WASHINGTON, Sept. 21- President Obama’s proposal to trim farm program spending by $33 million over 10 years looks generous to agriculture if you compare it with a recommendation of a panel of agricultural economists convened by the American Enterprise Institute. They urged that the “super committee” go for at least $100 billion in farm spending cuts as part of its assigned $1.5 trillion in deficit reduction over the coming decade. The AEI panel’s leader would go even further – eliminating all traditional farm program spending, nearly 14 percent of the committee’s goal.

“I’d say zero them all out and save $200 billion,” Dan Sumner of California-Davis, a one-time assistant secretary of agriculture for economics, said at a briefing last week in Washington. He would scrap all commodity programs, crop insurance and most conservation programs but increase investment in research.

“If you eliminated the programs, agriculture won’t look much different than now,” Sumner contended. “There would be some loss of wealth around the margins and some small switching of crops, such as cotton in California to tree fruits and wine grapes. Our reliability as an exporter would go up. The U.S. would still be a reliable exporter. We may well see more focus on world demand rather than a focus on subsidy considerations.”
Recognizing the political appeal of conservation programs, Sumner asked, “Do we need to rethink paying people not to pollute? If we were not spending money on these programs, would we start now? We think the answer is no. We should spend money only on programs with a clear rationale. Farm programs today really don’t meet that test. These are not the kinds of programs that government should be involved with.”
Farm program spending transfers money “from the realm of the poor to the realm of the rich,” said Vince Smith of Montana State, who once wrote a book about subsidized crop insurance that said “don’t do this. Now it’s $6.5-7 billion. It has turned into a subsidy, half of which does not go to farmers but to an insurance industry that would not exist without the subsidy . . . a tremendous subsidy to the industry. The subsidy is equivalent to 60 percent of the actuarially fair premium.” He argued that it would save $1 billion if the subsidy were reduced to 40 percent.

For more information from the AEI, go here.


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