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The Farm Bill Cometh

By Dennis Byrne

It's hard to imagine Bill Gates, that high-tech icon, as a farmer. Yet, he has bought up hundreds of acres of Illinois farmland, putting the world's richest man in line for federal agriculture aid, just like any other American farmer.

Agribusiness; perhaps no other endeavor reaps as government aid. But all that aid will disappear on Sept. 30, when the 2002 farm authorization act expires--unless, of course, Congress passes a new one. And considering the powerful special interests at work, it's a safe bet that Congress will pass the 2007, on time and with as much or more largesse.

Gates, the good businessman that he is, can't be blamed for making a small--for him--investment in farmland, which is in high demand right now, and consequently, quite pricey. Crain's Chicago Business reported July 2 that Gates has spent $14 million buying Illinois farmland since 2006. Gates also owns 20 percent of California-based Pacific Ethanol Inc., the holder of almost $65 million worth of American farmland. Gates, the publication said, was positioning himself to benefit from the boom in ethanol, which is made from corn, soybeans and other biomass generated down on the farm.

What accounts for the boom? Certainly not motorist demand. The answer is the obscene federal incentives for ethanol production and consumption. Washington subsidizes ethanol-producing corn and ethanol refining; it mandates that gasoline refiners lace their gasoline with ethanol, and it limits imports from such large ethanol producing countries as Brazil. From beginning to end, government has its hand in ethanol.

The government-created, artificial demand for ethanol is just one of the boons that the government rains down on agribusiness. It makes for a nearly sure bet for smart investors, such as Gates. Of course, the government didn't have the likes of Gates in mind when it started the subsidies flowing in the Depression. It's to preserve the "family farm." It's a nice sentiment, but the truth is that family farmers are vanishing for systemic reasons: improved technology and economies of scale, not some sinister plot to destroy the "American way of life." The Washington-based environmental working group calculates that more than half of government farm payments in 2005 went to 7 percent of farms defined as large. Not only does it help the likes of former Bulls basketball star Scottie Pippen, but it also provides a subsidy for the larger farms to buy out their struggling neighbors. The reality of unintended consequences is never far behind anything government does.

Farmers receive subsidies when prices are "too low." Having thus encouraged production, government also hands out subsidies to take land out of production, for "conservation's" sake. Some 25 crops are subsidized (about one-third of gross farm production), including not just corn, wheat, rice, cotton, sugar, soybeans and dairy products, but also sunflower seeds, rapeseed, canola, sesame seeds, peanuts, grain sorghum, barley, oats, wool, mohair, honey, dry peas, lentils, small chickpeas and dairy products.

That's just the start. If you want to immerse yourself in all the possible titles up for consideration in the 2007 farm bill go to a House web site for the complete gift list. There, the vast array of direct and indirect benefits the government and taxpayers give on agribusiness is impressively creative and dizzying. Loan guarantees. Price supports. Small business start-up aid. Rural wastewater, organic agriculture programs, wildlife habitat conservation, rural development, biorefineries, renewal energy incentives, wetlands preservation grants, fresh food subsidies for needy school children, seniors and families. Protective trade policies. Marketing advice. Forestry and horticulture programs. Research of all kinds.

The whole schmear will cost us something like...well, estimates are hard to come by, because who knows how many carloads of goodies will be coupled to the Handout Express. Some suggest $88 billion over five years. That's still probably not enough to feed every porker at the trough, so you can imagine the backroom arm-twisting. Some special interests already are feeling left out, such as some environmentalists, which are lamenting that the bill now being considered "does little to address" greenhouse gasses. Others are demanding more attention be paid to Hispanic, Native American and other minority farmers.

Some would turn the farm bill into a "healthy diet" bill, by giving fruit and vegetable farmers their fair share. While the price of fruits and vegetables have risen, they argue, the price of soft drinks and other sugary and high-fat foods have declined, thanks to the big subsidies given to fructose feedstock producers, such as corn farmers. No one explains where the additional subsidies for growers of "healthy foods" would be found, but not over the dead bodies of the corn and other big lobbies.

Cleverly, all these freebies are described as the farmers' safety net, as if the economics of the business make farming impossible in a free market. Undaunted, the libertarian Cato Institute has set out to prove otherwise. The first best solution is to completely end farm programs, said Sallie James and Daniel Griswold in a paper, "Freeing the Farm: A Farm Bill for all Americans." Just cut them off, without compensation or transition payments, to ease the plunge into a true free market. Recognizing that such measures are politically infeasible, the authors, both of Cato's Center for Trade Policy Studies, argue that the government should "buy out the damaging and expensive support for farmers by paying them a fixed amount of money, which they would be free to spend as they wish. Although it would require large up-front outlays, a politically expedient buyout of agricultural subsidies and trade barriers, with concrete steps to ensure the charges are permanent, would be a worthwhile investment. The 2007 Farm Bill provides an opportunity for less government interference with rural America."

If, that is, you can convince rural America that they're better off without the government's teat.

Recognizing the realities, less draconian measures have been introduced. One, a bi-partisan proposal by Reps. Ron Kind (D-Wis.) and Jeff Flake (R-Ariz.), seeks to wean farmers from government payments by replacing subsidies with savings accounts that farmers could use to cover losses when crop prices are low or yields are poor. Kind won 200 votes for a similar plan during the debate on the 2002 bill, and one of its supporters was current House Speaker, Rep. Nancy Pelosi (D-Calif.). It's not clear where she stands now on the larger issue, although her web site proclaims an agenda that includes "...a strong new agriculture bill for family farmers and ranchers who will lead the way to an energy independent America." Whatever that means.

The chances of a major overhaul might be signaled by a House agriculture subcommittee's unanimous rejection last month of Kind's proposal. Instead, it approved a bill that would extend the 2002 law, the one with all the pork.

The coming cultivation, seeding, weeding and ultimate harvesting of the 2007 farm bill should help explain why the public's approval ratings of Congress are just about as low as they can go (i.e. lower than President George W. Bush's). Bush could raise his standing--at least in my eyes--by vetoing this nonsense.

Dennis Byrne is a Chicago Tribune op-ed columnist.

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