Senate Farm Bill Ambitious Policy Reform Proposal

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A five-year agricultural spending bill was passed by the Senate yesterday on a 65-34 vote. This version of the farm bill is expected to cost $970 billion. The following are some observations on the most ambitious farm policy reform proposal in decades.

Senate Farm Bills are always a bastion of bipartisanship, but this one might be the product of a what N.Y. Sen. Charles Schumer is calling a “new Senate”:

As the Washington Post reports:

“The farm bill is the latest in a string of measures that went through what insiders call ‘regular order’ — a committee drafted a bill over several months, sent it to the larger Senate and, after haggling, Majority Leader Harry M. Reid (D-Nev.) agreed to allow a few dozen amendments.

“That process led to success on the highway bill, as well as changes to the Postal Service and the Food and Drug Administration, and it probably will work on the farm bill, too. On these important issues, Republicans have supported the final legislation because they have been allowed to offer amendments.”

Senate Minority leader Mitch McConnell called it “one of the finest moments in the Senate in recent times in terms of how you pass a bill.”

In such a conciliatory environment, grassroots activism has its best chance of success:

Those working towards key reforms to decentralize agriculture and make farming more sustainable had their voices heard.

Of the amendments passed during three days of debate, there was one by Senator Brown (D-OH) that benefits rural development and beginning farmers. Organic farmers were guaranteed crop insurance coverage, thanks to Senator Merkley (D-OR). Senators Durbin (D-IL) and Coburn (R-OK) were able to impose crop insurance subsidy limits, while Senator Grassley (R-IA) saw to caps on commodity payments.

Without independent economic insight into agricultural production on an international scale, both major parties will continue to compromise on short-sighted farm policies:

The 2012 Farm Bill approved by the Senate has confirmed what many agricultural leaders were anticipating. Direct subsidy payments to farmers are now out of the question. Gone, also, is a system of target prices where farmers are paid when commodity prices drop below a predetermined threshhold.

But while Congress is taking a step in the right direction to make more viable a broader range of agribusinesses, University of Tennessee economist Daryll E. Ray explains why revenue insurance (the favored policy instrument to replace these subsidies) is an overcompensation:

“There are a number of problems with using revenue insurance. Not the least of which is that it can guarantee profits above the cost of production during times of extremely high prices—like now. But when prices are low, especially for multiple years, it “guarantees” a proportion of low prices even when those low prices are below the cost of production. It can be an upside-down safety net in which farmers receive protection when they do not need it but are given little help when they do. Insurance makes sense for yield protection but other programs are indicated to address price extremes. If it is true that the future begs for a policy for all seasons then both yield insurance and other program instruments will be needed or it will be “déjà vu all over again” akin to the emergency payments that followed the 1996 Farm Bill.”

The phrase ‘spending cuts’ doesn’t mean what it used to:

Senate Committee on Agricuture, Nutrition and Forestry Chairwoman Sen. Debbie Stabenow (D-MI) and Ranking Member Pat Roberts (R-KS) patted themselves on the back for potentially saving $23 billion over the next 10 years when compared with spending under the current farm bill.

The $4 billion in “cuts” to the Supplemental Nutrition Assistance Program (formerly known as food stamps) arrived at by the Senate provides little solace to House conservatives who will likely demand much higher reductions from the omnibus bill’s biggest program. This is because food stamps comprise 80 percent of farm bill spending, some $80 billion a year. Since the last farm bill in 2008, food stamp spending has doubled and participation in the program has gone from 20 million to over 46 million. The Senate bill projects $770 billion in spending for food stamps alone over the next 10 years.

Here’s a short history lesson to put this number into perspective: when the 2008 farm bill was enacted the Congressional Budget Office projected total spending on all programs to be around $600 billion over 10 years.