O ne of mankind’s earliest inventions was agriculture. Growing their food rather than chasing it around or wandering in search of it enabled people to stay in one place. This stability allowed the development of other trappings of civilization: towns, trade, regional culture and government. But agriculture provided the foundation upon which all else was built.
As adventurous people moved into and settled new lands, farmers were among the first to arrive. In the United States, the Homestead Act of 1862 encouraged people to settle on the frontier by giving them 160 acres of government land in exchange for their labor to improve the property over five years.
It’s not surprising, then, that farms and farmers have a special place in our history and in our hearts; many urban Americans are only a generation or two removed from working the soil. So when the federal government pays subsidies for agricultural products or sets artificial prices that don’t reflect the true market, even many conservatives are comfortable with the programs. After all, they reason, everyone needs a little help now and then, and the family farm is the backbone of our nation.
But there are problems with that line of thinking. For starters, the family farms we envision in our pastoral dreams are becoming fewer in number as agricultural giants muscle their way into the market. For these companies, farming is a business rather than a way of life. They have employees who watch markets and trends to help them decide production rates. And government aid, meant to help keep small farmers on their land, goes mostly to corporate farmers.
In addition, subsidies, quotas and price supports distort the market and shield producers from reality. They grow what provides the best return with little regard for economic rules of supply and demand.
With these points in mind, fiscal watchdogs in Washington will, from time to time, try to reduce farm subsidies in their efforts to cut the federal budget and restore market forces to agriculture. Reformers face tough fights in the House and Senate as farm-state politicians on both sides of the aisle work to protect programs that benefit their constituents.
That’s the situation unfolding in the nation’s capital. President Bush is proposing reductions in cotton subsidies. It’s not that Bush is a budget hawk who’s constantly looking for ways to save the taxpayers a buck; we know better than that. Rather, the proposed cuts come as a result of a World Trade Organization ruling that says the U.S. pays higher subsidies to cotton farmers than allowed under a 1994 trade agreement. Should the U.S. fail to scale back payments to cotton growers, Brazil, which brought the complaint to the WTO, could retaliate with tariffs against other U.S. goods.
When debates over farm subsidies turn to cotton, we’re not talking peanuts, either. Cotton payments eat up about one fourth of all farm subsidy payments each year. Of that aid, a lopsided portion goes to large operations because of the way price supports are set up. Payments to farmers rise as market prices fall; the less farmers get from sales, the more they get from the feds.
One of the biggest problems is that they shield producers from market realities. Recipients of cotton subsidies say they need the payments to make up for low global cotton prices. One Mississippi cotton grower said, “It would put us out of business not to have these subsidies because the price is so low the farmer can’t get a fair return. We’re always one year away from going broke.” Depressed prices are a sign of too much supply and not enough demand. Perhaps it’s time some of the cotton growers switch to crops for which there is greater demand. That would allow them to make a living without doing so on the backs of taxpayers. And it would allow the United States to be more a free trader in the global marketplace.