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The Case Against Bipartisan Farm Bills

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The Case Against Bipartisan Farm Bills

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For decades there was a stark contrast between advocates for the original Farm Bill approach of the Democratic New Deal, and Republican efforts to reduce and eliminate it. The programs existed at parity or "living wage" levels from 1942-52, then under Eisenhower, Congress voted to reduce these Price Floor/Supply Management programs, more and more, until they were ended in 1996 for everything except sugar crops and dairy (dairy was ended in 2014). During the 1980s Farm Crisis, for example, Democrats proposed to restore adequate programs, which would have saved many farms, and reversed a number of trends that have severely damaged U.S. agriculture. Republicans were in charge, however, and the 85 Farm Bill was the worst in history up to that time, (1990 was essentially the same on the core issues. 1995 was again worse, 2002 was slightly better, and every "Bi-Partisan" Farm Bill has gone down hill since then, (worst ever). Meanwhile, in 2001, Iowa Senator Tom Harkin (& other rural populist progressives, all of whom led the earlier Democratic proposals to restore adequate Price Floor programs,) switched sides, () joining Republicans in a series of bi-partisan ("worst ever") bills.

For decades there was a stark contrast between advocates for the original Farm Bill approach of the Democratic New Deal, and Republican efforts to reduce and eliminate it. The programs existed at parity or "living wage" levels from 1942-52, then under Eisenhower, Congress voted to reduce these Price Floor/Supply Management programs, more and more, until they were ended in 1996 for everything except sugar crops and dairy (dairy was ended in 2014). During the 1980s Farm Crisis, for example, Democrats proposed to restore adequate programs, which would have saved many farms, and reversed a number of trends that have severely damaged U.S. agriculture. Republicans were in charge, however, and the 85 Farm Bill was the worst in history up to that time, (1990 was essentially the same on the core issues. 1995 was again worse, 2002 was slightly better, and every "Bi-Partisan" Farm Bill has gone down hill since then, (worst ever). Meanwhile, in 2001, Iowa Senator Tom Harkin (& other rural populist progressives, all of whom led the earlier Democratic proposals to restore adequate Price Floor programs,) switched sides, () joining Republicans in a series of bi-partisan ("worst ever") bills.

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The Case Against Bipartisan Farm Bills

  1. 1. Brad Wilson, 11/26/22. The Case Against Bi-Partisan Farm Bills Republican Farm Bills Fail Farms, Communities, the Economy & the Environment
  2. 2. Price Floors were raised to ’living wage’ (parity) levels as a private sector economic stimulus to fight World War II.! Data source: USDA-Economic Research Service, “Income and Wealth Statistics.” Democrats Invented the Farm Bill in the New Deal Foreclosures and bank failures gradually ended. Rural prosperity began.
  3. 3. Democratic Farm Bills 1. & 2. for Farmers. 3. & 4. for Consumers. Bottom-side Price Floors & Supply Reductions protected farmers from below cost prices. Top-side Price Ceilings & Reserve Supplies protected consumers & industry.
  4. 4. Hoover, 1929-33: Farm Prices crashed 63%! Democrats ran farm programs like a business, managing supplies.! Source of chart: Henry A. Wallace, Achieving a Balanced Agriculture. Before Supply Management, Farm Prices Crashed The Democratic Farm Bills managed supply for farmers, like big businesses do for themselves.
  5. 5. USDA-NASS data going back to 1866 for most crops. “Hooverism:” Record Low Farm Prices Roosevelt inherited a massive farm crisis.
  6. 6. Price Floor data: Agricultural Statics Annual. ! Price data source: USDA-NASS, Crop Production: Historical Track Records. Minimum Price Floors Raised Prices There were no subsidies needed for corn, wheat, rice, soybeans, oats, barley, sorghum, etc.
  7. 7. Source: USDA-Economic Research Service, “Income and Wealth Statistics.” Giant Agribusinesses Paid Farmers More Up more than double, (115%,) 1942-52 compared to averages of 1920-32.
  8. 8. Top left: Food Grains, Feed Crops & Oil Crops. ! Top Right: Fruits,Vegetables, Melons & Nuts. (Their programs featured market orders & agreements.) ! Bottom Left: Livestock & Poultry & Products.
  9. 9. Nixon’s Earl Butz emptied out the grain reserves. With the Soviet sale, it fell to 11% & 12% for 73 & 74, & there was a global food crisis as prices rose briefly well above parity. It rose to more than 40% for 85 & 86, but fell to 22% with the drought of 1988. Data source: USDA Economic Research Service, “Feed Grains Data: Yearbook Tables,” ParityV. Eisenhower to Reagan Parity years: drought in 47. It briefly rose to 21%, 22% for 3 years before falling to 15% in 1952. Not liking the Democratic Farm Programs, Eisenhower & Reagan allowed oversupply to skyrocket. Democrats managed it better. The Soviet Grain sale was a huge exception. Eisenhower started at 23% and ended at 35%. Kennedy Johnson started at 39% and reduced it a lot.
  10. 10. Date Eisenhower: Prices Fell Below Price Floors! 1950s: Growing oversupply under Eisenhower led to partial failure for Price Floor programs.
  11. 11. Agribusiness buyers got the money, of course. Eisenhower’s Farm Program Failure Farm programs became more expensive under Eisenhower, and worse for farmers!
  12. 12. This left consumers, industry and livestock farmers in jeopardy, as was quickly seen. Nixon: Emptied Reserve Supplies. Earl Butz, Secretary of Agriculture, didn’t like the Democratic farm programs.
  13. 13. Nixon: Rice Spiked to 150% of Parity! Nixon secretly subsidized the Soviet Union with a huge sale of cheap grain. Agribusiness bought cheap from farmers, then prices spiked, resulting in huge profits for the buyers. Earl Butz predicted that farm prices would stay high, and farm programs would not be needed. He was quickly proven wrong!
  14. 14. 01 Republican Hypocrisy. Earl Butz FAVORED Supply Management for Ralston Purina. Then, as Nixon’s Secretary of Agriculture, Butz OPPOSED Supply Management for Farmers, to give cheap, below cost farm products to Ralston Purina and other agribusinesses. Butz was then rewarded with a job back at Ralston Purina, where he again FAVORED Supply management.
  15. 15. Ralston Purina: Huge Farm Crisis Profits! Source: A. V. Krebs, The Corporate Reapers: The Book of Agribusiness, p. 418.
  16. 16. Source of Corporate ROEs: Forbes Magazine, 1980s. Cf. previous slide and its source.! Source for Farmers: USDA-ERS, “Farm Income and Wealth Statistics.” Return on Equity: Iowa 32% Below Zero! Kelloggs: 32% above zero! Republican 85 Farm Bill: lower farm prices for agribusiness.
  17. 17. Date Republicans: “No Farm Crisis” 1984: Iowa Farmers’ Return on Equity: 32% below zero! (See previous slide.)
  18. 18. Date Farmers Forced Branstad Reversal The Family Farm Movement in Iowa fought hard against Republican Injustices
  19. 19. Maximum potential “Safety Net” = Target Price (subsidy trigger) minus Loan Rate (price floor).! Source: Robert C. Green, “Program Provisions for Program Crops: A Database for 1961-90,” USDA-ERS. Republican Farm Crisis Response: 85 Farm Bill Lower Price Floors, (blue,) a lot, to give cheap grain from farmers to agribusiness/CAFOs & foreign buyers.! Increase subsidies, (red,) a lot. Combined Result: greatly increased taxpayer costs, lower farm income, farmers forced to subsidize CAFOs, losing livestock to them, losing money on exports (dumping).
  20. 20. Supply Management was insufficient in the 1981 Farm Bill. Republicans chose the yellow approach in 1985.! Source: FAPRI 1-85: “Options for the 1985 Farm Bill: An Analysis and Evaluation.” Democrats: Reduce Oversupply FAPRI study of the 1985 Farm Policy Reform Act (Harkin-Alexander proposal).
  21. 21. Source: FAPRI 1-85: “Options for the 1985 Farm Bill: An Analysis and Evaluation.” Yellow is as proposed for 1985, to lower price floors and decrease subsidies. But Republicans lowered price floors and increased subsidies in 1985. 80s Farm Crisis: DemocratsVs. Republicans FAPRI study of the 1985 Farm Policy Reform Act (Harkin-Alexander proposal).
  22. 22. During the 1980s Farm Crisis, Iowa’s 1984 Return on Equity from Current Income, (similar to this statistic,) was 2.49%. 1985 Republicans: Move from Red to Pink If you divide FAPRI Net Farm Income results by historical Equity figures you get this.
  23. 23. Source: FAPRI 2-87: “Commodity Supply Management Program.” Republicans: Big Red Government Costs Republicans: large subsidies, (but reduce farm income by a bigger amount).
  24. 24. 1985 Farm Bill: The Worst Farm Bill in History (up to that point)! Republicans: Make itWorse; Democrats: Restore Profits The 2-87 FAPRI study, using the 1985 Farm Bill Baseline, predicted the results.
  25. 25. The big, 1983, 1-time reduction in supply, plus land going into CRP, helped a little, but farm income remained low. 1980s: Low Net Farm Income Fell Farther Reagan’s PIK Program: Big 1-Time Reduction in Supply: Below Zero Iowa Net Farm Income
  26. 26. Date 1980s Record High Farm Debt Massive Foreclosures Reduced Debt, Collateral (Assets) Crashed, Causing More Foreclosures
  27. 27. The full cost data is from actual data, not baseline data, so it varies somewhat from year to year. 1988 was a drought. Democrats: FarmValue Above Zero If you apply USDA-ERS “full cost” figures to the FAPRI data, you get this.
  28. 28. Democrats proposed making a profit on exports above full costs. ! Republicans chose to lose money on Exports to be more “competitive” (dumping)! Republicans: Lose Money on Exports! If you apply USDA-ERS “full cost” figures to the FAPRI data, you get this.
  29. 29. 1996 Republican Spin: “Freedom to Farm” was really “Freedom to Fail” ✤ In the 1996 Farm Bill Republicans ended the (now severely reduced) Democratic Market Management programs. As in the spin of the “Contract for America,” they labeled it as “Freedom to Farm.” It was the worst Farm Bill in history (up to that point)!! ✤ Prices fell to record lows, (below the Depression, below the 1980s). Diversified crop farmers subsidized CAFOs more, lost more value-added livestock to CAFOs. Farmers lost “the livestock option,” the freedom to put grains into more livestock when prices are low, because they had no livestock.! ✤ Losing Livestock, farms lost the sustainable “livestock crops,” grass pastures, alfalfa and clover hay, and nurse crops like oats. Farmers lost the sustainable “crop rotation option,” (freedom,) of using diversity to lower input costs.! ✤ President Clinton vetoed the bill, but later signed it.! ✤ All later “Bi-Partisan” Farm Bills maintained the core, Republican provisions of 1996.
  30. 30. 1996: Republican Farm Bill Failed ✤ 1996 Farm Bill: No Price Floors, No Supply Management. Temporary subsidies. Republicans planned to end all subsidies by 2002!! ✤ Another increase in the chronic farm crisis started by 1997.! ✤ Farmers and Bankers flocked to Washington D.C. to protest!! ✤ Congress passed 4 emergency farm (subsidy) bills in 4 years, greatly increasing subsidies and farm program costs, but without restoring Price Floors and Supply Management.
  31. 31. Farmers saw 8 of the 9 lowest corn and soybean, prices in history from 1997 to 2005. (Adjusted for inflation.)
  32. 32. Republican “Freedom to Fail!”
  33. 33. “The Harkin Compromise” of 2002 ✤ Iowa Senator Tom Harkin became Senate Agriculture Committee Chairman in 2001. He then abandoned advocacy for Democratic Price Floor programs, (ended by Republicans in 1996,) and called for continued large farm subsidies instead. The expensive 2002 Senate Farm Bill was “owned” by Harkin.! ✤ Other rural Democrats also stopped this advocacy and called for big subsidies.! ✤ Harkin’s 2002 Senate Farm Bill proposal included no Price Floors or Supply Management, (except for sugar crops,) plus big subsidy provisions like the 4 emergency farm bills of 1998, 1999, 2000, and 2001.! ✤ Harkin later praised the bill for a long list of small items.! ✤ Harkin argued that this would be good for the Democratic Party.! ✤ After 2001, Democrats went down hill a lot on the rural vote, continuing to today.
  34. 34. Source: APAC, Daryll Ray, et al, Rethinking US AgriculturalPolicy, https://www.agpolicy.org/publication.htm.! 2002 Farm Bill: Less for Crop Sales Big problems with cheap crop prices: subsidizing CAFOs, losing livestock/diversity, export losses.
  35. 35. The cheaper and cheaper prices and lower net farm income tend to remain invisible. Farmers are blamed for subsidies. “The Harkin Compromise:” Expensive Republican Farm Bills are expensive, hurt farmers, & lead to farmer bashing.
  36. 36. “Decoupling:” Irrational Farm Bills Republican in 96 - ‘Bi-Partisan’ in 02, 08, 14, 18. 2023? ✤ De-coupling was proposed by Minnesota Republican Senator Dan Boschwitz and Cargill’s Daniel Amstutz, who became the GATT trade negotiator. It was a way to spin (pretend) U.S. dumping programs, (losing money on exports,) as not “distorting markets,” not causing dumping. ! ✤ De-coupling is based on the myth that farm subsidies cause cheap farm prices, a myth used by WTO to pretend to reduce export dumping, while supporting below cost farm prices for agribusiness buyers. Dumping is caused economically by chronic market failure on supply & demand sides. Dumping is caused politically by low or no Price Floor programs.! ✤ De-coupling means paying subsidies to farmers whether they need them or not. The alternative approach to subsidies is called “countercyclical,” paying more when the need is greater, less when the need is less. Decoupling means farmers sometimes get little in subsidies when a lot is needed. De-coupling is expensive and highly inefficient.! ✤ A second myth in de-coupling is that farmers’ planting decisions are not affected if subsidies are de-coupled instead of countercyclical. Really the impacts are the same, with neither having significant affects.
  37. 37. 01 by Mark Ritchie
  38. 38. Economic Context Behind De-Coupling ✤ Farm Market prices were below full costs every year, 1981-2005, (except 1995 marketing year,) for a sum of 8 major crops. (See below.)! ✤ Returns per acre minus full costs for each crop, times # of acres for each crop, then summed for each year. ! ✤ For corn, soybeans, wheat, cotton, rice, grain sorghum, barley and oats.! ✤ So farmers needed a lot of subsidies on each of these years. So De-coupling, seemed less irrational, as subsidies were (almost) always needed. ! ✤ But then, influenced by greatly increased biofuels production, corn and soybean prices were above full costs for 7 years in a row, (2007-2013,) and rice was similar. So there were huge complaints about paying the same quantity of de-coupled subsidies when prices were usually well above full costs, instead of below.! ✤ Countercyclical subsidies, in contrast, fell during these years.
  39. 39. The chart data includes the crops listed. ! The pink area also mentions 8 crops, same as the list except cotton is added, and rye is removed. Prices: Below Costs 25/26Years in a Row Congress, led by Republicans, reduced Price Floor programs, lowering prices & incomes.
  40. 40. Countercyclical: Bigger subsidies when the need is greater and visa versa. CounterCyclical: Prices Up, Subsidies Down DeCoupled: Subsidies continue with no relation to varying prices & incomes.
  41. 41. Countercyclical Farm Subsidies (Common sense, get more when you need more, less when you need less.) ✤ 1961-1972: farm subsidies.! ✤ 1973-1995: “Deficiency Payments.”! ✤ 1998: MLA (Market Loss Assistance).! ✤ 1985 onward: LDP (Loan Deficiency Payments).! ✤ 2002, 2008: “Countercyclical Payments.”! ✤ 2014, 2018: PLC (Price Loss Coverage)
  42. 42. De-Coupled Farm Subsidies (False theory, unrelated to need, fostering farmer bashing.) ✤ 1996: AMTA (Agricultural Market Transition Act) Payments! ✤ 2002 & 2008: DP (“Direct Payments”)! ✤ 2014 & 2018: ARC (Agriculture Risk Coverage)! ✤ Learn more below from the discussion of crop REVENUE insurance.
  43. 43. The irrational “Coupled” Subsidies were invented to pretend that the U.S. was not violating WTO compliance. Spin.! Republican failures on farm “free trade” agreements will be examined in a separate slide show. Corn: 2Years of CounterCyclical Subsidies During a rare increase in corn prices, no CounterCyclical Subsidies were paid.
  44. 44. Myth: that farmers make planning decisions differently if the subsidies are yellow instead of blue. Same: Adjusted for Inflation DeCoupled & Countercyclical Subsidy programs were not adjusted for inflation, so farms got less every year.
  45. 45. Crop Revenue Insurance BradWilson,“PRIMER: Revenue Insurance in the 2018 Farm Bill,” Zspace: BradWilson, 5/11/12, with revisions, https://zcomm.org/zblogs/primer-revenue-insurance-in-the-2012-farm-bill-by-brad-wilson/. ✤ Crop Revenue Insurance pays an insurance indemnity if farm prices/ incomes are low. ! ✤ Advantage: these subsidies can be spun as “risk management,” a standard business practice. All businesses need insurance. It sounds rational.! ✤ Problem: it’s irrational. Prices were below full costs 25/26 years, 1981-2005. No insurance company would insure against that. No farmer could afford it if they did. Congress gave very low Price floors 1981-1995, then no Price Floors. No company would insure against that, no farmer could afford it.! ✤ Republican solution: To achieve participation in support of the ideological spin, pay insurance companies a subsidy to get them to offer Revenue Insurance, AND pay farmers a premium subsidy to get them to buy it.
  46. 46. 2008 Farm Bill: ACRE Average Crop Revenue Election ✤ Few Farmers chose this program (8% of corn farmers, 8.5% of soybean farmers, 7.4% of wheat farmers). Most chose CounterCyclical and fixed Direct Payment subsidies instead.! ✤ ACRE paid very little to farmers.! ✤ ACRE was like DeCoupled subsidies. The program could pay subsidies when there was no need, or no subsidies when need was great.! ✤ 2014 Farm Bill: Congress ignored what farmers had rejected in 2008, and offered 2 programs similar to ACRE in 2014.! ✤ ARC: Agricultural Risk Coverage! ✤ Revenue Insurance as part of Crop Insurance
  47. 47. 2014 and 2018: ARC: Agricultural Risk Coverage ✤ ARC subsidies were similar to crop revenue Insurance, (irrational). ARC subsidies are based upon an “Olympic year” history of farm prices, (previous 5 years, minus the high and the low, averaged), so it’s relative, not a fixed standard of need. The standard can be way too high or way too low.! ✤ Farmers had a Choice between PLC (Price Loss Coverage) and ARC (Agricultural Risk Coverage). Iowa farmers were encouraged to sign up for ARC, not PLC, because market prices were higher than PLC subsidy triggers at sign-up time.! ✤ Then market prices fell over 5 years, (corn fell from 4.46 in 2013 to 3.36 for 2016 & 2017,) but because of the irrational program calculations, subsidies also fell, to zero for most corn farmers, in spite of much greater need. Similar for other crops. (See maps on next slide, where gray areas received no subsidies for corn and soybeans for 2017 and 2018.)! ✤ Farmers were not allowed to switch to PLC until the 2018 Farm Bill. ! ✤ With the ARC-PLC choice, farmers had to gamble. “Risk” was fostered, not “managed.”
  48. 48. 2014 and 2018: PLC: Price Loss Coverage ✤ PLC Subsidies are CounterCyclical, (you get more when you need more, & visa versa. Farmers had a Choice between PLC and ARC (Agricultural Risk Coverage).! ✤ In the year prior to sign-up, 2013, corn prices averaged $4.46, well above the PLC subsidy trigger of $3.70. As prices fell in 2014 they were initially above $3.70, and averaged $3.70 for the year. More than 93% of corn farmers and nearly 97% of soybean farmers signed up for ARC, not PLC, in spite of their previous rejection of the ACRE program. That’s how many mostly got no subsidies for 2017 and 2018, as on the previous slide. Only a tiny percentage of corn and soybean farmers had gambled correctly, with PLC.! ✤ The Subsidy Trigger for corn was $3.70/bushel. You get a subsidy if the price falls below $3.70. The subsidy triggers for the various crops were not adjusted for inflation in the 2014 farm bill or again in the 2018 farm bill, (where they remained the same,) so in real terms, adjusted for inflation, they fell every year.
  49. 49. Same for other crops. Because of the higher rate of inflation in the past 2 years, the decline at the end is even greater. PLC Reference Prices Fell EveryYear Adjusted for inflation, here, in 2013 dollars. The 2013 $3.70 would fall to nearly $3.00 by 2024.
  50. 50. Midwestern Ag Committee members in Congress allowed programs to be much worse for their regions’ farmers. Southern SubsidyTriggers:Above Full Costs For most crops, prices had to fall well below full costs in order to receive a subsidy from PLC.
  51. 51. 01
  52. 52. Date
  53. 53. Net Farm Income falls to very low levels, even with subsidies and subsidy increases. 2008: Another ‘Bi-Partisan’ Farm Bill 2008 Farm Bill: No Price Floors, No Supply Management, & Reduced Subsidies.
  54. 54. SUMMARY DemocraticVs. Republican Farm Bills 1. Democrats invented farm bills during the Great Depression. 2. Democrats featured ‘living wage’ Price Floors, 1942-52. 3. Starting under Eisenhower, Price Floors were lowered, more and more. 4. Subsidies, starting in 1961 & later did not come close to making up for Price Floor reductions, resulting in large net reductions. 5. Republicans greatly lowered Price Floors in 1985, and increased subsidies by a large but lesser amount.An expensive failure continued in 1990. 6. Democrats proposed restoration of Parity Programs at adequate Price Floor levels repeatedly over the years. No subsidies needed. 7. Republicans & Clinton ended Price Floor Programs in 1996. Republicans also planned to end subsidies. 8. The 1996 Republican bill quickly failed with the lowest farm prices in history, year after year. Congress passed 4 emergency Farm (subsidy) Bills in 4 years, 1998, 1999, 2000, 2001. 9. Populist Democrats joined Republicans in ‘bi-partisan’ (Republican) Farm Bills, starting in 2002, (which was based on the 4 emergency bills). No Price Floors, no Supply Management.
  55. 55. 01 Conclusion: A “Bi-Partisan” Farm Bill Is a Republican Failure ✤ There is no Supply Management, (used by big companies in all major industries).! ✤ There are no Price Floors. (Companies use supply management to get profitable prices.)! ✤ There are no Price Ceilings and Reserve Supplies to deal with shortages, as from droughts, the war in Ukraine, climate change, etc.! ✤ The cheap prices force farmers to subsidize CAFOs, export dumpers and other agribusinesses. Most Farmers have then lost all value added livestock to CAFOs, to then lose all of the sustainable livestock crops, like grass pastures, alfalfa and clover hay, and nurse crops like oats. The U.S. repeatedly loses money on exports.! ✤ The recent subsidies are the most irrational ever.! ✤ Subsidies standards have declined in every Farm Bill since 2002.! ✤ Farm Debt reached record highs in 2020-2022. Returns on Assets and equity are extremely low. There is much at risk. Agriculture continues to be severely damaged.

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