NCPA - National Center for Policy Analysis

Two Approaches to Farm Aid

November 5, 2001

A new five-year farm bill is before Congress. The principal bill is the "Farm Security Act of 2001," by Rep. Larry Combest (R-Texas), chairman of the House Agriculture Committee.

This legislation has passed the House of Representatives and is now pending in the Senate.

It would continue the tradition of virtually open-ended handouts to farmers based primarily on what type of commodity they produce. The alternative bill in the Senate, by Richard Lugar (R-Indiana) would institute a broader, more flexible approach to farm aid.

One of the problems with the House approach is that aid tends to go to products that were dominant when the original farm legislation was enacted in 1933, such as corn and soybeans, but not to others, such as livestock and vegetables.

As a result, we are producing too much of some commodities and too little of others. It also creates problems in international trade negotiations, where the U.S. has been trying for years to phase out all government subsidies. Since U.S. farmers in general are the low-cost producers, if every country abolished all its farm subsidies, U.S. farmers would gain market share.

Because it is more efficient, economists prefer general support for farm incomes that is not tied to production. That is what Canada does and what Senator Lugar is trying to do.

  • Right now, almost three-fourths of farm aid goes to less than 20 percent of farms.
  • The Lugar bill would give farmers about the same total amount of aid as Congressman Combest, but would spread farm aid around to more farmers while improving agricultural efficiency.

The Combest approach would make the distribution of farm aid even more unequal.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, November 5, 2001, National Center for Policy Analysis.

 

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