Why Our Farm Policy Is Failing

By Michael Grunwald

Agricultural policy is not sexy. You probably don't know the intricacies of "loan deficiency payments" or "base acreage," and you probably don't care. This was once an agrarian nation, but now there's a less than 1% chance that you're a farmer, and if you are, you're probably part time; the average farm family gets 82% of its income from nonfarm sources. We're not a people of the soil anymore, and for most of us, our eyes glaze over when we see farm statistics like the ones in that last sentence.

But farms still cover most of our land, consume most of our water and produce most of our food. If you eat, drink or pay taxes--or care about the economy, the environment or our global reputation--U.S. agricultural policy is a big deal.

It's also a horrible deal. It redistributes our taxes to millionaire farmers as well as to millionaire "farmers" like David Letterman, David Rockefeller and the owners of the Utah Jazz. It contributes to our obesity and illegal-immigration epidemics and to our water and energy shortages. It helps degrade rivers, deplete aquifers, eliminate grasslands, concentrate food-processing conglomerates and inundate our fast-food nation with high-fructose corn syrup. Our farm policy is supposed to save small farmers and small towns. Instead it fuels the expansion of industrial megafarms and the depopulation of rural America. It hurts Third World farmers, violates international trade deals and paralyzes our efforts to open foreign markets to the nonagricultural goods and services that make up the remaining 99% of our economy.

Ever since the 1980s, when a wave of foreclosures inspired those iconic Farm Aid concerts, the media's sporadic reports from farm country have tended to focus on floods, droughts and other disasters. But the farm crisis is as over as Barbara Mandrell. Farm incomes are at an all-time high. The median farmer enjoys five times the net worth of the median nonfarmer household. Crop prices have soared--thanks largely to the Federal Government's promotion of corn ethanol over more efficient renewable energies--and yet subsidies have as well.

Nevertheless, Congress is finalizing a $286 billion farm bill that will continue our basic farm policies, which means it will keep funneling money to farmers and pseudo farmers through a bewildering array of loans, price supports, subsidized insurance, disaster aid and money-for-nothing handouts that arrive when times are tough--or not tough. "What a joke," grumbles Congressman Ron Kind, a Wisconsin Democrat who led a failed bipartisan reform effort in the House. "You're eligible as long as you're breathing." Actually, that's not quite true. Since the vast majority of the cash goes to five row crops--corn, soybeans, wheat, cotton and rice--more than 60% of our farmers receive no subsidies. And a recent Government Accountability Office report identified $1.1 billion of subsidies whose recipients were no longer breathing.

Franklin Roosevelt's Administration started farm aid in response to the Dust Bowl and the Depression, calling it "a temporary solution to deal with an emergency." But in Washington, the emergency has never ended. The government still gives farmers your money--more than ever over the past decade--along with research projects to expand their yields, restoration projects to clean up their messes, flood-control and irrigation projects to protect and enhance their land, visa programs to supply them with cheap labor, ethanol mandates and tariffs to boost their prices, and tax breaks by the bushel.

The bipartisan farm bills that Congress passes every five to seven years reflect the power and savvy of the farm lobby, which parlays cue-the-violins stereotypes of struggling yeomen into giveaways to the planter class of the South and Great Plains. In reality, the top 10% of subsidized farmers collect nearly three-quarters of the subsidies, for an average of almost $35,000 per year. The bottom 80% average just $700. That's worth repeating: most farmers, especially the small farmers whose steadfast family values and precarious family finances are invoked to justify the programs, get little or nothing.

This summer an unprecedented coalition, running the gamut of the advocacy world from rural development to health to business to the environment, emerged to help Kind and Republican Jeff Flake of Arizona try to shake up the system. Editorials thundered for reform, and House Speaker Nancy Pelosi of San Francisco--the city of organic kale and "meat is murder"--vowed to deliver it. The moment seemed ripe for Democrats to challenge the status quo. Agribusiness was steering two-thirds of its campaign donations to Republicans, and just 19 of the 435 congressional districts were vacuuming up half of all subsidies. Still, House Agriculture Committee chairman Collin Peterson of Minnesota had a warning for Kind. "I told him, 'Ron, you're a good guy, but you're way out of your league here,'" Peterson told TIME. "I knew we were going to kick his butt."

He was right. Pelosi sided with the American Farm Bureau, the National Farmers Union and the Big Five commodity lobbies, spearheading a bill she called "a first step toward reform," an oblique way of saying it isn't reform at all. The Big Five would still hog the subsidies, while the influential sugar industry would retain its lucrative price supports. The one major "reform" was that farm families earning at least $2 million a year would supposedly be ineligible for subsidies, assuming none of them knew decent accountants.

The story of this butt-kicking is a quin-tessential Washington tale, illustrating how a single special interest with a single-minded devotion to a cause can trump a broad coalition and the national interest. The Senate is considering a similar bill, and a reform effort led by Republican Richard Lugar of Indiana seems likely to meet a similar fate. The Bush Administration has made noises about a veto; Kind says the President, famously reluctant to admit mistakes, confided in a private chat that he regrets signing the lavish 2002 bill. But it's never wise to bet against the farm lobby, which spent $135 million on lobbying and donations last year and brilliantly portrays opponents as enemies of the heartland of America. "The game is always the same," says Oxfam America's Jim Lyons, a former U.S. Agriculture Under Secretary. "The big commodity groups have a stranglehold on policy. And there's not a lot of stomach for new ideas."

'Look What's Happened.'

OUR CULT OF THE SMALL FAMILY FARMER dates back to Thomas Jefferson, who hailed humble "cultivators of the earth" as America's "most valuable" and "most virtuous" citizens. Politicians still paint American Gothic portraits of the country folk who toil in the soil to grow our food and fiber. But at the Husker Harvest Days farm show in September in Grand Island, Neb., it was clear how far American agriculture had come from the days when Cornhuskers husked corn by hand.

The farm show looked like a state fair but felt like an industry expo, with barkers urging visitors to increase productivity or cut costs rather than ride a pony or eat corn dogs. John Deere salesmen showed off their largest machinery ever, including a 530-horsepower tractor and a combine that costs $410,000 fully equipped. At the Firestone tent, a rep said the company is preparing a 91-in. (230 cm) farm tire, taller than Yao Ming. TopCon Precision Agriculture exhibited GPS gadgets that adjust your spraying and watering according to the topography of your fields and can even steer your tractor. ADM Financial advisers showed how to hedge risk in futures markets, while a lecturer at Monsanto's Biofuture tent touted drought-tolerant corn: "We're in a brand-new world here, folks! You've got to get more production out of every acre just to keep up!"

Jefferson's "cultivators of the earth" didn't have genetically engineered seeds or 530-horsepower tractors. They had 1-horsepower horses. And they didn't have subsidies either. In fact, most antebellum farmers opposed all federal aid to private enterprise, assuming it would just enrich manufacturing elites. The lesson of Husker Harvest Days is that modern farmers--at least the ones with most of the land and subsidies--are a new manufacturing elite. They just happen to be manufacturing food and fiber. Production agriculture is a high-tech, globalized business with economies of scale. You don't buy a $410,000 combine to farm the back 40.

But it's hard to start big, which is why agriculture has the kind of demographics that cancels sitcoms: only 6% of farmers are younger than 35, while 26% are over 65. "It's damn near impossible to get started today," Craig Ebberson says during a tour of the endless rows of corn and soybeans he farms with his sons near Randolph, Neb. "Farms are getting bigger and more efficient, and that's not going to stop." The Environmental Working Group's farm-subsidy database shows that Ebbersons in the area collected $3 million in crop aid over the past decade. Craig used that money to snap up more land, expand his feedlot, invest in a nearby ethanol plant and buy gizmos that track his fertilizer and pesticide use and the food and drug intake of every cow. It's no accident that agriculture's productivity growth consistently outpaces the rest of the economy--or that farms with million-dollar revenues are the fastest-growing agricultural sector. "We started with a corn knife and a scoop shovel, and look what's happened," he chuckles.

What's happened is, some farm families got big, but more got out. Subsidies have helped finance the expansion plans of the big guys while inflating the rents of the little guys. Ebberson's neighbor Mike Korth has a 1,000-acre (400 hectare) corn and soybean spread that would have been considered enormous a century ago but is now about average for the area. His township has only 39 families on 36 sq. mi. (94 sq km), a frontier-level population density. No wonder a Federal Reserve Bank of Kansas City study found the rural counties most dependent on subsidies had the worst population losses and the weakest job growth.

"We're killing what made America great," says Korth, an intense 50-year-old who looks like a miniature Mike Ditka. Randolph's school district has dwindled from nearly 1,000 students to fewer than 400. It's adopted a four-day week to save money and might switch to eight-man football. The town has lost its Ford, Chevy and Chrysler lots, all its implement dealers and lumber yards, its creamery, jewelry store and movie theater. "The big farmers took over, and it's killed small business," says Paul Loberg, who runs a welding shop off Main Street. "All they need downtown is coffee and beer. They can't buy that by the truckload yet."

Subsidies aren't the only cause of expansion, but they do "wed farming regions to an ongoing pattern of economic consolidation," concluded the Kansas City study. Nebraska's Center for Rural Affairs found the 2002 farm bill--the Farm Security and Rural Investment Act--spent six times as much on subsidies for the state's top 20 farmers as on rural development programs for the 20 counties losing the most population. And the South's cotton and rice farmers get even fatter checks than Middle America's grain farmers, which is why Korth managed to persuade the Nebraska Farm Bureau to endorse limits on payments to rich farmers, even though the national Farm Bureau aggressively opposes them. "Wealth has a natural tendency to concentrate," says Chuck Hassebrook, the center's director. "But why reinforce that? Shouldn't government try to offset that?"

Modern agroindustrialists are perhaps even more admirable than the modest ploughmen of yore. They're still family farmers who like to play in the dirt--only 2% of our farms are corporate-owned--but they also have to be land managers, soil scientists, hydrologists, veterinarians, mechanics, commodity traders, exterminators, meteorologists and highly sophisticated businessmen. The question is, Why do they need our help when they're doing so well? Agriculture Secretary Mike Johanns, a former Nebraska farm boy who is running for Senate, put it this way in an interview hours before he announced his resignation: "Congratulations! We celebrate your success. You don't need subsidies anymore!"

An Imperfect System

IN JEFFERSON'S DAY, 9 OUT OF 10 Americans cultivated the earth. When Abraham Lincoln created the U.S. Department of Agriculture, half the country still farmed. He once said farmers were "neither better nor worse than any other people," just "more numerous." (They also received inordinate political flattery, "the reason of which I cannot perceive, unless it be that they can cast more votes.") Under F.D.R., 1 in 5 Americans was still a farmer.

Now it's just 1 in 150, and closer to 1 in 500 for full-timers. But farm lobbyists say that simply highlights the continuing need for a safety net--and if the net happens to catch Scottie Pippen, Chevron, Ted Turner and 1,324 recipients in bucolic New York City, that's a small price to pay. "The system isn't perfect, but politics is the art of the possible, and the system works," says agribusiness lobbyist Charlie Stenholm, a cotton farmer and former Texas Congressman who was once the committee's top Democrat.

Most farmers say they'd rather not accept subsidies--if they didn't have to comply with so many government regulations, compete with subsidized farmers abroad and deal with commodity prices beyond their control. And don't get them started on the rising costs of their machinery, inputs and fuel. But their main arguments are that we'd spend more on food in a world without subsidies and that dependence on foreign protein would be even worse than our dependence on foreign oil. "The subsidies help keep us in business, so we can play in the dirt and you don't have to grow your own food," says Ben Boyd, a Georgia cotton farmer who's active in the Farm Bureau. "It's not like we're all living in plantations like Tara, wearing fancy white suits like Colonel Sanders."

But ensuring cheap food is not the real goal of the system. Farmers rightfully complain that they don't set food prices; they only receive a few pennies from the sale of every loaf of bread or box of cornflakes. When commodities are cheap, the main beneficiaries are well-heeled grain -and-livestock processors like Cargill, Tyson and Archer Daniels Midland. No, the real goal has always been to protect farmers from the vagaries of the weather and the market. Farming is indeed a risky business--most businesses are risky businesses--and farm policies have tried to reduce that risk by any means available. The result has been an evolving mix of income supports, price supports, disaster relief, government purchases of surplus crops for school lunches or foreign aid, and "supply controls" that boost crop prices by preventing overproduction. Such controls range from rules requiring farmers to leave some land fallow to acreage allotments directing them as to what and how much to plant. "If you can't feed and clothe yourself, your nation's at risk," says Arkansas Congressman and rice farmer Marion Berry. "Farming is a dadgum hard life, and we need folks to keep doing it."

For decades, this largesse was fairly uncontroversial. Georgians didn't like the sugar program, and Minnesotans rolled their eyes about cotton subsidies, but everyone made sure everyone else got theirs. In the 1970s, the House and Senate agriculture committees cleverly tacked food stamps onto farm bills to solidify the support of urban legislators. But when Republicans seized Congress in 1994, promising a revolutionary age of fiscal conservatism and free-market capitalism, they vowed to gut command-and-coddle farm policies that they compared to Soviet communism. They wanted the government to treat agriculture like any other business, and they said they'd offer farmers a deal: no more supply controls, so farmers could plant what they wanted, but no more subsidies, so they would have to survive on their own.

That was the deal enshrined by the Freedom to Farm law of 1996--except the part about no more subsidies. "The regular order took over," recalled Dan Glickman, a former Kansas Congressman who was President Clinton's Agriculture Secretary. "There was a lot of hefty intellectual discussion about weaning farmers off the dole, but of course, it didn't happen." Instead, GOP leaders agreed the next farm bill would wean farmers off subsidies but only after they received seven years of guaranteed transitional payments--even when prices were high. Farmers also received more generous crop-insurance subsidies so that Congress would no longer need to send them disaster checks every time their region had nasty weather. But when prices collapsed again in 1998, Congress approved the most generous disaster packages in history.

The 2002 election-year farm bill didn't wean farmers off subsidies either; it was the most profligate yet. It created new "countercyclical payments" for bad times, while extending transitional payments for all times, renaming them "direct payments" so no one had to keep pretending they were temporary. Texas Republican Larry Combest--then chairman of the House Agriculture Committee, now another agribusiness lobbyist--threatened to block legislation enhancing Bush's power to negotiate trade deals if he didn't sign the farm bill. Bush signed.

The result is that farm payments that used to cost a few billion dollars a year have averaged $17 billion. They'll be lower this year because commodity prices are so high. But owners of eligible farmland will still get direct payments regardless of how much their farms earn or whether their farms are still farmed. And even though crop-insurance subsidies have increased nearly tenfold, farmers will still receive disaster aid if things go badly, no matter how often that happens. More than 21,000 farmers have cashed at least 11 disaster checks each in the past 21 years, at a cost of $2.5 billion.

That's fine by Congress, which is considering a $5 billion "permanent disaster fund" to streamline these bailouts for persistent failures. "The system doesn't serve any consistent public-policy goal," says economist Bruce Babcock, director of Iowa State University's Center for Agricultural and Rural Development. "It only makes sense if the mission is finding ways to shovel money to farmers."

Mission Accomplished

CRITICS OFTEN EXAGGERATE THE IMPACT of farm programs, as if the Great Plains would become amber waves of arugula if only we stopped subsidizing King Corn. But government policies are supposed to reflect national priorities. Politics isn't destiny, but it does influence behavior on the margins. And in a country with 1 billion acres (40 million hectares) of farms and ranches, we've got big margins.

For example, health advocates ask why the most fattening calories on our grocery shelves are the most subsidized. During an unprecedented obesity epidemic, why not support fruits and vegetables instead of cattle and poultry feed? Similarly, green groups would shift funding from subsidies for the grain-industrial complex to conservation payments for eco-sensitive farmers of any size. The results would be less erosion; more restoration of grasslands and wetlands; and less degradation of water bodies like the Chesapeake Bay, the Everglades, the Colorado River and the Gulf of Mexico, where farm nutrients have created a 5,000-sq.-mi. (13,000 sq km) dead zone.

Another unintended consequence: we don't make West African cotton farmers poor, but our subsidies encourage overproduction that slightly reduces world cotton prices, making millions of them slightly poorer. An Oxfam study found that eliminating our subsidies could boost their average income as much as 5.7%, enough to feed two of their kids for a year. We spent $3.3 billion on cotton subsidies in 2005, more than half of Mali's gross domestic product. "We're not judging you--if we could subsidize our farmers, we'd do it!" says Abdoulaye Diop, Mali's ambassador to the U.S. "But you're hurting some of the poorest farmers in the world."

This is a legal and geopolitical issue as well as a moral one. Brazil has successfully challenged our cotton subsidies in the World Trade Organization (WTO), and a recent congressional report admitted "all major U.S. program crops are potentially vulnerable to WTO challenges." When U.S. officials urge the world to embrace free markets and free trade, the inevitable response is, What about your farm programs? "Our credibility is zero," says economist Daniel Sumner, a former Assistant Agriculture Secretary who runs the University of California's Agricultural Issues Center. "Every other country thinks of us as a liar and a crook."

We end up taking a hit in the global economy. In the Doha round of trade negotiations, the U.S. and Europe are supposed to slash farm supports, and the rest of the world is supposed to slash tariffs and other barriers on everything from cars to software to wood to wine to legal and financial services. But for several years, our reluctance to cut farm supports has stalled the talks, kneecapping American firms ranging from Microsoft to FedEx to Anheuser-Busch, and even American farmers who rely on exports. "The problem is a vested political constituency that's absolutely committed to the status quo," says retired California Congressman Cal Dooley, a former cotton and walnut farmer who leads the Grocery Manufacturers Association. "That's the main obstacle to free trade."

For all those reasons, Congressmen Kind and Flake proposed an amendment last summer to eliminate no-strings-attached direct payments, end subsidies to the rich, boost conservation funding and create a more targeted safety net for farmers having rough years. Kind thought they had a shot. A similar package had gotten 200 votes in 2002 without such a grand coalition, and this time Democrats--who had spent six years complaining about Republican giveaways to the rich--were calling the shots. Even the Bush Administration supported payment limits. During speeches to farm groups, Johanns kept displaying maps of all the subsidy recipients on Manhattan's swank Park Avenue.

But Kind thought wrong. "I got a real lesson in how Washington works," he says.

Game Over

EVEN BEFORE THE Agriculture Committee began work on the farm bill, chairman Peterson took Pelosi to meet with farm groups and warned her that Democratic freshmen in rural districts might lose seats if farm programs were revamped. Reformers countered with polls showing support for strict payment limits in those districts, and an analysis showing that most of those districts would receive more money under Kind-Flake through conservation payments. But as a Pelosi aide told them, it didn't matter whether the danger was real; it only mattered that freshmen Democrats believed it. The aggies flew in hundreds of farmers to lobby for the status quo, and several "Blue Dog" Democrats agreed to support Pelosi's efforts to fund children's health insurance with tobacco taxes only if she supported the status quo. Berry once called Pelosi late at night to beg her not to allow strict payment limits or any cuts in subsidies. "She said, 'Marion, this stuff is complicated, but if you say it's that important, I'll take your word for it,'" Berry recalls.

Pelosi ultimately pledged to support the work of the Agriculture Committee, whose members represent districts that receive 42% of the subsidies. "That was 'game over' right there," Kind says. "That committee is completely beholden to the status quo." The committee passed its bill without a dissenting vote.

How did Peterson achieve this consensus? By buying off the reform factions. California Representative Dennis Cardoza and the fruit-and-vegetable lobby agreed to support the bill once Peterson threw $1.6 billion at specialty crops. He added $4.7 billion for nutrition, $4.5 billion for conservation and $100 million for black farmers, which brought progressives, sportsmen and the Congressional Black Caucus into the fold. Even the Sustainable Agriculture Coalition dropped its opposition for scraps: $5 million for organic research, $22 million for organic certification and $30 million to help farmers sell value-added products. "The programs that really benefit small farmers are tiny, but the unfortunate fact of the politics is, if you want anything from the committee, you have to play their game," says Kari Hamerschlag, a sustainable-agriculture consultant.

Peterson still had to pay for the extras. He considered trimming the widely ridiculed direct payments, which were originally supposed to be transitional. But the methadone had become the heroin. "I don't like direct payments myself, but they're political reality," Peterson says. "I needed them in there to keep everyone on board." In fact, the House bill increased the maximum direct payment 50%. And cutting easier-to-defend payments for times of low crop prices was even less realistic.

So instead of cutting farm spending--which accounted for less than nutrition spending--Peterson persuaded Pelosi to pry money out of the Ways and Means Committee by closing a loophole that helps foreign firms duck U.S. tax liabilities. Republicans denounced this back-door tax hike to no avail. "They had every right to scream foul," Kind says. "There was no vetting in Ways and Means, no hearings, no markup. My party just grabbed $10 billion to buy off the opposition." Democratic leaders then squelched an amendment that would have forced an up-or-down vote on eliminating subsidies for farmers earning $250,000 a year. One lobbyist mused that General David Petraeus could learn something from Pelosi about crushing an insurgency.

Pelosi allowed a vote on Kind-Flake--or, as the farm groups called it, "Kinda-Flakey"--but this time it was crushed, 309 to 117. "I had two members tell me they felt sorry for Ron, I was stomping him so bad," Peterson said with a grin. "If I had put down the hammer, I could've taken him under 100." As they watched the debate, with its predictable tributes to hardworking family farmers, frustrated reformers filled out "Farm Bill Bingo" cards with aggie catchphrases like "farmer-friendly," "dismantling the safety net" and "East Coast media."

The Senate is expected to pass a similar bill soon. Bush will almost certainly veto anything with a tax hike, but it's not clear if he will block a status quo bill without one. For health, business and environmental groups, the farm bill is a compelling issue, but for the farm lobby, it's the issue, and politicians oppose it at their peril. The same flattery that irked Lincoln was on display last month at a National Farmers Union reception for members of Congress, who gushed about the farmers who had gathered to lobby against change. "Let me thank you again for the wholesome, wholesome inspiration you all are!" Pelosi shouted.

Pelosi has warned her caucus that the next farm bill must include real reforms. But nobody ever opposes reforms in the future farm bills. "In five or 10 years, maybe we could get off subsidies," Peterson says. "That would be great. Farmers would love that!"