Wednesday, October 19, 2011

NYT: Farmers Facing Loss of Subsidy May Get New One

This story in the New York Times, demonstrated both the folly that is American politics, and how difficult it will be to ever truly do any real deficit reduction.  I'm not picking on farmers - it is just representative of the system, and a beholden political class.  Very similar to what we read in 2008 [Mar 27, 2008: WSJ - Farm Lobby Beats Back Assault on Subsidies] even as commodity (esp. food) prices shot through the roof.   Even the so called fiscal 'conservatives' are beholden to corporate (much of the U.S. ag sector is corporate) masters [Jun 15, 2011: AP - Republicans Dodge Farm Cut Subsidy]  Again, not picking on this group- - pick any powerful industry, and the game is the same.

  • It seems a rare act of civic sacrifice: in the name of deficit reduction, lawmakers from both parties are calling for the end of a longstanding agricultural subsidy that puts about $5 billion a year in the pockets of their farmer constituents. Even major farm groups are accepting the move, saying that with farmers poised to reap bumper profits, they must do their part.
  • But in the same breath, the lawmakers and their farm lobby allies are seeking to send most of that money — under a new name — straight back to the same farmers, with most of the benefits going to large farms that grow commodity crops like corn, soybeans, wheat and cotton. In essence, lawmakers would replace one subsidy with a new one.
  • Vincent H. Smith, a professor of farm economics at Montana State University, called the maneuver a bait and switch.  “There’s a persistent story that farming is on the edge of catastrophe in America and that’s why they need safety nets that other people don’t get,” he said. “And the reality is that it’s really a very healthy industry.”
  • The subsidy swap is gaining momentum as lawmakers seek to influence the cuts in farm programs that are expected to be made by a special Congressional panel charged with slashing $1.2 trillion from future budgets.  On Monday, leaders of the House and Senate agriculture committees said they were preparing recommendations for $23 billion in unspecified cuts over 10 years, far less than some other proposals.
  • Lawmakers’ reluctance to simply eliminate a subsidy without adding another in its place demonstrates how difficult it is for Washington to trim the federal largess that flows to any powerful interest group. Indeed, the $5 billion program that lawmakers are willing to throw under the tractor, known as the direct payment program, was created in 1996 as a way to wean farmers off all such supports — and instead was made permanent a few years later.
  • The new subsidy is being championed by Senator Sherrod Brown, Democrat of Ohio, and Senator John Thune, Republican of South Dakota.  Mr. Thune, a leading voice in favor of deficit reduction, received at least $80,000 in campaign contributions since 2007 from political action committees associated with commodity agriculture, according to data compiled by the nonpartisan Center for Responsive Politics, which tracks campaign spending. 
  • Critics say that farm subsidies today have little to do with helping struggling family farmers. Instead, they go predominantly to well-financed operations with large landholdings.  An analysis of federal data by the Environmental Working Group, an advocacy group that tracks farm subsidies, showed that the top 10 percent of direct-payment recipients in 2010 received 59 percent of the money under the program.
  • In lean times, such support might seem vital, but in recent years commodity farmers have done well.  The Agriculture Department forecasts that farm profits this year, measured on a cash basis, will total $115 billion, 24 percent higher than last year, thanks to soaring crop prices. Adjusted for inflation, profits are expected to be at their highest level since 1974.
  • The average income for farm households has been higher than general household incomes every year since 1996. The average household income was $87,780 for all farms in 2010, and $201,465 for families living on large farms.
  • Direct payments have come under fire because farmers get them whether markets are high or low. The new subsidy, called shallow-loss protection, would act as a free insurance policy to cover commodity farmers against small drops in revenue. Most commodity farmers already buy crop insurance to protect themselves against major losses caused by large drops in prices or damage to crops. Those policies typically guarantee 75 to 85 percent of a farmer’s revenue, with the federal government spending $6 billion a year to pay more than half the cost of farmers’ premiums.
  • The proposed new subsidy would add another layer of protection to guarantee 10 to 15 percent of a farmer’s revenue, paying out not only in years of heavy losses, but also when revenue dipped less severely.

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