-Caveat Lector- Getting Back to Normal The case against farm subsidies. BY PETE DU PONT Wednesday, September 26, 2001 12:00 a.m. EDT The world has changed. America is at war against terrorism, what president Bush called "the murderous ideologies of the 20th century." Congress has changed too, quickly appropriating $40 billion to meet the emergency and begin waging the war. Then came $15 billion in help for the battered airlines and the restoration by the Senate Armed Services Committee of $1.3 billion in strategic antimissile-defense funds it had previously cut from the president's request. For the moment there is a truce in the ideological wars that consumed Congress for two decades. A new reality is also showing up in unexpected places. Last week's U.S. Department of Agriculture report "Food and Agricultural Policy, Taking Stock for the New Century" is a direct attack on the fundamental concept of farm subsidies, a program that has been sacrosanct since the Depression. The report is a forceful analysis of the negative impact of existing farm policies and a good discussion of the economics of farming. It is a bit soon to conclude that going to war against terrorism has brought common sense to farm policy, but Agriculture Secretary Ann Veneman's report is a good beginning. Farming has changed a lot since the 1930s. As the report points out, farm production has doubled over the last 50 years while the number of farms has fallen by two-thirds. Technology has increased yields; corn yields have grown to135 bushels an acre from 40, wheat to more than 40 bushels from 15. Food expenditures as a share of domestic disposable income have declined to 12% in 1999 from 22% in 1949 while exports have grown to $54 billion from $7 billion in 1970. Farm incomes have greatly increased. As the report points out, they "no longer lag, but rather surpass those of other U.S. households. . . . Most farms are run by people whose principal occupation is not farming." But government agricultural programs have hardly changed; they subsidize agriculture today in much the same way they did during the Dust Bowl and Depression years. The report questions the basis for such subsidies: "Even the most carefully designed government intervention distorts markets and resource allocation, produces unintended consequences, and spreads benefits unevenly. We cannot afford to keep relearning the lessons of the past." "Many of the program approaches since the 1930s proved not to work well or not at all," the report continues: History has shown that supporting prices is self-defeating; Supply controls proved unworkable too; Stockholding and reserve plans [withholding grain from the market to increase prices] distort markets enormously; and Program benefits invariably prove to be disparate, providing unintended (and unwanted) consequences. The report also notes that "there is still no direct relationship between receiving benefits and the financial status of the farm." Subsidies are based on acreage or harvest size, not farm economics. So the poorest 6% of farms, with an average household income of $9,500, receive less than 1% of the payments while nearly half the subsidy payments go to large commercial farms with an average household income of $135,000. Congress recognized in 1996 that the old ideas were not working. So it enacted the Freedom to Farm Act, which was supposed to return market forces to agriculture, reduce agricultural subsidies to $4 billion a year from $9 billion and wean farmers off what Speaker Newt Gingrich called "East German socialist" agricultural programs. But it didn't work. Direct payments to farmers have tripled since 1996.The farm lobby persuaded Congress to enact "emergency payments" over and above the reduced subsidies; they increased to $23 billion last year. And so we are right back where we started 70 years ago, with a set of increasingly expensive, flawed '30s policies favoring large wealthy farmers and costing consumers a great deal of money. Unfortunately it gets worse. Last July the House Agriculture Committee approved Chairman Larry Combest's bill to replace the Freedom to Farm Act that expires in 2002. It restores wool and mohair subsidies that the 1996 act eliminated, adds a new $350 million-a-year peanut subsidy, restores below-target price payments for basic crops and adds a tobacco export subsidy. And it creates new subsidies for fruit, vegetable, hog and cattle farmers. Altogether it adds another $73 billion in subsidies to the $95 billion 10-year base. It is a big step backwards, for in the words of a Cincinnati Post editorial, "Through a variety of techniques . . . the legislation continues to subsidize products it has always subsidized, subsidizes again some it used to subsidize and subsidizes some it has never before subsidized." Which makes Secretary Veneman's report an interesting and unexpected document: a powerful Republican administration critique of agricultural subsidies shortly after a Republican-led House committee approved a massive increase in agricultural subsidies. The report is a good starting point for a long-overdue debate about subsidies, welfare and the free market. I will confess to more than passing interest in the question and a lot of skepticism that reason will prevail. All through 1987 and the winter of 1988 I campaigned across Iowa in the Republican presidential contest, advocating the phasing out of farm subsidies over five years. Every farmer who heard the idea disliked it, but I lost my cool only once, when a farmer stood up and said "Five years? You want to phase out subsidies in five years?" I somewhat testily offered an alternative--how about a 1% reduction a year over 100 years? There was a long pause. And then he replied, "I'd have to think about it." Mr. du Pont, a former governor of Delaware, is policy chairman of the Dallas-based National Center for Policy Analysis. His column appears Wednesdays. <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, mis- directions and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. 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