Analysis confronts attacks on U.S. farm policy by Heritage Foundation
A big push is being made by production agriculture following attacks by Heritage Foundation on U.S. farm policy.
A comprehensive study by Brandon Willis, a lawyer, academic, and former Administrator of USDA’s Risk Management Agency (RMA), examined the implications of the Heritage Foundation recommendations to eliminate the farm bill’s safety net, deeply cut and phase out crop insurance, make unilateral concessions in the context of the World Trade Organization (WTO), and repeal U.S. domestic trade laws. Link to Willis report. Link to Heritage report.
A search for facts and relevant data is key, Willis notes. He called the Heritage report, “Farms and Free Enterprise: A Blueprint for Agricultural Policy,” flawed because it “selectively uses data” to draw certain conclusions from which its recommendations are based.
Willis provided a preview of the study on AgriTalk Radio recently:
Willis identified several points in the Heritage report, and refuted them.
On farm income, Willis said Heritage was able to demonstrate that farmers have the financial means to manage risk without a safety net by exaggerating farm income, with 70% of the income Heritage measured being non-farm income. Heritage neglected to examine costs verses returns for farmers where the data indicate that “[for] the top four planted crops, producers’ costs have outpaced market returns 70% of the time in the past 19 years. Without off-farm income, most farmers would be unable to pay off their farm debt,” Willis said, with 59% or more of every category of farm size currently in medium to high risk zone.
Agricultural risk. Heritage said agricultural risk is no different than the risks of other businesses. But he said Heritage ignores data showing the “rate of return on agricultural assets exceeded the return on nonfarm assets in only one of 32 years,” and that the higher income volatility for agriculture is due to “weather-related risks and global markets distorted by high foreign subsidies, tariffs, and non-tariff trade barriers,” and that exit rates in agriculture are higher than other businesses even with a safety net in place.
The Heritage report claims the safety net in 2014 Farm Bill is flawed by charging costs taxpayers more than expected. Not so, says Willis. The Congressional Budget Office’s most recent analysis indicates the bill will save more than $100 billion above despite a 50% drop in net farm income over three years.
Heritage took special aim at dairy and sugar farmers, claiming dairy policy costs taxpayers too much and it hasn’t been reformed while sugar costs consumers. But Willis notes that dairy policy has been completely overhauled over the past 21 years and dairy farmers are actually paying more into their program than they are getting out of it.
As for sugar, wholesale and retail sugar prices are actually lower in the U.S. than for counterparts in the rest of the world under a policy that operates at zero cost to taxpayers, Willis details.
Crop insurance is a key attack point for Heritage, which said the program was really meant to fill the footprint of 1970s disaster programs which were limited to a few row crops. But Willis cites nearly 80 years of legislative history to show Congress has long sought to make crop insurance available to producers of all commodities in all regions of the country. Crop insurance has helped farmers manage risks and has also been more cost effective than crop loss disaster programs, he says, adding that the 2012 drought would have cost taxpayers more than $17 billion under an old style disaster program.
The impact of Heritage’s crop insurance recommendations, Willis concludes, would drive up premiums and lower coverage on others and herald in another era of costly ad hoc disaster bills that Congress abandoned a decade ago.
Crop insurance costs roughly what it did 13 years ago despite a doubling in participation over the past 17 years, with 290 million acres, or 90%, of all U.S. planted acres, 130 commodities, and $100 billion in liability insured today, according to details cited in the Willis report.
Meanwhile, crop insurance has been cut by $17 billion since 2008, with most falling on the private sector leading to major industry exits, and funds to pay agent commissions and loss adjustor salaries and wages have been reduced by an average of 30% per year.
Willis concludes by noting the successes for U.S. agriculture, which he says includes:
- Agricultural output has tripled since 1948.
- Americans pay less of their disposable income for food than consumers in any other nation.
- Agriculture has a trade surplus.
- Agriculture creates 21 million jobs and is 5.5 % of U.S. GDP.
- Soil erosion has been cut in half since 1985
Bottom line: Willis’ study refutes the Heritage Foundation’s assertions but shows the importance of agriculture to the U.S., and the unique risks of farming and ranching, and how U.S. farm policy helps mitigate these risks.
