Untitled Document

May 29, 1988, Sunday, Late City Final Edition

SECTION: Section 3; Page 3, Column 1; Financial Desk

LENGTH: 1042 words

HEADLINE: BUSINESS FORUM: TWO MERCEDES FOR EACH FARMER?;
Farm Subsidies Stifle Agriculture

BYLINE: By JAMES BOVARD; James Bovard is an associate at the Cato Institute.
His book, ''Farm Fiasco,'' will be published in September by the Institute for
Contemporary Studies.

BODY:
FOR more than 50 years, American agriculture has been the nation's largest
recipient of political intervention and economic aid. Agriculture has been
subjected to an almost constant effort by the Federal Government to set prices,
control producers and allocate capital. So far, the clearest lesson of farm
policy is that members of Congress have no incentive to correct their
The New York Times, May 29, 1988

mistakes.

Federal mismanagement is turning one of America's largest industries into a
ball-and-chain on the economy. Every year since 1983, the total cost to
consumers and taxpayers of farm welfare has approached - or exceeded - total
farm income. Subsidies often exceed the market value of an entire crop, even
though many farmers receive no subsidies at all.

Federal agricultural spending - more than $25 billion this year - is the
equivalent of giving every full-time subsidized farmer two new $30,000
Mercedes-Benz automobiles. Even though the average full-time farmer has a net
worth 10 times greater than the average American family, the average non-farm
head of household must work almost one week a year to support farm welfare.
These non-farm taxpayers have paid about $160 billion in farm subsidies since
1980 enough to buy every farm, barn and tractor in 30 states.

Farm programs are the epitome of arbitrariness in contemporary America.
Department of Agriculture bureaucrats have forced Arizona farmers to abandon
three-quarters of their lemon crop to satisfy the department's marketing plans.
The department has bankrupted cattlemen to enrich dairymen, bushwhacked dry-bean
growers to reward wheat growers and clobbered soybean growers.
The New York Times, May 29, 1988

Federal agricultural policy has been a hodgepodge of contradictions since
1929, with conflicting programs to boost and to slash production, to inflate
domestic prices and to drive down prices abroad, and with one program to
conserve farmland and another to reward farmers for plowing
fencerow-to-fencerow. The contradictions have always been there, but the
politicians have never stooped to correct them.

The Federal Government's catastrophic misperceptions of market developments
have repeatedly devastated farmers. In 1930, the Federal Farm Board tried to
corner the grain crop - and helped wreck the world's trading system. In 1973,
after two droughts in the Soviet Union, the Agriculture Department announced
that a new export era had arrived and that farmers should plant until they drop,
thus leading to huge surpluses (and price drops) a few years later. In 1981, the
department was so confident that an era of world food shortages had arrived that
it supported a farm bill that rapidly decimated American farmers'
competitiveness by automatically raising price supports.

Supply control is the heroin of farm policymakers. In the last four years,
the Agriculture Department has shut American farms in a quixotic effort to drive
up world grain prices. This year, the department will reward farmers for idling
almost 80 million acres of farmland - equivalent to the states of Indiana, Ohio,
and most of Illinois. These set-asides increase farmers' cost-of-production -
The New York Times, May 29, 1988

but as long as crop prices increase, policymakers proclaim success.

Huge export subsidies are the only way to hide the profound anti-export bias
of existing farm programs. American wheat is cheaper in Moscow than in Kansas
City, Mo. and American barley is cheaper in Baghdad than in New York. The
Agriculture Department is spending three times the world price to export butter
and sugar and spends four times the world price to boost rice exports. Even
though the United States has a huge comparative advantage in agriculture, only
huge export subsidies have prevented America from becoming a net food importer.

The more welfare American farmers have received, the less competitive they
have become. Every farm handout program has reduced efficiency, produced higher
costs of production or increased Federal control over the farmers. Many farmers
have gone bankrupt largely because of receiving too many subsidized Government
loans. Up to half the cost of producing tobacco stems from the farmers' rental
payments for the licenses to produce that crop.

THE nation's farm policy is built largely from worthless, inaccurate
information. Statistics on crop yields are vital to the Agriculture Department's
judgments on the health and productivity of American agriculture. But different
agencies of the department routinely differ by as much as 100 percent in their
estimates of the wheat or corn yield of the same cropland. The Farmers Home
The New York Times, May 29, 1988

Adminstration bases its loan programs on plans intended to help each borrower
budget his expenses. But a Agriculture Department Inspector General's report
found that more than half the Farm and Home plans were worthless because they
were inaccurate, unrealistic and even deliberately manipulated to establish
eligibility for additional loans.

The Department of Agriculture and members of Congress defend farm programs as
economic democracy - but this usually only means giving a majority the right to
seize a minority's property. In the department's referendum on tobacco
subsidies, more than 80 percent of the votes were cast by non-farmers who own
the licenses the farmers must rent to grow their tobacco. Dairy cooperatives are
allowed to cast their members' votes - which is like allowing a landlord to cast
votes for his or her tenants. In a nectarine referendum, the Department of
Agriculture blatantly tried to bias the election's result and made only a feeble
effort to distribute ballots to farmers who might not support continued control
over the growers.

Farm policy's failure is starkest in the contrast between subsidized and
unsubsidized crops. The vast majority of food products grown in the United
States receive no Federal subsidies. During the 1980's, unsubsidized farmers
have had lower bankruptcy rates than subsidized farmers.
The New York Times, May 29, 1988

Agricultural policy epitomizes the mindless paternalism of modern times. The
Agriculture Department is a bureaucratic Leviathan that, because it was created
to benefit farmers, continues grinding away regardless of how many farmers it
harms. In the end, agricultural policy means trusting the honesty of politicians
and the wisdom of bureaucrats.