There’s No Farm Bill Like No Farm Bill

by Don Boudreaux on November 20, 2007

in Agriculture, Current Affairs, Politics

This letter of mine is published in today’s edition of the Washington Times:

No farm bill is best farm bill

Among the jobs of any secretary of agriculture is to portray the administration as smart, fiscally responsible and in awe of farmers’ goodness and wisdom. Secretary Chuck Conner tries to do his duty in “Farmers deserve better” (Commentary, yesterday).

But those of us who don’t work for the Beltway circus should ignore the corny debate over the relative merits of the Bush administration’s offensively expensive farm bill against those of Congress’ obscenely expensive alternative bill.

We should instead tell our “leaders” that the best farm bill is no farm bill. There is no sound reason for government to subsidize farmers or to protect them from foreign competitors. Any farmer or rancher too incompetent to produce food that consumers pay for voluntarily should find other employment.

DONALD J. BOUDREAUX
Chairman
Department of Economics
George Mason University
Fairfax

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{ 26 comments }

shawn November 20, 2007 at 1:19 pm

The other day, I saw someone make a very interesting point re: farm bills.

Farms sold have been sold with the notion that subsidies would continue. It seems just to 'pay out' a lump sum to the owners of all farms based on what the future subsidy would have been, somehow discounted, of course.

Any merit to that? Or do you just say "hey, if you bought something with the HOPE that a subsidy would continue, and now it isn't, that's your own bad business move."

Dave November 20, 2007 at 1:57 pm

Do you believe there is any merit to the argument that we should maintain the ability to feed ourselves in the case of a threat to our food imports (e.g. tainted food, shipments cut off by war)? You could of course make this argument for all imported goods, but most other shortages wouldn't result in mass starvation. I'm not trying to claim that the proposed (or current) farm bills are well designed, but perhaps there is sound reasoning behind some form of subsidy to keep us from being dependent on foreign food. In addition to being dependent on foreign oil, that would be a scary prospect. Or do we have good reason to believe that we would always have enough farmland capacity to be self-sufficient if need be?

Jason November 20, 2007 at 2:11 pm

Dave,

Sanctions barely work on small countries for esoteric goods. Our own government can't prevent the free flow of illegal drugs. How could you ever imagine "the world" cutting off food to the largest economy? This falls into the "Worst case scenarios" that Prof. Roberts discussed in his last EconTalk. Not only is it extremely improbable, but insurance against it does more harm than good.

Jason November 20, 2007 at 2:22 pm

shawn,

Many people bought stocks on the assumption that the dividends would be taxed at 15%. Can they get a lump sum payment if Congress raises capital gains taxes? Many people accept jobs with high salaries assuming the current tax structure. Can they get a lump sum if the marginal rates go up?

John Pertz November 20, 2007 at 3:26 pm

This is the ONE issue that commentators, left and right, have no disagreement on. We are all united in saying that agriculture policy in the U.S and Europe is an atrocious waste and a text book example of corporatism run foul.

Plac Ebo November 20, 2007 at 4:06 pm

Dave, I think your national security question is a good one. I think it would be foolish to depend on free market economics to work in times of war. It would be interesting to have input from military planners and others who plan for disaster scenarios.

shawn November 20, 2007 at 5:39 pm

dave/placebo: i think the important thing to remember is that we won't be at war with EVERYONE at once, and we can get almost everything from almost anywhere else. meat, corn, fruits and veggies from canada, mexico, and south/latin american countries.

SOME ally or neutral party will sell us food. even if it's a little more expensive, it's got to be cheaper than the farm subsidies every year.

TheAlbatross November 20, 2007 at 7:35 pm

I think the national security aspect is always appealing to most people. However, it is an argument prone to abuse. If not food, then why not boots, steel, chemicals, etc.–plus plenty of smokes, coke, chocolate for the troops. The problem is that almost any industry can justify protection under national security or war needs–such is the nature of mercantilism or autarky.
Furthermore, I would argue that markets will continue to function under war conditions–the fact that they do is often the only thing that can hold things together. Many a military collapse has been triggered by government going to war against the markets that feed the war effort. The important thing is to harness the wealth and creativity provided by markets, which will build the armed forces and keep the trade lanes open.

Plac Ebo November 20, 2007 at 9:46 pm

How about something more obvious, energy. Current events show that energy is a national security issue. For 40 years plus this country has been increasingly dependent on foreign oil. Yet our energy policy has been conducted to the benefit big oil. You can't solely blame the oil companies. They exist to maximize profits. They went where the profits were, overseas. It is not their business to plan for national security. That is the government's job, and they have failed the nation. Shouldn't our government, in the goal of national security, been doing more than half-assed efforts to develop alternatives?

brotio November 20, 2007 at 10:39 pm

Plac Ebo,

We finally agree on something! Our government SHOULD be doing more. Like: Allowing oil exploration in ANWAR and the Gulf of Mexico, eliminating 'boutique blends' of gasoline, allowing oil shale development in Colorado, allowing more refineries to be built, and allowing more coal and nuclear power plants.

What government should NOT be doing is subsidizing ethanol, wind, solar, or any other energy source. However, you might be able to convince me that government should offer a substantial reward to the first person/company that can bring to market a fuel to replace gasoline that is cheaper per btu than gasoline is at $3.00 per gallon.

TheAlbatross November 20, 2007 at 11:24 pm

Plac Ebo,

I like the reasonableness of your argument. The major U.S. oil companies abandoned the U.S. 30 years ago, because they responded to incentives. The entire east coast is off limits to drilling, as is the eastern Gulf of Mexico and most of the Pacific Coast (everything grandfathered in before 66 excepted—I think). However, as this is an economics blog (and as you rightly pointed out) how can you blame them? Although at the same time the oil companies have taken risks only to see their investments put in danger or outright seized—Iran, Iraq, Saudi, Nigeria, and (most recently) Venezuela—among others. We use foreign oil (especially Canadian and Mexican oil) because it is still comparatively cheap, and there are few better useful things on this planet than a barrel of oil. Consider what comes out of a barrel of oil, and I will do it no justice, as I cannot possibly name all the valuable products, but everything from the bottle that holds your water, to the mesh in your shorts, to the stretch in your shirt, to the thread in your carpet, from the gas in your car, to the kerosene in your airline, to the asphalt in you road, to the petroleum coke that allows your local coal-fired electricity to remain within its pollution permit.
At the same time, we do import a lot of oil, because if you scratch the sand in Saudi the average well will spout 6,000 barrels a day, while the average in the U.S. will only make 11. This is not to say that 11 won’t do (especially when two barrels remain in the ground for every one extracted), but why bother with 11 when you can buy 6,000. There is a world market for oil—got ninety some bucks and it is yours. Does not Israel have oil?
I could wax on and on about the business—one could spend a lifetime studying it and never understand even a fraction of everything.
Oh, and Brotio, I recently visited the fields in Colorado and Wyoming; there are 2.6 trillion barrels of shale oil there—1.6 trillion of which are recoverable with our current technology. The recovery price is still higher than the regular stuff, and the folks in the industry still think we are heading for a glut—but maybe when the price hits the same level it was at—ahem, nearly thirty years ago—then maybe some sober and sagacious gentlepersons will consider making a prudent investment. Anyway, the point is that we can have much cheaper gasoline or even much cheaper oil prices, it is merely a matter of trading one thing off for another. Oil self-sufficiency is easy, as gasoline is very inelastic then $15-$20 a gallon should about do it, although as robust as our economy has been of late (and as the percentage of household income spent on fuel has decreased with rising wages), then maybe we might make it

muirgeo November 21, 2007 at 1:10 am

This is the ONE issue that commentators, left and right, have no disagreement on. We are all united in saying that agriculture policy in the U.S and Europe is an atrocious waste and a text book example of corporatism run foul.

Posted by: John Pertz

I second this opinion. The farm Bill is a disaster and a great example of monied interest running policy. A great example of a wealth transfer from the tax payors and family farmers to multinational agri-business. The recent meager attempts by congress to do anything to stand up to these guys is quite depressing.

Plac Ebo November 21, 2007 at 7:55 am

Albatross, who watches out for the long term interests of the country when big business is designed to maximize profits short term? What if those who warn that the planet has reached peak oil are correct? Is the nation supposed to wait until big business has squeezed every last dollar out of oil before we move on to alternatives?

Side note: don't put all of your hopes in the shale oil basket. Similar to ethanol, it takes about as much energy to produce it as you get out of it.

vidyohs November 21, 2007 at 10:17 am

Let's see, in the 1950s my Dad's uncle, 160 acre farm, received farm aid, soil bank payments…….I guess he fits muirduck's description of an evil multi-national business……and as a young boy I sat and watched him split firewood with an axe and a wedge, grub in the soil to plant and raise……..and I never suspected his evil connections and deeds.
But then as muirduck said of himself, "I am always confused" and he certainly proves it.
—————-
placebo, I think you're on the right track, but barely so.
Posted by: Plac Ebo | Nov 20, 2007 9:46:57 PM
How about something more obvious, energy. Current events show that energy is a national security issue. For 40 years plus this country has been increasingly dependent on foreign oil………Yet our energy policy has been conducted to the benefit big oil"…….Really, placebo? At the instigation of the Sierra Club et. al, big oil was prohibited from developing domestic oil sources and it was to their benefit?………..You can't solely blame the oil companies. They exist to maximize profits…….."They went where the profits were, overseas"……..They went, placebo? Really? How about they were FORCED to go elsewhere in order to stay in business…..placebo, do you really think that businesses that want to maximize profits are turning their backs on domestic resources and importing oil from foreign sources because they prefer it??? Does that maximize their profits??? Get a grip, son!!…… It is not their business to plan for national security. That is the government's job, and they have failed the nation. Shouldn't our government, in the goal of national security, been doing more than half-assed efforts to develop alternatives?
——–

I like your end conclusion, placebo, but getting there with you was a chore.
But you blew it here:
"it takes about as much energy to produce it as you get out of it.
Posted by: Plac Ebo | Nov 21, 2007 7:55:08 AM"

That's is only marginally true today, placebo, but is the world going to remain static? Do you suppose that could change in the very near future. Do you imagine that reaseach and experimentation might be going on to turn that to a profitable equation?

I can guarantee you that it is and it is successful and it will be done on a massive scale very soon. (personal insider info there).

The questions to be overcome do not involve the oil shale, but the existence and power of such as the Sierra Club.

muirgeo November 21, 2007 at 10:33 am

"Let's see, in the 1950s my Dad's uncle, 160 acre farm, received farm aid, soil bank payments…….I guess he fits muirduck's description of an evil multi-national business……"

vidhoys

So how is the farm doing today? Most of of the aid from the farm bill DOESN'T go to small farms.

"Our farm policy is supposed to save small farmers and small towns. Instead it fuels the expansion of industrial megafarms and the depopulation of rural America." Time

http://www.time.com/time/magazine/article/0,9171,1680139-1,00.html

vidyohs did you miss the wave of farm foreclosures in the 80's

Plac Ebo November 21, 2007 at 11:50 am

vidyohs, do you ever consider effects to the environment? Tar sands, like those found in Alberta, require about 2 units of energy for every 3 produced. Shale oil is more difficult to recover. Furthermore, the quality of the product is poor and the environmental expense in water used and pollution created is enormous.

The philosophy of live big today and don't worry about tomorrow is catching up to the world in all manner of ways.

Methinks November 21, 2007 at 2:06 pm

What if those who warn that the planet has reached peak oil are correct?

They aren't. For all intents and purposes, there is an infinite amount of hydrocarbon in the ground. You could go out to your back yard, dig up some dirt and get hydrocarbon out of it. There just isn't an infinite amount at any given price. Peak oil theorists hold both price and technology constant (or relatively constant) when predicting that we'll run out of oil. Since oil reserves are a function of price and cost to find and lift, these two variables are very important. The peak oil guys have been screaming the same thing before I became an oil industry analyst, while I was an analyst, after I left the field and they're still at it and will be long after I'm dead. They'll never be correct.

don't put all of your hopes in the shale oil basket. Similar to ethanol, it takes about as much energy to produce it as you get out of it.

Shale oil is nothing like ethanol. What makes it expensive is that the rock is less porous and permiable, which means that they have to spend a lot of time and money fracturing the rock to get the oil to flow. When I was an analyst, shale oil cost $40/bbl to lift. Oil was less than $20/bbl back then. Albatross has since informed me that the cost of lifting shale oil has now fallen significantly over the past 10 years – thanks to changes in technology! It's now economic. to lift. So let's do the math – if it costs $30 unsubsidized dollars to lift shale oil which you can then sell for $90/bbl you make a profit. If the only way you can make a profit in ethanol is by collecting a subsidy from the government, which product is more efficient? Which one takes more energy? Which one is less destructive to the environment? If you guessed "shale oil", you are correct. But my bet is that isn't what you guessed.

Of course, if you don't want to destroy the environment at all, you're going to have to make some trade-offs. For example, if you and yours get badly damaged in a car accident, you'll have to forgo all modern medicine because it's all pretty toxic to the environment and uses lots of energy. Chemotherapy, for example, would not be for you should you come down with cancer and you should really stop using your computer – uses electricity and electricity doesn't come free either. In the NE, to produce electricity, somebody has to risk his life to dig up the coal and we have to release the emissions burning it causes into the environment. Better turn off the heat in your house too. Natural gas is basically over-cooked oil and you have to drill evil, environmentally bad wells for that. So, you can't cook or turn on the electricity. Better move to a cave. But don't heat it. It would be a shame to deforest the land just to warm your hide. Speaking of hides, don't hunt and kill animals for food and clothing. That might lead to the environmental disaster of extinction of certain species. And don't try farming either. Nothing has led to more deforestation on the planet than farming. In fact, dying would be the best option. That's the most environmentally friendly thing to do. At least when you die, you turn into fertilizer for the earth.

We wouldn't want to "live big today" and worry about tomorrow catching up to you , would you?

vidyohs November 21, 2007 at 2:42 pm

You're right Plac Ebo, the world will remain static and the costs that exist today will always exist…..there is no hope, no future, close the patent office and shut down all the research centers. It's over, done, no more to be discovered, developed and produced.

Nothing can be made cleaner, more pure, more productive. The environment is history. Get used to sucking in soot and poisons. Man is too stupid to cope and get beyond.

Shut it down, shut it all down.

Oh woe.

vidyohs November 21, 2007 at 2:55 pm

So how is the farm doing today? Most of of the aid from the farm bill DOESN'T go to small farms.
Posted by: muirgeo | Nov 21, 2007 10:33:09 AM

muirduck,
Your problem is the one you stated earlier in which you said, "I am always confused".

Because of that you try to believe that corporations are evil, when in fact the vast majority of America is employed by small corporations 100 people or less and those corporation produce taxes for the government and revenues for the people in sums so overwhelming of those produced by such as Shell or GM.

You try to believe that the majority of the farm aid payments will wind up in the pockets of large corporations, and again that is not so. The majority will go to a vast number of people who own small plots of land and many of whom do not farm at all.

Your closing comment compels me to ask; just what the hell does farm closures in the 80s have to do with the subject of whether farm aid should or should not be handed out?

If they couldn't make it with aid, why the hell should they be further subsidized at such a level of incompetence?

The difference between me and you, muirduck, is that I know business and I am a hard nosed realist, while you…..while you…eh..I guess you summed it up, "You're always confused."

Plac Ebo November 21, 2007 at 6:33 pm

methinks and vidyohs,

Do you think the country would be a better place to live if we had no environmental regulations … none at all?

muirgeo November 22, 2007 at 12:02 am

vidyohs,

Does your uncle still have his farm??

Methinks November 23, 2007 at 6:01 pm

Plac Ebo,

Why don't you tell me how you're planning to live without leaving some kind of mark on the environment. We can't even begin to talk about regulating anything until we define what is acceptable and what isn't. Of course, since laws and regulations are specific, you're going to have to be specific in your answer before I can specifically tell you whether I'm for or against it.

I can't possibly begin to answer a question where what is to be regulated and how much regulation will be required is left up to the half-wits in the government.

I will tell you that I'm whole-heartedly against recycling in the case of paper and plastic – which I'm required to do by law in the Empire State. The environmental damage of recycling those items is far greater than just throwing them away and starting over. Re-using plastic bottles, as a company called TerraCycle does, is far more environmentally friendly AND the company does so without any mandates from regulators. In this case, the government mandate creates more environmental damage (in the name of the environment, of course) while the free market has found a way to re-use the items (by using the used containers to store the fertilizer they sell), reducing environmental damage. And TerraCycle has done so in the absence of any regulations requiring it to re-use plastic bottles.

[note: I'm in no way affiliated with or invested in TerraCycle.]

Plac Ebo November 23, 2007 at 9:29 pm

Methinks,

Maybe you can answer these instead:

Can a society prosper long-term, and not just economically, without any environmental regulations?

If environmental regulations are necessary, and we can't trust the "half-wits" in government, then who should make them?

No argument that there are unnecessary rules and regulations- in all areas of life. It's one of the trade-offs of living in a maturing democracy. As people prosper they look to government to improve their quality of life in ways that the private sector either can't or won't and that means more laws, rules and regulations. So, short of curtailing democracy and finding a benevolent dictator what's your solution?

Methinks November 26, 2007 at 9:21 pm

So, short of curtailing democracy and finding a benevolent dictator what's your solution?

Plac Ebo, our democracy is already curtailed by a constitution which limits the power of government. Do you consider the US to be a dictatorship? I've already stated what my solution is – a government limited by a constitution which maximizes individual liberty. Unfortunately, opponents of the 16th amendment lost their battle to curb the government's reach and that's how we ended up with a 90% top tax rate (which Kennedy cut to 78% in the 60's). 90% – that's what happens when you you let government run wild.

As people prosper they look to government to improve their quality of life in ways that the private sector either can't or won't and that means more laws, rules and regulations.

Am I to understand from this statement that you finally admit that prosperity leads to more government spending and not the other way round? That's the opposite of what you said on another thread. So the private sector can't or won't improve the quality of life? Then how do you explain that where government was largest – the Soviet Union, China, Eastern Block countries – quality of life was lowest and where government is smaller quality of life is distinctly superior? I hate to answer a question with a question but it seems to be your only method of arguing and I'm quite tired of posting responses when you don't process them at all and don't answer very many questions yourself.

Tim (Organic) Lester January 5, 2008 at 9:35 pm

I think there should be no farm bill but should be phased out over a few years to not all in one go.
Regards
Tim
http://www.nuganics.com.au

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