House must protect taxpayer interests in next farm bill

House must protect taxpayer interests in next farm bill
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When it comes to farm subsidies, who in Congress is going to protect the interests of taxpayers and consumers?

It certainly isn’t the House Agriculture Committee. Its new farm bill may be great for agricultural special interests, but it’s a disaster for everyone else.

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The committee’s bill would make the current out-of-control farm handout system even worse by creating new loopholes to funnel more taxpayer money to special interests, undermining existing protections.

 

Under current law, you don’t even have to farm to receive farm subsidies. Sen. Grassley (R-Iowa) recently explained this absurdity: “Setting sound, enforceable payment limits for subsidies is a straightforward way to close loopholes that allow some farmers to exploit the system. They do this by using non-farming family members — or ‘managers’ — to qualify for additional subsidies, paid by taxpayers. This practice is dishonest and ties up funds that could help young farmers get started in farming.”

What does the committee farm bill do to address this issue? Nothing. In fact, it would make this abuse even worse by making it possible for cousins, nieces and nephews of farm operators to receive farm subsidies.

Commodity subsidies should go to one manager per farm — a key recommendation in the Trump administration’s fiscal 2019 budget — not to multiple members of the same family, some of whom may not even be engaged in farming.

The committee bill would also game a massive new commodity program, the Price Loss Coverage program, so it can deliver more handouts to agricultural producers.

This program triggers payments to farmers when commodity prices go below a fixed price set in statute, known as the reference price. The problem is, projected prices for most commodities are already lower than the reference prices.

So the program is effectively providing some farmers with taxpayer-guaranteed payments instead of protecting them against severe price losses. Even worse, the bill would actually make it possible for the reference prices to go even higher than they are now.

Unfortunately, farm subsidy waste doesn’t just end at home. Under the Committee’s bill, American taxpayers could be on the hook for payments to Brazilian cotton growers. Yes, you heard right. Taxpayers have already paid about $800 million to Brazil in recent years to settle a long-standing trade dispute over U.S. trade-distorting cotton subsidies.

In the last farm bill, Congress intentionally avoided further problems by not including cotton in certain commodity programs. The Committee farm bill would irresponsibly risk another trade dispute by adding cotton to those programs, which very well could lead to taxpayers again paying millions of dollars to Brazil in order to settle a new dispute. As it is, cotton is already one of the most heavily subsidized commodities without being added to these programs.

The serious problems with the Committee bill are not just what it does, but what it doesn’t do. Most importantly, it doesn’t include reforms to fix the critical problems with current farm subsidies.

For example, the bill ignores crop insurance reforms that have been proposed in bipartisan legislation and by the Trump administration, the Obama administration, and the Government Accountability Office.

Currently, taxpayers pay on average 62 percent of the premiums for crop insurance; farmers cover the rest. Is it really too much to ask for farmers to pay at least half of the premiums for their crop insurance policies? One of the widest recommended reforms is to reduce this premium subsidy rate from 62 percent. It should be 50 percent or lower.

Furthermore, the Congressional Research Service recently released a report showing that 94 percent of farm program support goes to just six commodities (corn, cotton, peanuts, rice, soybeans, and wheat). In other words, almost all commodities receive little to no assistance. The committee bill doesn’t address this extreme amount of subsidies going to a small handful of commodities, or the ability of these producers to double-dip into multiple programs.

One common sense reform is to require agricultural producers to choose between the Agricultural Risk Coverage/Price Loss Coverage programs and crop insurance. Producers would still get billions of dollars, but taxpayers wouldn’t be forced to cover the same losses through more than one program.

Finally, the bill doesn’t even put an end to the federal government dictating how much of a commodity can be sold. For example, under the infamous federal sugar program, the federal government would continue to intentionally drive up food prices by restricting how much sugar can be sold. The cost to consumers for this egregious central planning is about $3.7 billion a year.

As the House continues to debate potential farm bill reforms, we arrive back at our original question: Who is going to stand-up and protect taxpayers and consumers?

It will need to be House members who want to fight the swamp, not expand it. It will be House members who recognize that respect for farmers doesn’t mean tolerance for wasting taxpayer money on handouts to the politically well-connected.

Ultimately, House members who are not on the committee will have to do what the committee refused to do: End the egregious subsidy provisions in the committee’s farm bill, and push necessary reforms to fix the harmful farm subsidy system. For once, the swamp needs to lose.

Daren Bakst is a research fellow specializing in agricultural policy in the Institute for Economic Freedom at The Heritage Foundation.