Wednesday, July 5, 2006

Ideas for farm subsidy reform ...

   The faults in the current farm subsidy program, as highlighted in the Washington Post all this week, are worth a second post.  The most expensive component of the system is the "direct and countercyclical payments" to those who have refrained from growing crops on land that was once planted.  The biggest fault is that the payments may go to any owner of the land and can continue on for decades after the land was last farmed.  In addition to wasting money, the system discourages useful production of some crops.

   Cynics and public choice advocates may snicker that the largest impetus to the current system was not the ostensible one -- propping up farm prices by reducing production -- but rather was the political power of farmers … and of influential non-farmers those who may reap the benefits of a system that can be politically marketed as a farm support program.
   Here are some ways to control the pay-for-not-growing system, which may serve as boundaries for any type of subsidy program:   (a) Require that any recipient have farmed at least some -- say, 1/3 -- of  the land in the year in which the subsidy is given; (2) Limit the number of years -- say, 10 years -- for which the subsidy may be given for any particular farm (so as to remove the subsidy for land that has not been planted for many years or is no longer suited for the crop); and (3) Restrict the subsidy to only those years in which crop prices are lower than in recent history.

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