The House farm bill’s sleight-of-hand

When drafting the farm bill, its authors explicitly repealed underlying permanent law governing agricultural price support programs but then tinkered with effective dates to cleverly replace the old permanent law with a new permanent law—a classic case of giving with one hand and taking away with the other.

What is permanent law? During the Great Depression, the federal government deemed it essential to inject liquidity into rural America in order to help reverse the economic decline.  So laws were enacted that dramatically increased farm commodity prices through a complex system of production restrictions.  When it became apparent over time that the federal bureaucracy was not adept at managing agricultural supply and demand, command-and-control commodity programs began to give way to ones that provided farmers with financial support in a less market-distorting manner.

But farmers were never willing to completely sever the umbilical cord to the old programs.  They lobbied  to ensure that the Depression-era laws would be kept in place as a permanent safety net to fall back on, in case Congress failed to enact new programs or the new programs failed to live up to expectations.  For almost fifty years, farm bill after farm bill suspended application of the old law while authorizing new programs for a limited period of time, usually five years.

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The problem with permanent law is the enormous economic impact it would have on the nation if ever implemented.  Agricultural commodity prices would double or triple from present day levels, which are already historically high.  The resulting increase in food prices would reverberate throughout the economy, hurting those on limited incomes the most and subjecting the rest of the population to a jolt of higher interest rates and increased unemployment.  Farmers would also eventually suffer as demand for their crops declined in the wake of the economic slowdown.

The House-passed farm bill responded appropriately to this threat by repealing the offending provisions of the old statutes.  Had it stopped there, the bill would have served the public interest—if future Congresses failed to enact a new farm bill, U.S. agriculture would have operated in a free-market environment rather than under the government’s tight control.

Unfortunately, the House also took the unusual step of making the changes to the commodity price support programs applicable to all “succeeding crop years”, thereby effectively replacing old permanent law with new permanent law and repeating the mistakes of the past.

Admittedly, the new permanent law is less market distorting than what it replaces and therefore represents an improvement that should be acknowledged.  However, its permanency fosters the same ongoing dependency on a safety net that eventually becomes an albatross around the neck of the intended beneficiary.

Principles of good governance hold that no policy or program should be spared periodic review. Periodic review is usually prompted by the automatic expiration of a program’s authority. These principles are on display elsewhere in the House version of the farm bill.  Virtually all conservation, research, energy, forestry, rural development, trade, specialty crop and credit programs covered by the legislation are authorized for a limited time, through 2018.  The Senate version of the farm bill applies similar limits to its programs, including the commodity price support provisions.  Why the House strayed from good governance in its treatment of commodity programs is unclear.

There is, however, a clear way to remedy the situation as well as an imminent opportunity to do so in the House-Senate conference committee which will soon convene to produce the final farm bill.  Conferees should repeal the applicable provisions of the Depression-era permanent law and sunset the authorization of commodity program changes. This action would remove the threat of unprecedented food price increases in case a future Congress failed to enact new farm legislation and would help wean farmers from dependence on government-mandated subsidies.   This outcome should attract support from liberal Democrats and conservative Republicans, presenting a rare opportunity for bipartisan consensus on reform of a federal entitlement program — all without any legislative sleight-of-hand.

Leonard is a former senior staff member for the Senate Agriculture Committee and former special assistant to President Reagan for food and agriculture. He is currently a senior consultant with Prime Policy Group in Washington, DC.