There has barely been time to process the Obama Administration’s unfortunate decision to stand by US biofuel policies—bad for the environment and hungry people, here and in developing countries—and now we’re confronted with what to do about ag subsidies that make it hard for developing country farmers to compete. With Congress failing to approve new legislation, the 2008 farm bill expired at the end of September and US policy reverted to “permanent” legislation passed in 1949 (that’s even older than the Foreign Assistance Act!) The effects have been muted so far, in part because Congress passed a continuing resolution to extend food stamps for millions of poor families through March, but if nothing else is done by January 1, the price of milk is expected to double and things get crazier from there.
The Senate passed its version of the farm bill last June, but the House bill never reached the floor. Some policymakers are calling for temporary extension of the 2008 legislation, and there could be advantages to that since both bills this year include features that are even more trade-distorting than those they replace. An extension would also mean that the ag committees are working with a lower budget baseline when they return to the issue, which is one of the reasons that this option is exceedingly unpopular with key farm constituencies.
The key differences preventing congressional agreement on a farm bill are how deeply to cut food stamps and whether to retain “counter-cyclical payments” that subsidize farmers when prices fall below legislated targets. The farm bill approved by the House Ag Committee would cut food stamps by three times as much as the Senate bill. It would also reverse the Senate decision to eliminate counter-cyclical payments (to be called price loss coverage), and make them even more trade-distorting by linking them to current production.
So if there must be a farm bill this year, let it be the Senate bill, warts and all.