Disastrous?

Now that the Finance Committee has officially come up with the cash for the farm bill (which we’ll analyze later), it appears that the number one priority of Finance Committee Chairman Max Baucus will be included in the Senate version of the 2007 Farm Bill.  That priority, of course, is a permanent disaster program, and it takes about half of the $11 billion or so that the Finance Committee came up with for new farm bill funding.  Other Senators strongly supportive of the concept include Conrad (D-ND), Nelson (D-NE), Thune (R-SD), Dorgan (D-ND), Coleman (R-MN), Klobuchar (D-MN), Chambliss (R-GA).   Those are just the most vocal; others are strongly supportive as well.

Current disaster programs are funded on an ad hoc basis-  Every time Senators want money, they have to pass a bill through the House and the Senate.  A permanent disaster program would establish a fund to provide money automatically.  The $5 billion under discussion would be spread out over five years, the life of the farm bill.

Much talk has focused on the politics of this program, but not much discussion has occurred regarding the policy wisdom of a permanent disaster program.  That is unfortunate, but typical of farm bill media coverage which focuses on political conflict, not substantive policy disputes.  Of course, we’re occasionally guilty of that as well.

Fortunately, the Environmental Working Group is up to the task.  This week they put out a report analyzing who would benefit from a permanent disaster fund, and questioning whether such dedicated funding is really a good idea.  Their conclusion:

A bid to establish a dedicated trust fund to compensate farmers and ranchers who suffer weather damage to crops and livestock would direct most of the funds to a handful of states where agricultural disaster “emergencies” are in fact routine, virtually annual occurrences, primarily because of low rainfall.

“Our analysis raises the question of whether it is fair to designate such a large portion of revenues to a single purpose that mostly benefits just a few states on the committee,” said EWG president Ken Cook. “Other states represented on Senate Finance have higher priority agriculture-related needs for such funds, including conservation, rural development, or specialty crop agriculture,” Cook added.

“These other priorities have never been funded through ad hoc assistance and are, in fact, perennially short-changed by federal farm and appropriations policy decisions. Indeed, in recent years, conservation and other programs have had their funds cut in order to pay for disaster aid,” Cook stated

For us, this is one of those the-devil-is-in-the-details situations.  We believe that there is a proper role for government in the agricultural economy, and we think that can include a properly targeted disaster program.  We especially believe in a disaster program for livestock producers, who do not have an existing array of government programs and federally subsidized crop insurance available to them as risk-management tools (this is true for other sectors of agriculture as well).

However, we worry that like traditional farm programs, there will not be a true limit on program benefits, which is an absolute must.  A poorly designed disaster program could easily turn into yet another commodity program that benefits mega-farms to the detriment of small and mid-sized farms, and when Sen. Baucus is throwing around numbers like $5 billion over the life of the farm bill, that’s not an insignificant issue.  We also wonder if there will be extreme pressure to spend that money regardless of actual need- if it isn’t, then the disaster fund budget will be cut when the next farm bill rolls around.  If you don’t spend it, you lose it- and that creates a powerful incentive to spend as much as possible as quickly as possible.

So we’ll have to wait and see the details of the program.  The House farm bill includes a permanent disaster program, but does not have any funding available.  So if a $5 billion disaster program makes it through the Senate, the conference committee will have to have some serious discussions.  We’ll be watching.

 

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