subsidies go to corn growers, thanks to the clout of Midwest and Plains-state Senators. The USDA reports that prices for wheat, soybeans and sugar are also at "near-historic highs." Farm incomes are now about 30% higher than the average for all workers. And thanks to a surge in land values, the average net worth of a full time farmer is $830,000.

The (temporarily) historic Freedom to Farm Act, enacted in the mid-1990s, was intended to phase out federal subsidies by the year 2002. But Congress couldn't resist the pressure for annual farm bailouts, and farm payments increased to $23 billion in 2001 from $7 billion in 1996. Then in 2002 Congress reinstated price supports to end these annual bailouts. That didn't work either.

Farmers have received price supports and an annual "emergency" payout every year since 2001. In 2003, drought assistance went to farmers in hundreds of counties where investigators later discovered there was no drought. Farmers in Washington state received earthquake assistance even when their crops weren't damaged. Yet the farm lobby continues to push $7 billion in new "emergency" payouts this year for livestock, milk, fisheries and rural development aid.

The enduring myth is that all of this aid goes to needy family farms. In reality price supports have accelerated the demise of small farms because the benefits go to the most profitable growers. Citizens Against Government Waste has documented that three-quarters of the payments under the 2002 farm bill have gone to the richest 10% of farmers. More than half of the $1.9 billion sugar program lines the pockets of the wealthiest 1% of plantation owners.

Although the law technically limits any single ranch or farm from receiving more than $360,000 in farm subsidies in a year, you can drive a John Deere tractor through the loopholes. In 2003 the biggest single recipient of farm aid was Riceland Foods, in Arkansas, which bagged $69 million, according to Citizens Against Government Waste. Other "farmers" collecting payments include ExxonMobil, Chevron, International Paper and Caterpillar.

The Bush Administration has proposed modest reforms that are worth supporting (see "Washington Harvest" editorial, March 27). But a more ambitious effort is being pushed by an unlikely pair of House Members, Wisconsin Democrat Ron Kind and Arizona Republican Jeff Flake. They'd phase out most direct cash subsidies to farmers and reroute funds into "risk management accounts."

These would be insurance policies that farmers could draw upon in years when their incomes fall unexpectedly. Some of the money for the funds would come from the government, in lieu of subsidies, and some would come from the farmers themselves. Farmers could put up to $8,000 a year tax-free into the accounts, similar to a contribution to an IRA. After 2014 the accounts would become self-financing by the farmers, and government payments would eventually cease.

The Kind-Flake bill would steer tax dollars away from the wealthiest agribusinesses, while funding a safety net for moderate-income farmers facing real financial strain due to bad weather, low prices, or crop failure. Only farmers with gross incomes of less than $200,000 would be eligible for aid.

This all makes sense. But in order to get bipartisan support for this new aid formula, liberal groups are demanding new social welfare and environmental programs that could end up replacing one giant waste of money with another. So the Kind-Flake bill provides $6 billion for "conservation programs" and makes payments tied to "environmental performance."

It funds 300,000 new acres of wetlands preservation, a Grasslands Reserve Program, wildlife habitat, and anti-urban-sprawl program designed to wall off "millions of acres of farmland" from development. If there is anything more objectionable than paying farmers to grow food, it's paying them not to grow anything.

The danger is that Congress's agricultural barons -- who favor the status quo, only more so -- will pocket the new subsidies and drop the reform. The bill that passed the House Agriculture Committee recently is a classic in bipartisan logrolling. Messrs. Kind and Flake have a better idea -- and let's hope that in these flush times liberals and conservatives can unite on the House floor to slash subsidies to all but the poorest farmers.