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Congress must end blank check to use on government farm subsidies

Congress must end blank check to use on government farm subsidies
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Over the last two months, leading members of the agriculture committees in Congress have proposed using an obscure law, the Commodity Credit Corporation Charter Act, to give the administration a permanent annual blank check of nearly $68 billion to spend on federal subsidies to farm businesses. The administration would be free to allocate the funds to programs that would not be developed or authorized by Congress.

This means any president could use the funds to benefit special interest groups for political purposes. From a public policy perspective, allowing any administration free rein to spend that much money on programs of its choice with little or no accountability to Congress is simply a bad idea. It also represents an abdication by Congress of its key policy and oversight duties as the legislative branch of the federal government.

Commodity Credit Corporation funds are sent to farm businesses through a wide range of farm bill programs authorized by Congress. These include crop subsidies triggered by low prices, payments to adopt soil and other natural resource conservation practices, promoting exports of crops from almonds to wheat, financing international aid shipments, providing relief assistance, and supporting agricultural and science research.

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In normal times, Congress would likely not consider any proposal to raise the Commodity Credit Corporation cap, and certainly not to the level of nearly $68 billion. The current annual spending cap of $30 billion has been in effect since 1986. Since then the cap has only been exceeded once by a small amount. There is no reason for a permanent increase because of current and projected spending on farm bill programs. The Congressional Budget Office estimates that those federal subsidies will average less than $11 billion each year over the next decade.

Since 2018, the administration has exploited some of the discretionary provisions of the Commodity Credit Corporation Charter Act to send an additional $28 billion to farm businesses as compensation for any losses they might have incurred because of the trade wars with China, Mexico, Canada, and other nations. Then with the Cares Act, Congress increased the cap by $14 billion to deal with the dire disruptions in the agricultural commodities market caused by the coronavirus pandemic.

Over the past 40 years, administrations of both parties have rarely chosen to use excess Commodity Credit Corporation funds for their own political purposes. When they have, their initiatives have been limited in scope and subject to scrutiny by Congress. For instance, when President Obama had disbursed $350 million in emergency disaster assistance in 2010, some of the funds were specifically targeted for Arkansas rice producers, a move that many viewed as an attempt to help Senator Blanche Lincoln retain her seat in her unsuccessful campaign for the 2012 election.

Congress responded by inserting a provision in the appropriations bill for the following year that sharply curtailed the discretionary authority of the administration to use Commodity Credit Corporation funds for any more emergency payments. Those restrictions were retained through 2017 but were not included with subsequent appropriations bills. President Trump was then free to use his authority to compensate farmers to the tune of an additional $28 billion for any losses from all the trade wars.

Like the other industries that export, many farm businesses have been hit hard by the policy decisions of the administration and, more dramatically, by the coronavirus pandemic. However, giving permanent authority to the administration to send new federal handouts that are 200 percent larger for producers than those authorized by Congress is fiscally irresponsible and diminishes legislative and oversight responsibilities.

While this approach could be viewed as addressing urgent legitimate needs, it will likely lead to political subsidy initiatives in the future. With little or no accountability and oversight from Congress, such programs inevitably invite abuse. The initial $30 billion cap for Commodity Credit Corporation funds should be left in place or even lowered. Let Congress be the one to decide when circumstances warrant raising the cap, not when it is expedient for a current or future administration.

Vincent Smith is director of agriculture studies at the American Enterprise Institute and professor of economics at Montana State University. Joseph Glauber is a visiting fellow at the American Enterprise Institute and senior policy research fellow at the International Food Policy Research Institute.