The US Farm Bill: From Bad to Worse?

"House and Senate negotiators bargaining over a new farm bill have reduced funding for a key school lunch program for poor children abroad and agreed to sharply expand nutrition programs for low-income families and children in the United States."Washington Post, May 6, 2008"How can the world's hungriest schoolchildren be denied meals while the farm bill being debated in a House-Senate conference provides millions in subsidies for wealthy farmers? That's what Congress proposes. In all fairness, it should not become law."Former Senators Robert Dole and George McGovern, Washington Post, May 6, 2008No one would criticize Congress for doing more to help poor children in the United States, but at the expense of even poorer children overseas? Apparently farm bill negotiators have decided that they must cut nearly $800 million over 5 years from a program that provides school lunches for poor children in developing countries in order to increase funding for nutrition programs for American children. But as the congressional sponsors of the program noted yesterday in the Washington Post, the money could easily be found elsewhere with just a little political will. A few examples of the egregious excesses in the farm bill include:

• Millions that might be saved by capping the adjusted income level at which farmers can collect subsidies at well under the nearly $1 million that has been proposed (income after expenses).
• The failure to fix the rules so that farmers cannot game the system by collecting subsidies and then selling commodities later when prices rise above the subsidy-linked price floor.

Finally, as much as $5 billion annually could be saved by eliminating the so-called direct payments that are paid out every year, no matter how high prices go. A version of these payments was originally created in the 1996 farm bill when the intent was to bolster farm incomes as part of a reform to gradually reduce production-distorting subsidies (for more on this, see my book, Delivering on Doha: Farm Trade and the Poor) The administration has continued to support inclusion of the direct payments because they are "non-distorting." But it is now clear that Congress has no interest in reform and, in today's market, the payments are a pure windfall for farmers already reaping the benefits of historically high prices. They should be eliminated.