Saturday, November 13, 2010

A New Freedom to Farm? How To Do It

House Ag chair ( until Jan.) Collin Peterson raises the possibility of a new Freedom to Farm program in a quote from Farm Policy:
"He  [Speaker to be Boehner] may be pushed and not have any choice because of his caucus to weigh in to try to do something like Freedom to Farm where they are going to phase out subsidies again.’”
Okay, just suppose they truly want to phase out the direct payment subsidies, which in turn were supposed to compensate for the deficiency payments of the 1980's and early 90's.  How should they do it?
  • Graduate the total amounts.  Freedom to Farm hardly graduated the amounts at all.  Although the theory was that farmers were being weaned from subsidies, the "weaning" metaphor wasn't taken seriously.  Anyone who's weaned a mammalian baby (calves in my case) knows you accustom the baby to the new food and cut down the old food. So, if you start at $5 billion, reduce it by $1 billion a year.
  • Consider a ratchet.  In other words, tie the phase out to farm income.  If farm income goes up, payments go down.  If farm income goes down, payments don't change from the previous year.  That approach might soften the arguments it's no time to cut payments when farmers are in trouble because their income is down.  
  • Consider prorating reductions to make the net payments progressive.  In year one, everyone gets 100 percent.  In year two, the top 10 percent in payments gets reduced by 20 percent, the next 20 percent gets reduced by 15 percent, etc. etc.


Anonymous said...

What were deficiency payments?

Bill Harshaw said...

Sorry, just realized my comment didn't post.

Deficiency payments were akin to today's "Counter-cyclical payments"--payments were issued if market prices were down, they weren't if prices were up. When they started, they were tied to the acres of the crop planted, using reasonably accurate yields. Over time yields were frozen and there was some provision to plant other crops and still earn deficiency payments. But because they were viewed as encouraging production, they ran into WTO restrictions. The 1996 farm bill did away with them, replacing them with the direct payments.