FOR IMMEDIATE RELEASE: Washington, DC (January 6, 2016) — Is the 2014 Farm Bill a successful piece of legislation that reduces farm subsidies, helps decrease the federal budget deficit, and benefits farmers? Or does it increase government expenditures on farm subsidies, increase the federal budget deficit, and increase incentives for farmers to waste economic resources?
In “The Economic Welfare and Trade Relations Implications of the 2014 Farm Bill” (Emerald Group Publishing, January 2016), a collection of studies on various key aspects of the Farm Bill, editor and AEI agricultural economist Vincent H. Smith joins other experts to assess the impact of the 2014 Farm Bill. Throughout the 12 chapters, college professors and agricultural experts examine the different sections of the 2014 Farm Bill and find that the programs appear to focus on transferring income — at the expense of US consumers and taxpayers — to relatively wealthy farmers and to nonfarm entities, such as the US merchant marine and private insurance and reinsurance companies. These transfers have negative effects on the long-term productivity of the agricultural sector and on how well international food aid programs can meet humanitarian needs. In addition, the 2014 Farm Bill does too little to efficiently address conservation issues and will likely make it harder for US trade negotiators to secure beneficial trade agreements.
A summary of the chapters follows:
Chapter 1 by Barry K. Goodwin (North Carolina State University) and Vincent H. Smith (Montana State University): An introduction of current farm policy and how farm subsidies have distorted the market.
Chapter 2 by David Orden (International Food Policy Research Institute) and Carl Zulauf (Ohio State University): A look at the evolution of modern US agricultural policy since the 1990s, including the continued support for programs that transfer resources from taxpayers to consumers, though transfers to farmers are no longer needed to mitigate rural poverty.
Chapter 3 by Bruce Babcock (Iowa State University): Examines the Price Loss Coverage and Agricultural Risk Coverage programs, which are really price and income support programs for specific commodities under the guise of providing farm income safety net programs.
Chapter 4 by Erik Lichtenberg (University of Maryland): Examines the economic rationale and efficiencies of the conservation programs authorized under Title II of the Farm Bill.
Chapter 5 by Christopher B. Barrett (Cornell University) and Erin C. Lentz (University of Texas at Austin): Examines the problems associated with international emergency food aid, including the requirement that aid be transported on US flagged ships; the requirement that the US be the source of food aid, instead of using conveniently located local food sources; and the monetization of food aid, where nongovernment agencies sell food aid and use the funds for other forms of assistance. They conclude that millions of lives are not saved because of all these requirements.
Chapter 6 by Colin A. Carter (University of California, Davis): Examines the trade policy implications of the 2014 Farm Bill including the new dairy margin protection program and the livestock-related Country of Origin Labeling, which violates US WTO trade obligations.
Chapter 7 by Dr. Joseph Glauber (International Food Policy Research Institute) and Patrick Westhoff (University of Missouri): Discusses how the 2014 Farm Bill could cause the US to violate its current WTO obligations because of the various subsidies included in the program.
Chapter 8 by Brian Davern Wright (University of California, Berkeley): Examines the economic benefits and costs of the federal agricultural insurance program and finds that the program accounts for about 30 percent of all farm-subsidy spending, which amounts to an estimated $8 billion a year or more, according to the Congressional Budget Office. Wright finds that the insurance program increases riskier behavior while transferring income to the wealthier farm operations and transferring the financial risks to taxpayers.
Chapter 9 by Daniel A. Sumner (University of California, Davis), Joseph V. Balagtas (Purdue University), and Jisang Yu (University of California, Davis): Studies dairy programs and finds that the Dairy Margin Protection Program has the potential to exceed all previous government outlays on dairy subsidies and makes it more difficult for US dairy food processors to be competitive in export markets.
Chapter 10 by Gary W. Brester (Montana State University): Assesses the US sugar program and finds that restrictions of imports, restriction of acreage where sugar beets and sugar canes are planted, and a long-standing “loan rate” price support result in US domestic sugar prices being much higher than world prices.
Chapter 11 by Philip G. Pardey (University of Minnesota), Steven T. Buccola (Oregon State University), and Jason M. Beddow (University of Minnesota): Explores the impact of the 2014 Farm Bill on public research and development (R&D) programs and finds a modest increase in R&D funding, though an insufficient one to reverse the decline in the US share of global food and agricultural R&D spending — with adverse consequences for the future competitiveness of US agriculture.
Chapter 12 by Dr. Mary Clare Ahearn (United States Department of Agriculture Economic Research Service, retired): Examines rural development policy reflected by successive farm bills between 1950 and 2014. She assesses the effectiveness of the various rural credit programs targeted to new and socially disadvantaged farmers and finds that they are in fact trivial (less than 0.04 percent of the spending on all other farm and rural programs).
As the first comprehensive account to address contemporary US agricultural policy as defined by the 2014 Farm Bill, this primer provides a careful analysis of US agricultural policy that is accessible to students, graduates, interest groups, and policymakers.
For more information about “The Economic Welfare and Trade Relations Implications of the 2014 Farm Bill,” click here. An accompanying infographic pertaining to the book can be found here.
Vincent H. Smith is a visiting scholar at the American Enterprise Institute. He is also a professor of economics in the Department of Agricultural Economics and Economics at Montana State University and codirector of MSU’s Agricultural Marketing Policy Center. For interview requests, or for a copy of the book, please contact Meg Cahill at meg.cahill@aei.org or 202.862.7155.
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