Tuesday, December 11, 2007

Jimmy Carter Almost Makes Sense

Former President Jimmy Carter has an editorial in the Washington Post today about farm subsidies. He almost finds the right answer, but alas he can't quite get over the hump. First he recalls the history of farm subsidies in the US:

A long-overdue debate is taking place on reform of the 1933 farm bill, passed during the Great Depression to alleviate the suffering of America's family farmers. I was a farm boy then, and the primary cash crops on my father's farm were peanuts and cotton. My first paying job was working for the U.S. Department of Agriculture, measuring farmers' fields to ensure that they limited their acreage and total production in order to qualify for the life-sustaining farm subsidy prices.

That brings to mind a quote from Milton Friedman: "Nothing is so permanent as a temporary government program." Why are we still paying subsidies that were first enacted to alleviate suffering during the Great Depression? Didn't that end already?

Carter then goes on to talk about the things most of us already know about agriculture subsidies - they are not for the small farmer; most of the subsidies going to wealthy individuals or large corporations. Here's a good source about who really gets farm subsidies.

It is embarrassing to note that, from 1995 to 2005, the richest 10 percent of cotton growers received more than 80 percent of total subsidies. The wealthiest 1 percent of American cotton farmers continues to receive over 25 percent of payouts for cotton, while more than half of America's cotton farmers receive no subsidies at all. American farmers are not dependent on the global market because they are guaranteed a minimum selling price by the federal government. American producers of cotton received more than $18 billion in subsidies between 1999 and 2005, while market value of the cotton was $23 billion. That's a subsidy of 86 percent!

The Carter Center works primarily among the world's poorest people, including those in West Africa whose scant livelihood depends on cotton production. For instance, in 2002 Burkina Faso received 57 percent of its total export revenue from cotton, while Benin depended on cotton exports for more than 75 percent of its national export revenue. Overproduction in the United States leads to the dumping of U.S. cotton on global markets, which drives prices down. In recent years, cotton exported from the United States has been sold 61 percent below its cost of production.

Fragile African economies that depend on agricultural exports, especially cotton, are sometimes devastated by these practices. A 2002 report by Oxfam International estimates that in 2001 sub-Saharan Africa lost $302 million as a direct result of U.S. cotton subsidies, with two-thirds of the loss sustained in eight countries -- Benin, Burkina Faso, Mali, Cameroon, Ivory Coast, Central African Republic, Chad and Togo. Compared with American humanitarian assistance, the subsidies to U.S. cotton farmers amount to more than the U.S. Agency for International Development's total annual budget for all of sub-Saharan Africa.

So now that he's properly diagnosed the problem it would seem a short leap to the answer to this vexing problem: No subsidies and Free Trade. But is that where Carter goes? Um no:

Two amendments being proposed in the Senate represent the best hopes for fixing what's wrong with the system of crop subsidies. Sens. Richard G. Lugar (R-Ind.) and Frank Lautenberg (D-N.J.) have proposed the Farm, Ranch, Equity, Stewardship and Health Act of 2007 as an amendment to the farm bill; it would replace the subsidies with an insurance program protecting farmers from excessive losses and catastrophes such as flooding or drought. This approach would correct many of the flaws I've noted in the current farm bill. An amendment being circulated by Sens. Byron Dorgan (D-N.D.) and Charles E. Grassley (R-Iowa) would place a $250,000 cap on annual subsidy payments to a farmer. Various schemes under the present law allow these limits to be grossly exceeded, with some big farmers receiving several million dollars annually. Both amendments would go a long way toward making the farm bill fair for farmers at home and abroad.

Why can't farmers buy their own insurance? Why should I pay to make sure their business makes a profit? Can I get some of this Federal gravy? And a $250,000 cap? Isn't that a tad generous? By the way, the House just passed a farm bill that puts an income cap of $2,000,000 on farmers who receive payments. What the hell do they need subsidies for?

Carter makes the best case for the elimination of the subsidies and free trade in the last paragraph:

I am still a cotton farmer, and I have been in the fields in Mali, where all the work is done by families with small land holdings. Cotton production costs 73 cents per pound in the United States and only 21 cents per pound in West Africa, so American farmers do need protection in the international marketplace. But Congress has a moral obligation to protect American agriculture with legislation that will serve our national interests, that will feed hungry people and that does not suppress the ability of the poor to work their way out of poverty.

If Mali farmers can produce cotton for 21 cents a pound shouldn't we let them do it and buy our cotton from them? I think there might even be an economic term for this....oh yeah, comparative advantage. I know it's a new concept - Ricardo only came up with it 190 years ago - but you would think politicians would have heard of it by now.

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