The New York Times

October 13, 1985, Sunday, Late City Final Edition

SECTION: Section 3; Page 2, Column 3; Financial Desk

LENGTH: 894 words


BYLINE: By JAMES BOVARD; James Bovard writes frequently on agricultural policy.

BODY: BUYING votes is the only farm policy most Congressmen understand. With existing farm programs, costs to taxpayers have soared, food prices have in some cases doubled or tripled, crop exports have nosedived and farm income has fallen. Yet, as the debate in Washington this last month has made painfully clear, most Congressmen favor perpetuating the tangle of failed and contradictory programs or making them even worse, by imposing manadatory production controls over millions of farmers.

American agricultural policies are a cruel joke. Sugar prices are pegged at four times world prices. The dairy program drives cheese prices to double world price levels. The wool program gave sheep ranchers far more in price-support payments last year than the entire wool crop was worth. The dairy, sugar and peanut programs alone add $7 billion a year to consumer food bills. The Government has spent the equivalent of more than $70,000 per full-time farmer since 1981 - yet farmers are not prospering.

The current farm recession stems largely from the 1981 Farm Bill, which presupposed insatiable world demand for American crops - and that Congress could set price supports wherever it chose, since foreigners would have to buy American crops. Congress set high price supports - and foreign demand nosedived as it became cheaper to buy elsewhere.

Since almost half of America's grain harvest is sold abroad, the 15 percent fall in export sales since 1981 has devastated wheat farmers. As it became obvious that price supports were too high, the Reagan Administration responded with the Payment In Kind program, which paid farmers not to grow crops. With the $10 billion P.I.K. Band-Aid, America tried to boost world prices by slashing its production. But this only encouraged foreigners to plow more land, which both further reduced America's share and kept world grain prices down.

American agriculture is also depressed partly because of continual barrages of Government-sponsored cheap credit. Every time in past decades that farming was on the verge of shrinking to a reasonable size, Congress rushed in with more easy money. The result was soaring land values and continual overproduction.

Almost every farm group is complaining about persistent crop surpluses. Yet the same lobbies are also demanding more cheap Federal credit. But agriculture is heavily overcapitalized right now - which is why the Government is spending billions annually to pay farmers not to sow on tens of millions of acres.

(c) 1985 The New York Times, October 13, 1985

Many Congressmen favor a special Federal boost for falling land values, one more bad idea from Capitol Hill. But for most export crops, debt-servicing costs - the result largely of high land prices - are a larger portion of production costs than labor. High land prices have made American farmers less competitive on world markets. Lower land values, though causing a temporary loan-servicing crunch, would make American agriculture more competitive for the rest of the decade. MANY Americans favor an agriculture policy designed to protect the small-sized, full-time family farmer. But there is no way for farm income support programs to be both equitable and effective. If Federal aid is to reduce crop sizes significantly, it must go to big farmers, who don't need the money. Small farmers do not produce a large enough share of the harvest to make a difference.

Most full-time farmers are wealthy compared with other Americans. The average full-time farmer's net worth as of Jan. 1, 1984, was $790,000. The average net worth of a ''small'' full-time farmer (those with net sales between $40,000 and $100,000 a year) was $532,000. By comparison, the net worth of the average American household is $136,000.

The best thing for the future of American agriculture would be for tens of thousands of farmers to cash in their chips. This may seem unkind - but the alternative is for the Government to perpetually pay farmers not to farm. Too much farmland was brought into production during the booming 1970's and much of that farmland - much of it low-quality acreage that is hard to work profitably - should be retired.

We need an agriculture policy that admits the existence of world markets. For 50 years, Congress has tried to manage agricultural supplies and prices by paying farmers not to grow. Paid set-asides have always been used in conjunction with higher-than-market price supports. Thus, Government first encouraged farmers to grow, and then paid them not to grow. This is plain stupidity that we can no longer afford.

Crop price supports should be slashed to between 75 percent and 80 percent of world market prices. This would dampen grain prices in the short run and make it too expensive for the European Economic Community to continue its lavish agricultural subsidies. The bankruptcy of the E.E.C.'s agricultural programs -knocking out the United States' biggest source of subsidized competition - would be one of the best thing that could happen for American farmers.

Congress should get out of the agriculture business. The gold-plated farmer safety net is raising production costs, sending the wrong signal to foreign competitors and preventing farmers from reacting to market signals. Farmers can either endure a couple more hard years with deregulation and then recapture lost export markets - or become permanent wards of the state.