The House of Representatives is scheduled to begin debate
this week on a bill to provide another five years of farm
subsidies. Unfortunately, the main guide to the farm bill is
a 914-page report by the House Agriculture Committee -- a
report that breaks new ground in convoluted logic.
How convoluted? U.S. peanut prices are double those in the
rest of the world. The committee does not blame the peanut
program's production controls and barriers to imports; it
blames -- "advertising costs which can be particularly high
when a major television or movie personality is hired to
represent the product."
The committee also notes, "If American consumers are
serious about saving money, they should make informed
choices, like purchasing generic peanut butter instead of
name brands." The Agriculture Committee sounds suspiciously
like the Japanese beef lobby, which encourages Japanese
consumers to adjust to the sky-high price of beef by eating
very small pieces of meat.
The committee makes similar excuses for its expensive wool
program. The purpose of the National Wool Act, the committee
report says, is "to assure wool and mohair producers a fair
return . . . during periods of depressed market prices." The
so-called wool price depression has been going on for 36
years. The wool program is expected to cost $121 million this
The report praises the sugar program because "it insulates
the U.S. market from the very volatile and often depressed
world sugar market." The U.S. market is indeed "insulated" --
by sugar prices that are double the world sugar prices. The
committee wants to solve the "sugar problem" with production
controls on sugar farmers.
The report announces that the new farm bill will "continue
the relative supply/demand balance in the dairy industry."
"Relative" is a generous description of that "balance": The
federal government is expected to buy the equivalent of
almost 8 billion pounds of surplus milk this year. The report
opines that "The [milk production] problem is one of
price-cost misalignment between the Federal support price and
a low cost of production for many producers."
Stripped of jargon, that means that the reason the U.S.
has perpetual dairy surpluses is that the government pays
efficient dairymen far more than it costs them to produce
milk. The Agriculture Committee's solution -- more subsidized
dumping of U.S. dairy products and possible production
controls on dairy farmers.
The report justifies spending $69 million a year on the
honey program because of the vital role that pollination
plays in crop production. But the General Accounting Office
last month recommended phasing out the honey program because
"producers of crops can rent bee colonies or purchase their
About wheat, the report declares, "the Committee's
legislation carries forward the same goals which have been at
the root of agricultural programs in place throughout the
20th century." Regrettably, this means the U.S. government
will continue trying to conquer world markets by shutting
down American farms. In 1988, the federal government rewarded
farmers for not planting 29.3 million acres of wheat -- equal
to almost the entire wheat acreage of the European Community,
the U.S.'s primary competitor in world markets.
The Agriculture Committee's report takes pains to rebut
the suggestion that artificially doubling, tripling and
quadrupling food prices hurts the consumer in any way: "It is
clear to the members of the Committee that consumers would
not receive any benefit from cuts in farm commodity prices."
The U.S. Department of Agriculture estimates, based on a
study of 10 farm programs, that federal policy resulted in
$12.1 billion in higher prices to consumers in 1987.
The report lavishes praise on the Export Enhancement
Program, which it credits for much of the increase in U.S.
wheat exports since 1985. But a Department of Agriculture
study concluded in 1988 that nine out of 10 bushels of wheat
exported via the program would have been exported anyhow. The
primary effect of EEP is that, instead of exporting for a
profit, the U.S. sells at a loss. Harvard economist Robert
Paarlberg notes, "It would have been almost a dollar a bushel
cheaper simply to buy surplus wheat on the free market and
then destroy it, rather than to give it away under EEP."
Admirably, the committee report does concede that U.S.
farm policy hurts Third World farmers. "In El Salvador,
shipments of [U.S.-donated] nonfat dried milk exceeded the
amount of domestic consumption causing domestic milk prices
to decline and domestic production to plummet." Federal law
has long mandated that U.S. food aid not undercut farmers in
the recipient countries. But how could the dumping of more
than a billion dollar's worth of free food each year fail to
undercut those farmers?
While the committee report repeatedly pays homage to the
need for farm programs to be market-oriented, this farm bill
is far more interventionist even than the existing farm
legislation. After 60 years of failed federal farm policies,
the House Agriculture Committee appears to have learned
nothing and forgotten nothing.