Milling & Baking News - July 23, 2013 - 28

Washington 

Farm versus fork
BY ROBBIN JOHNSON

The 2013 farm bill, after clearing the
Senate on a 66 to 27 vote, went down
to defeat in the House, 234 to 195. Its
two primary entitlement programs,
farm commodity provisions and feeding programs, played very different
roles in the outcome.
A segment of American agriculture
representing most of America’s farmed
area but only about one-third of the
value of farm output would enter its
ninth decade of “temporary” income
supports with this 2013 bill. Commodity programs cover designated commodities, including grains, oilseeds,
cotton, sugar and dairy products. The

this coverage, as the coverage is not
sound from an actuarial standpoint.
Moreover, the coverage reflects the
record high commodity prices of recent years; if prices were to fall back to
more normal levels, taxpayers would
face an explosive program cost.
Given a new farm provision targeting
mainly well-off individuals, with large
and unpredictable taxpayer exposure at
a time when farm subsidies might be expected to wind down, you might expect
that the controversy around the 2013
bill would center here. You might think
that Democrats would object on equity
grounds and that Republicans would
resist heavy-handed subsidies in an

vs.
two-thirds of agricultural output not
covered include livestock, fruits and
vegetables, horticulture and the like.
The covered segment of farming, however, looks very different from what
was at risk during the Great Depression. Then, a quarter of the population
lived on farms, and farm gate prices
had collapsed under the pressure of
falling demand.
Today, roughly 250,000 farmers account for about 80% of covered commodity production and capture the
lion’s share of farm program benefits
that total around $20 billion per year.
These are largely middle- and upperincome families. As a group they have
enjoyed record incomes in 7 of the last
10 years. This has enabled them to pay
down debt, purchase new equipment
and put their balance sheets in the
strongest position in a century. And
they are riding the crest of a wave of
double-digit increases in land prices in
recent years.
Yet the farm provisions of the 2013
farm bill include a new revenue insurance scheme on top of other income
protections. Taxpayers would pay
nearly two-thirds of the premiums for
28 / July 23, 2013 Milling & Baking News

economic sector that could and should
be market-based. You would be wrong.
House and Senate provisions are very
similar and enjoy bipartisan support.
The larger share of farm bill expenses actually goes to food programs, including for school breakfasts
and lunches and special programs
for women, infants and children. The
largest fork provision, however, is the
Supplemental Nutrition Assistance
Program, or SNAP.
SNAP is a classic countercyclical
safety net. To be eligible, people must
be living at or near the poverty level.
The scale of benefits is tied to their
needs, and total benefits available are
capped at quite modest levels. The recession that started in 2007, however,
drove SNAP program costs from $35
billion per year to $80 billion in 2012.
A number of economists have defended the program before Congress
not just on equity grounds but also as
one of the most effective ways the federal government can prop up spending
in a recession. The 47 million Americans receiving SNAP benefits last year
were typically disabled, elderly, children living in poverty, the unemployed

and the working poor. While they cover on average about two-thirds of their
food expenses, they depend on SNAP,
food shelves and feeding programs for
the balance, rapidly putting that support into circulation in the economy.
SNAP program costs are likely to
decline in coming years for a couple of
reasons. First, enhanced benefits passed
in the American Recovery and Reinvestment Act of 2009 expire this fall. Second,
as the economy recovers, the number
of individuals qualifying for SNAP will
decline as people find employment or
are able to get better-paying jobs.
Nevertheless, the Senate sought an
additional $4 billion in savings over
a projected 10 years through restrictions on how some states treat utility
costs in their relief efforts. The House
sought more than $20 billion in savings over the projected 10-year period
by adding limitations to how states
could apply “categorical eligibility,”
which most states use to align various relief programs and to streamline
administration. These changes would
mainly affect children living in poverty and low-wage working families.
So the 2013 farm bill is hung up,
much like it was in 2012, because of
the tensions created through the marriage of two kinds of entitlement programs in the bill. The farm provisions
are an activity-based entitlement that
is not means-tested, scales benefits up
in line with farm size and places no
real caps on the size of individual benefits. The fork provisions are meanstested, targeted at people living in or
near poverty and caps individual benefits at very low levels.
In other words, the farm bill offers a
microcosm of what Congress faces in
reining in federal spending in an efficient and equitable manner. Activitybased entitlements enjoy well-organized and well-funded support, which
buoys them along even when common
sense might call for cutbacks. Meanstested entitlements typically enjoy less
well-organized and well–funded support, which makes them vulnerable
when votes must be counted. In these
circumstances, the meat-axe approach
of a sequester may have more appeal:
it may not be well-considered, but at
least it is not counterintuitive. MBN

Robbin S. Johnson, a fellow
with the Hubert H. Humphrey
Institute of Public Affairs,
is a contributing editor at
Sosland Publishing Co.
bakingbusiness.com / world-grain.com

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