After the 2014 Farm Bill's passage, some questions remained about solutions that were left off the table that could benefit both the taxpayer and the farmer.
The Heritage Foundation recently published a report, "Farms and Free Enterprise: A Blueprint for Agricultural Policy," edited by Daren Bakst. The report provides not just an alternative to the farm bill, but a free-market vision for agricultural policy, and other areas that outline where, in Bakst's opinion, the 2014 Farm Bill fell short.
Bakst and others have written this new report, summarized below, in the hopes it will give legislators a clear choice before the next farm bill is debated: Support a free-enterprise alternative to the farm bill or maintain the status quo.
Move away from subsidies to address agricultural risk
It's said that agricultural producers, like other businesses in any field, can face a wide range of risks while doing business. However, unlike other businesses, agriculture producers have a tax-payer funded safety net available to catch them if things don't go as planned.
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According to Bakst, this is a misuse of funds, as he says ag producers are well positioned to manage risk and often have private means in order to do so.
"The commodity programs and the federal crop insurance program cost taxpayers about $15 billion a year," writes Bakst.
Bakst says instead of meeting the needs of the market, farmers will make planting decisions based on how to maximize the subsidies that are being offered to them. He says this isn't a criticism of farmers, but it points out incentives created by subsidies.
He said Congress has gone beyond providing a taxpayer-funded safety net for agricultural producers, which includes the Agricultural Risk Coverage program in the 2014 Farm Bill that protects farmers from dips in their expected revenue. Bakst criticized the program, saying it is just there to make sure that large ag producers do well financially.
The report recommends moving away from subsidies and keeping programs that only address deep yield losses, such as losses due to disasters. This includes keeping the federal crop insurance program, but getting rid of the revenue-based policies that Bakst says insulate farmers from the market.
End favorable treatment for biofuels and the Renewable Fuel Standard
The report provides detail about how the RFS in particular is harmful.
Biofuel policies cost taxpayers $7.7 billion in 2011 and $1.3 billion in 2012 - after the expiration of the ethanol blenders tax credit, a 45-cent-per-gallon tax credit for blending ethanol into gasoline. Over a 30-year time frame, ethanol subsidies have diverted $45 billion in taxpayer money.
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The report goes on to explain how the RFS has increased food prices. The USDA's Economic Research Service states "increased corn prices draw land away from competing crops, raise input prices for livestock producers, and put moderate upward pressure on retail food prices."
The report calls for the repeal of the RFS and eliminating the bioenergy programs in the farm bill, and argues that producers should be allowed to drive alternative fuel innovation. It also explains that policymakers should "use the repeal of the mandate as momentum for greater reform in the energy sector. Such future reforms should include a further leveling of the playing field for all energy companies and technologies."
Promote free trade in agriculture
Bakst states free trade benefits consumers with lower prices and greater choices, while at the same time helping ag producers to export to new markets.
"U.S. agricultural exports have had a ripple effect through the economy," stated the report. "According to the USDA's Economic Research Service, the $150 billion in agricultural exports in 2014 created an additional $190.6 billion in economic activity and over 1 million full-time jobs."
Despite the benefits of free trade in agriculture, Bakst writes the United States continues to create protection schemes through tariff and nontariff trade barriers.
A recommendation in the report is for the United States to put its own house in order by getting rid of these barriers. It states the federal government needs to be proactive in seeking to eliminate the barriers that block domestic producers from entering foreign markets.
Reduce and eliminate key regulatory obstacles
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The report looks at another ag producer problem: How does federal government intervention, specifically regulations, make it more difficult for farmers and ranchers?
The report explores many of the key regulatory obstacles such as Clean Water Act, the Endangered Species Act, public lands, and agricultural biotechnology regulation.
"Federal regulations, which often are based on unsound science and data and extended beyond the scope of the underlying statute, impose significant burdens on farmers and ranchers," writes Bakst.
The report recommends significant changes to reduce federal regulations on the nation's farmers.
The reason behind the report
Bakst writes that, though there are some other gaps that need to be filled, the report is a detailed alternative to the farm bill, which is, at a minimum, a valuable starting point to change the status quo.
Although he expects there will be critics of certain sections of the report, the overall goal of the report is to help start a new constructive dialogue about agriculture.
