NCPA - National Center for Policy Analysis

Gargantuan Farm Bill Distorts Markets

January 25, 2002

The Daschle-Harkin farm bill up for debate in the U.S. Senate would add $73.5 billion in spending over 10 years on top of the $98.5 billion that would go to maintaining current programs. Among its worst features, according to Sen. Dick Lugar (R-Ind.), is that it encourages overproduction -- further eroding farm prices and prompting even more subsidies.

Critics argue this policy distorts food prices, frustrates innovation, limits product diversity and subsidizes a select group of farmers at enormous public cost -- because the majority of payments in most states go to only the top tenth of farmers.

While the prospect of the downward spiral is obvious to politicians in both parties, most will probably vote for the bill -- since both parties are fighting for control of Congress and neither wants to be labeled "anti-farmer."

Lugar wants to break this cycle and has suggested a program for achieving that:

  • As an alternative safety net for crop and livestock farmers and ranchers, he proposes that each receive a federal payment equaling 6 percent of total farm receipts.
  • This would allow them to pay the premium for whole-farm income insurance that would provide assurance of 80 percent of an average income taken over a five-year period.
  • Not only would such an arrangement be less expensive than $172 billion over 10 years, it would be more market oriented and would allow farmers more choice.

To pass such a program and alter the disastrous course of current farm policy, Lugar is soliciting the organized support of groups that would benefit from the change. He cites the need for involvement among consumers, environmentalists, taxpayers, Social Security recipients and the poor.

Source: Sen. Dick Lugar (R-Ind.), "The Farm-Bill Charade," New York Times, January 21, 2002.


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