Former President Ronald Reagan once accused Congress of spending like a drunken sailor and immediately had second thoughts: "But that would be unfair to the drunken sailor. At least he's spending his own money."
Well, Congress has fallen off the wagon again, spending taxpayers' money with abandon and stupidity in the farm bill it just sent to the president for signature. The bill constitutes a 10-year $80-plus-billion raid on the Treasury, but that is the least of its problems.
The farm bill largely repeals the landmark Freedom to Farm Act of 1996, which was supposed to replace federal subsidies with a market-oriented approach. FFA was designed to increase farmer flexibility and remove market distortions created by price-support payments. In place of price support payments, farmers were to receive fixed "transition" payments that were to be phased down from $6 billion then to $4 billion this year. Instead, Congress now is asking the president to sign into law a 70 percent increase in crop subsidies that would bring total farm subsidies during the next decade to more than $180 billion -- almost $20 billion a year.
In reality, the farm bill is nothing more than an inefficient corporate welfare bill. According to Brian Riedl, budget analyst at the Cato Institute, "Congress could guarantee every full-time farmer a minimum income of 185 percent of the federal poverty line ($32,652 for a family of four) for 'only' $4 billion per year -- one-fifth the cost of the direct subsidies in the new bill." Moreover, contrary to congressional claims that the bill is required to "save the family farm and its way of life in rural America," two-thirds of the subsidies will go to large corporate farms and wealthy agribusiness, most of which generate earnings in excess of $250,000 a year.
The farm bill is designed to "compensate" farmers for falling commodity prices, but typical of market interventions by government, the bill will be self-defeating and cause prices to fall further. Not only will it hurt the national economy, it will also harm the political faction it was intended to help. Much of the agriculture price squeeze is the direct result of the Fed's deflationary monetary policy, which drove down all commodity prices and created a clamor for other protectionist measures, such as President George W. Bush's steel tariff increases. Also, because foreign governments extensively protect and subsidize their own farmers, American farmers have been unable to export record crop yields overseas. The result was "excess" supply, which further squeezed prices down.
The farm bill will not alleviate these price pressures; it will only exacerbate them. In order to receive subsidies, farmers must plant more crops, which in turn increases supply and puts even further downward pressure on prices, calling forth even more subsidies. Sen. Richard Lugar, himself a farmer and senior member of the Senate Agriculture Committee, summed it up best: "The effect of this farm bill is an inevitable vast oversupply of agricultural commodities and lower prices."
Trade, not aid, is the key to farmers' security and prosperity. And expanding trade in agricultural products means removing foreign market barriers that artificially restrict the amount of agricultural products American farmers can export. Congress and the president had it right in 1994, when they insisted on making the reduction and eventual elimination of trade-distorting agricultural subsidies a central tenet of the Uruguay-Round world-trade agreement.
Enactment of the Freedom to Farm Act two years later was the next logical step in American leadership to bring about free and open trade in agricultural products. Enactment of this year's farm bill, alas, would reverse all that progress and run the United States right up against, if not beyond, the limits on agricultural subsidies set in the Uruguay-Round trade agreement.
That's not all. Coming on the heels of Bush's tariff increases earlier this year, his signature on the farm bill will signal a full-fledged retreat from efforts to discourage protectionist sentiments in the Congress. Once that genie is out of the bottle, look out!
A presidential signature may grease the way for congressional passage of Trade Promotion Authority, as the president and congressional backers of the bill claim, but our moral authority on free trade would be so damaged by this time that its value would be diminished. If the president signs this bill into law, it will validate in the eyes of our trading partners the harsh reaction of Canadian Farm Minister Lyle Vanclief: "The bill's protectionist elements (would) undermine the world trading community's long-standing efforts to move toward trade liberalization."
If ever there was an illustration of why the Founding Fathers gave the president a veto over congressional acts, this is one. The founders relied on the presidential veto, which, in Alexander Hamilton's word, "establishes a salutary check upon the legislative body calculated to guard the community against the effects of faction, precipitancy, or of any impulse unfriendly to the public good, which may happen to influence a majority of that body."
Please, Mr. President, veto this farm bill.