Farm Bill Payment Limits: Part 2

This post was cross-posted on the blog where we are participating in a series of farm bill blog posts.

This is my second of three posts on payment limits. The first can be found here. A comment left on the first post:

I'm struggling with an Eiger-like learning curve here with the actual issues. But, as a possible rallying point for public opinion, it seems to me that Grassley-Dorgan scores as being explainable to Sixpack in a soundbite:

Capping the subsidies hits at corporate welfare for the fat cats while protecting the family farm.

With some decent visuals, that's 20 seconds tops on the nightly news.

That's about it. If somebody really wants me to go way into the policy weeds and explain the details of payment limitations and how they work (or don't work), please put up a comment to that effect and I'll do my best. But as a concept, the issue of payment limitations is very simple. A producer can receive up to this much money and no more.

Setting a limit or cap (or whatever you want to call it) on farm program payments is an issue that has been around at least since the late 1960s. It has always been controversial, and it has most often broken down as a North vs. South (plus California) fight rather than along party lines. But at its heart, the fight over payment limits is a philosophical disagreement about the purpose of farm programs.

I happen to believe that farm programs should be focused on helping farmers.

Regardless of efficiency or innovation, unlimited payments reward those operations that continuously expand and drive their neighbors off the land. Therefore, I think payments should be limited. I also think the structure of farm programs is important, but whatever the structure, there should be a limit on how much you can receive from the federal government. Without that limit, our tax dollars will be used to subsidize the consolidation and concentration of agricultural production. And that is what is happening today.

Opponents of payment limits argue that farm programs are about helping the agricultural sector. In this view, farm programs primarily exist to address the unique economic nature of agriculture. Enacting strong payment limitations would favor one farmer over another, and that is not the purpose of farm programs. In fact, opponents say, that is unacceptable meddling in the "free markets" of agriculture. It is "bureaucrats in DC selecting winners and losers."

At the Center for Rural Affairs, we believe that this view does not take into account the fundamental nature of farm programs. It is impossible to design a farm program that does not determine winners and losers. Today, the winners are the farmers who play the subsidy game with their lawyers and accountants. And I don't want them to win. I want diversified family farms throughout rural America, and I sure as hell don't want my tax dollars being used to subsidize the destruction of those farms.

So where does our current farm policy fit? Not surprisingly, it is a particularly infuriating mix of these two ideas. Our elected representatives are perfectly aware that the majority of Americans- and the majority of farmers- support a farm program focused on helping farmers, and that means effective payment limits.

So they enact a limit. Right now, that limit is $180,000. But the people who write checks that finance campaigns don't like that limit. They are firmly in the "help the sector" camp in the philosophical fight over payment limits. So politicians start weakening the limit. Politicians enact a loophole that says you can establish multiple entities to receive farm program payments. Now the limit is doubled, to $360,000. Politicians insert a ridiculous "generic certificate" provision, and the explicit purpose is to evade the limit. The provision actually states "generic certificates do not count toward farm program payment limits." Now you have truly unlimited payments. They allow multiple partnerships to be formed to receive farm payments, and do not track who ultimately receives the farm program money. Now even if you wanted to enforce a limit, you can't, because you don't even know who the money is going to.

The Grassley-Dorgan bill, in fact, is mostly about closing these loopholes.

This is the reason the Center for Rural Affairs gets so damn worked up about payment limits. There is a payment limit. Politicians know the vast majority of Americans want limits. Politicians know that United States tax dollars are being used to drive farmers off the land. Yet they continue to pass laws creating loopholes, so the largest, most aggressive farms can receive unlimited payments.

There is a silver lining. When an elected representative is not representing the interests of his or her constituents, there is opportunity. And in many rural areas, including the South, a candidate who supports strong payment limits and a farm bill that helps farmers would have a pretty good chance of getting elected. More on that tomorrow.

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