While the chattering classes debate whether the White House or congressional Democrats earned more “wins” in the omnibus spending package released Monday, taxpayer advocates can take comfort that lawmakers got at least one thing right—resisting cries to bail out the cotton industry.
It initially appeared the special interests would get their way. With farm incomes down a bit since their record levels at the time of the last farm bill, the agricultural lobby saw the opportunity to use the appropriations process to bring new subsidy programs to cotton and dairy farmers. In the end, neither sector saw the increased support they were seeking make it into the bill.
House Agriculture Committee Chairman K. Michael Conaway, R-Texas, quickly responded with dismay that “critical help” for the cotton sector was excluded. According to Conaway, “the safety net for cotton and dairy is failing our producers. To its credit, the entire cotton industry came together on a plan to fix what is broken with respect to the safety net for farmers.” He blamed Senate Democrats for insisting on an all-or-nothing approach that he predicted would leave farmers in the lurch.
Of course, it shouldn’t be especially surprising that the entire cotton industry came together to support a plan that gives the cotton industry more money, nor should it be taken as testament to how good the plan is. It’s simply not true that the cotton lobby was seeking a “safety net.” Cotton producers already benefit from a generous system of taxpayer-backed farm supports that go far beyond what any safety net would provide. What they want is more government handouts to boost the incomes of big corporations, insulate cotton producers from normal business risk and distort agricultural markets.
According to the U.S. Department of Agriculture (USDA), more than 95 percent of cotton acreage is covered by federally subsidized crop insurance. On average, the government picks up the tab for 62 percent of farmers’ premiums to purchase crop insurance, whether it’s a small struggling farm or a multimillion dollar agribusiness. Moreover, thanks to the Stacked Income Protection program (STAX), which was created solely for cotton producers as part the last farm bill, taxpayers also already subsidize 80 percent of the cost for policies that protect cotton farmers against even minor dips in revenue.
As agriculture economist Vince Smith explains, for every $1 of premium a cotton grower pays, they can expect to get back about five times that amount. Even if you agree that farmers deserve government assistance to help them stay afloat in times of hardship, it’s hard to call an investment with that kind of return a “safety net.”
Dissatisfied even with that already generous support, the cotton lobby also wanted to be included in two other USDA programs called the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs. While the common understanding of a “safety net” is a social program that protects citizens struggling with financial hardship or on the brink of poverty, ARC and PLC insulate even highly profitable farms from suffering shallow losses. They’re also wildly expensive. Together, ARC and PLC are projected to cost taxpayers $32 billion over five years—more than double their original projection. Moreover, bringing cotton into the programs almost certainly would have violated WTO agreements and reopened a costly trade dispute with Brazil.
There’s no denying that a strong agricultural economy is crucial to our national security and economic well-being, and there may be a role for government to play in providing assistance to farms on the brink of failure. However, our farm support systems work more like corporate welfare or a rigged lottery in which the taxpayers always lose.
Fortunately, it’s possible simultaneously to rein in spending for farm-support programs and also to direct taxpayer dollars toward farms that most need assistance. Lawmakers should consider reforms like those proposed in the AFFIRM Act—introduced this week in the House by Reps. Ron Kind, D-Wis., and Jim Sensenbrenner, R-Wis., and in the Senate by Sens. Jeff Flake, R-Ariz., and Jeanne Shaheen, D-N.H. This bill would put reasonable restrictions around our farm-support programs so that taxpayer dollars no longer are used to subsidize the richest and largest agribusinesses, while small farms are increasingly driven out of business.
The cotton lobby’s failed attempt to pad their bottom line through the appropriations process offers a preview of what’s to come when the farm bill comes up for reauthorization in 2018. While President Trump has requested a $4.7 billion cut in the USDA, Agriculture Committee members have pleaded for no further budget restrictions and farm-lobby groups already are clamoring for more support.
If they wish to comply with the president’s budget blueprint and put our farm-support system on a path toward sustainability, lawmakers will have to make some tough decisions this farm bill cycle. Let’s hope they put the interests of taxpayers and small farmers over those of the Big Ag special interest groups.