Recent Farm Financial Philosophy

No, I am not picking on the farmers of America. I have personally worked on farms, I grew up in Idaho completely surrounded by farmers, and when it came to picking someone to marry I chose the prettiest and smartest farmer’s daughter I could find. I have chosen the example of the government farm policies of America from the 1930s to the present as one of the kindest and simplest examples of government encroachment upon our free enterprise system. I recall here our observable objective that, to the same degree that a government manipulates a redistributive outcome of an economy, the right of economic and cultural free choice is taken away from the constituents. And to the same degree that the free choice is high jacked from the people, resources of the nation are misappropriated and that nation becomes poorer rather than wealthier.

Because of past governmental intervention in the farming industry, the constituents now pay two to three times what would be necessary for basic items such as milk and sugar. In addition, just as a result of unsound decisions, greed, and inefficiency of the leaders, the constituents pay on April 15th each year billions and billions of unnecessary taxes to cover the inappropriate expenditures.

No, the government’s intrusion and intervention of the free market aspects of agricultural products in America did not result in supplying Americans with more abundant and cheaper food products over the past eighty years. And if errant farm policies bother you, a little investigation into free cell phones, government contracts, free healthcare coverage, and other exorbitant giveaway programs of the government, aimed directly at procuring votes, will likely make you downright angry.

So, what is happening now with the farm financial philosophies? In the 1930s, when many of the major farm policies were established, the farmers represented about twenty-five percent of the total population of the nation. That was a very large portion of the voting block and political consideration. Following the Reagan administration, there were questions raised regarding a reexamination and revision of the economic farm policies. The farm population had dwindled from a full 25% to less than 2% of the population. Farm families had sold their acreages to large corporate agribusinesses and found other employment. Urban congressional representatives now constituted a 10-to-1 majority over the rural representatives. And by that time some of the farmers themselves had come to resent the involvement of the federal government into their farming affairs.

In 1996, Congress passed the Freedom to Farm Act that radically overhauled the previous seventy years of farming. People began to say that it was time to wean the farmers off their subsidies and cease giving the above-equilibrium crop prices. In real-world-language that meant that, with less than 2% of the voting population, the farmers were not that important any more to the election process. It was no longer necessary to buy their votes in order to get elected. It almost sounded like a consensus for a move back to free enterprise, where the farmers had a choice as to what crops they wanted to plant and how many acres they wanted to plant.

In order to ease the transition and wean the farmers off the dole, the Freedom to Farm Act and the Bill Clinton Congress provided to the farmers declining annual transition payments from 1996 through 2002. They set aside $37 billion to cover the payments to the farmers that were to be based not on the current levels of crops but on the production levels of the old system. That meant, for example, that a farmer who had previously raised wheat would receive a cash payment from the government for seven years regardless of the current price of the wheat or amount of wheat presently grown. So much for reform!

In 1998 and 1999 the reform measures completely fell apart. The government ultimately ended up supplementing the direct payments in what they called “emergency aid” to the farmers. The agriculture subsidies for 1999 through 2002 actually cost more than before the passage of the Freedom to Farm Act. How does a thing like that happen?

When the Freedom to Farm Act expired, a new law was passed called The Farm Act of 2002. You probably guessed it: it included the direct-payment provision (direct payment subsidies are provided without regard to the economic need of the recipients or the financial condition of the farm economy) and, additionally, set aside another $118 billion for “automatic emergency aid” to be paid whether there was an emergency or not. The law was a direct slap in the face for any intent to move toward any semblance of free enterprise. In the 1996 Act, the payments were intended to decline over the years to wean the farmers off subsidies and price supports. But the new payments do not decline from one year to the next; by law the payments are a permanent part of the subsidy program.

Another strange and counter-productive feature of the present law is called themarketing loan program. At the heart of that program is provision for the qualified farmer (or more likely an agribusiness) to receive a loan from a government lender. Should the crop price be higher at harvest time than the loan price (the amount agreed upon when the loan was taken out), the farmer can simply pay off his loan with the agreed upon interest and own the crop. But if the crop price should be lower than the loan price the farmer can simply wash his hands, keep the money, and walk away from the crop. There is no risk. There can be no loss. The government lender (the tax payer, i.e. you) pay all the losses. I called the program strange and counter-productive. Why would the government guarantee an end value and then wipe out any initiative or incentive for the farmer to be a good steward and invest and manage well the future crop? He has already struck his deal.

Allow me to introduce next week’s discussion regarding the enigmatic farm politics over the past eighty years by raising a question: “Whatever happened to all the farm families who were living on the 6,000,000 family farms when FDR thought it so necessary to go after their votes to keep him in office forever? They represented twenty-five percent of all the voters in America. All of the subsidies and above-equilibrium crop prices were to guarantee the farm families as a U.S. institution protected forever as an American way of life.

But somehow, as smooth as a seamless piece of fabric, we look around and the farm families are gone from their farms, and without any fanfare the farms have morphed into huge sections of land owned by gigantic agricultural corporations. But the farm policies all stayed the same just as if the little farm families were still living in the white painted farm houses with red barns and tall stuccoed silos. Ironically, even though the existing farm folk now made up only one to two percent of the voters, the corporations were still being coddled as an endangered American way of life. Did Washington, D.C. not know that the individuals had disappeared? Had they not seen? Why would the corporations continue to receive the same nanny affection when it came to politics and the system of economic redistribution?

Next Week: Political Means of Transferring Wealth

(Research ideas from Dr. Jackson’s new writing project on Cultural Economics) 

© Dr. James W. Jackson  

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