Agriculture matters: the new role of farm policy

Farm policy plays an essential role in domestic food security and sustaining life; everyone must eat. As with any issue, I start with the question of whether it is appropriate for the federal government to have a role. Although I have a strong free market bias against government intervention in markets, there are two specific policies that I believe warrant analysis. 

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The first is Federal Crop Insurance, where there is federal backing of private insurance, which helps farmers manage lost income from flooding, drought, pests and other perils. According to publications released by opponents of federal farm policy, without government involvement, producers would simply not be able to purchase comprehensive insurance. Just as most Americans would not be able to obtain a home mortgage without insurance, farmers -- many of whom borrow more money each year than most Americans will borrow in a life time -- simply could not farm without insurance.  Federal involvement in this market is tempered by the substantial premiums producers must pay private companies and agents who provide exceptional service, innovative products, and policies that help producers manage individual risk. While risk-sharing limits government exposure, it substantiates significant economic activity, is actuarially sound, and fully complies with our trade commitments. To be certain, Federal Crop Insurance is not perfect.  Current policy does not meet the needs of all producers; it leaves some with low coverage, uncovered risks, and high deductibles. 

The second policy we must examine is how we protect both consumers and producers from the varied non-market forces that disrupt the free trade of agriculture products and commodities. Critics have consistently stated that circumstances have changed since the first Farm Bill. They might just as easily dismiss the need for an army because we are no longer at war with Britain. Circumstances change but threats remain. The global agriculture market is the most distorted of any sector, manipulated by high foreign subsidies and tariffs. U.S. producers can compete with foreign competitors, despite disparate labor and environmental standards, but they cannot compete against foreign treasuries as well. American producers are competing not only against foreign producers, but also against totalitarian governments that switch trade restrictions on and off and several celebrated free market countries with government-run trading desks manipulating markets by buying and selling commodities. We must work to ensure a level playing field for our American producers and thwart efforts to unilaterally unwind policies that protect our producers from the actions of foreign governments. 

In short, there is a necessary role for federal farm policy. The question remains, what form should that role take? Some argue for policies untailored to risk and, therefore, of little use to producers and creditors. Real reform should ensure that policies are tailored to risk.   

Finally, with respect to matters of fiscal responsibility, farm policy has taken a hit in every reconciliation bill involving cuts over the past 19 years. Over the past six years, fundamental programs that support our farm policy have been cut by $15 billion and appear likely to bear significant reductions yet again. Meanwhile, nearly all other federal spending has increased. Our farm policy accounts for just 16% of the USDA budget and less than one-fourth of 1% of total federal spending. There should be no sacred cows, but neither should there be scapegoats. In the ‘80s and ‘90s, deep cuts to farm policy in the short-run translated into bloated spending over the years that followed. However, when reasonable resources are allocated, farm policy has consistently come in under budget. 

Agriculture matters and a federal investment in farm policy is both strategic and necessary. Good farm policy need not be expensive, but bad policy can cost the American taxpayers a fortune.