The Wall Street Journal
Copyright (c) 1998, Dow Jones & Company, Inc.
Wednesday, October 21, 1998
"Farmers Harvest Bumper Crop in Beltway,"

by James Bovard

Nothing better illustrates the loss of spine among Republican politicians than the various farm
bailouts Congress has enacted since July, capped off by this week's budget bill. Agricultural
subsidies -- supposedly in decline -- are skyrocketing. Farmers will likely get over $15 billion in
federal handouts in the period around the November election. Direct handouts to farmers in 1998
could be more than double the level of 1995. And the 1996 "Freedom to Farm Act" -- ritually
invoked as one of the triumphs of the Republican revolution -- is in tatters.

That may not be a bad thing. Some champions of "Freedom to Farm" fostered the illusion that the
act put an end to farm subsidies. In reality, it merely abolished some restrictions on farming while
phasing down subsidies in the distant future. Any decision on ending farm subsidies was delayed
until the next century, effectively killing any chance of serious reform. Farmers got their handouts
and congressmen could pretend that they had fixed one of Uncle Sam's biggest boondoggles.

Yet "Freedom to Farm" is no unalloyed boon for farmers. Indeed, it may well harm many of them.
A recent Agriculture Department study found that most of the act's benefits go to landowners --
often pension or insurance companies -- instead of to the people who actually do the sowing and
reaping. Landowners have responded to new subsidies by raising the rent farmers pay. The report
concludes that "in most cases. . . the resulting [higher] rents. . . essentially passed on much if not
all of the [subsidies] to the landlords." By inflating the price of land, the act boosts the cost of
crop production and undermines American competitiveness in world markets. Higher farmland
values also raise entry barriers for those wanting to buy their own farm, while increasing the
chance of an eventual bust in land values.

Without the 1996 law, farm subsidies would have fallen to their lowest levels in decades, thanks
to historically high crop prices. Instead, subsidized farmers received more than three times as
much in cash handouts over 1996 and 1997 than they would have received under the previous
five-year farm bill. The Des Moines Register reports that wheat farmers got 50 times more in
subsidies for their 1996 crop than they would have gotten under the previous law.

This year, when farm income retreated somewhat, Congress panicked. In July, it voted for $500
million in "disaster payments" to farmers, and for early payment -- just before the November
election -- of $5 billion in handouts originally due next year. Republicans claimed the premature
payout had no net cost, since farmers were going to get the money anyhow. But the next
Congress will almost certainly enact new handouts to take their place.

Then, in September, House Speaker Newt Gingrich and other Republicans rushed to pass a
second farm bailout. The Republicans sought an additional $4 billion in aid; President Clinton
upped the ante by demanding $7 billion. Last Thursday a bipartisan agreement was reached to
fleece taxpayers of another $6 billion.

The second bailout gives favored farmers a 50% bonus on their "market- transition payments" --
the 1996 act's euphemism for handouts. Congressmen claimed the boost would compensate
farmers for low prices, though there was no reduction of federal handouts in 1996 and 1997 to
"compensate" taxpayers and consumers for higher prices.

The two bailouts will provide more than $3 billion in disaster aid to farmers. "We have to be
practical about the impact of rain," said Mr. Gingrich at a press conference, thus making taxpayers
liable for every drop of rain that doesn't fall. Yet farm disaster programs have long been rife with
fraud, waste, and rewards for damaging the environment. The federal government spends $500
million to subsidize crop insurance, which many farmers don't bother to buy because they know
that Congress will shower them with money after a drought. As it is, the definitions of "drought"
and "natural disaster" are continually stretched to allow congressmen to buy as many votes as possible.

Contrast the supposed Republican revolutionaries with the Democratic "big spenders" who voted
to abolish the honey, wool, and mohair programs in 1993, phasing them out over three years. The
GOP Congress never considered such a resolute approach. "Freedom to Farm" merely promised
to phase down subsidies in the politically distant future -- after deluging farmers with extra money
in the short run. (To be fair, congressional Democrats such as Senate Minority Leader Tom
Daschle have generally championed far worse farm policies.)

It will take more than clever bill titles to roll back Big Government. If the Republicans' idea of
freedom is less regulation and greater subsidies for landowners, it is no wonder that Mr. Gingrich
and his cohorts have lost credibility. The only solution to the farm problem is to depoliticize agriculture.


Mr. Bovard writes often on farm policy. Portions of this article are adapted from an article in the
November issue of the American Spectator.