Isn't this good news for developing countries? Bush's plan to cut agriculture subsidies is right thing to do Web-posted Feb 13, 2005 If any public policy issue is as contentious as the future of Social Security, it is the nation's taxpayer subsidies to the agriculture industry. President Bush wants to reduce them by 5 percent, which would save nearly $6 billion in the next decade. If the president is to accomplish his aim, he very likely will have to cast his first veto of legislation - the farm bill Congress almost certainly will pass. There are many good reasons to reduce, and even eliminate, this kind of spending. No one believes the nation would experience a corn shortage in the absence of federal payments to growers. Soy beans are not subsidized, and we seem to have plenty of them at a price no one has complained about. Some 60 percent of the federal payments go to 10 percent of the "farmers." They are capped on an individual basis, but that limit often is honored in the breach, typically by adding partners who are paid a token amount for lending their names to the scheme. The president's new budget wants to end that. And his main provision would reduce the maximum payment per farm operation from $360,000 a year to $250,000. Subsidies have the perverse effect of artificially driving up land prices for farmers who try to survive on unsubsidized crops, such as cattle. And it can't be said that all the recipients of agricultural subsidies need the money. Among them are David Rockefeller, the NBA's Scottie Pippen, Ted Turner and Kenneth Lay. But, by far the most nefarious aspect of the subsidies is that they allow the marketing of agricultural products globally at prices much less than even our highly efficient agriculture makes possible. All this is tough luck for farmers in other countries who are trying make a profit, too. Our undercutting of commercial farming, globally, is a major reason Third World nations find it so difficult to develop the capital needed for economic growth and higher standards of living. In the past, including in this country, agricultural profits typically financed the establishment of such enterprises as manufacturing and retailing. One reason so many Mexicans are coming to this country, legally and otherwise, is that we export corn to that country at a price below our cost, let alone that of a Mexican farm. Exporting the effect of a subsidy for one's own benefit is not free trade. Bush's supposed bold attempt to take on "agribusiness" is coming with the hot breath of the World Trade Organization on the backs of our necks. Crop by crop, the day of subsidizing farmers is ending, even in Europe. Sugar subsidies there have been disallowed. Time is running out for such taxpayer-supported operations as the sugar-beet farms in Michigan's thumb. The high sugar prices their subsidy produces already have forced longtime candy and soft drink operations to shut down in West Michigan. It will be interesting to see if the politicians of both parties in Washington, including the president, have the nerve to do what's right. Bush proposed this once before, with no follow-through. THE DAILY OAKLAND PRESS
I agree, farm subsidies should be eliminated. The federal government pays farmers NOT to grow crops to drive up the price artificially (yet I've been not growing crops for 25 years and haven't seen a dime ). If America's farmers can't survive in the global marketplace, then they should find a job doing something else. The federal government cannot and should not attempt to shield every industry from the economic realities of the world.
I hope that he can get this done. I've been hearing people for years complaining about the effects of U.S subsudies on farmers in developing countries. Maybe this will make globalization as far as trade work the way it should.
Good riddance. Its a shame the progressives don't target agricultural subsidies. Kick all agricultural subsidies! http://kickaas.typepad.com/
Here's the latest update on this. White House retreats on bid to slash farm aid By Libby Quaid Associated Press Published April 13, 2005 WASHINGTON -- In the face of opposition from lawmakers in both parties, the Bush administration on Tuesday tossed in the towel on the president's proposal to slash farm payments. Agriculture Secretary Mike Johanns told key senators he was willing to look at other ideas for spending cuts to hold down the federal deficit. "We acknowledge that many of these policy proposals, such as the reduction in the payment limit, are quite sensitive," Johanns told a Senate Appropriations Committee panel on farm spending. "We recognize Congress may have other proposals to achieve these savings, and we are willing to work with the Congress on other cost-saving measures." The president in February proposed cutting billions of dollars from payments to large farm operations by lowering the maximum subsidies farmers can collect, to $250,000 from $360,000, and by closing loopholes enabling some growers to collect millions of dollars more than the limits. Bush also asked Congress to cut all farm payments by 5 percent. The cuts would hurt cotton and rice growers in the South and in California much more than wheat, soybean and corn growers in the Farm Belt, although all farm groups oppose cuts. Many farm-state lawmakers were relieved by Johanns' comments. "Perhaps the administration has finally begun to hear the roar from the heartland," said Sen. Blanche Lincoln (D-Ark). "I have no doubt that Southern farmers are willing to sacrifice in order to reduce our deficit and to help pay for the war on terrorism, but they've been asked to bear a disproportionate share of that burden." Sen. Conrad Burns (R-Mont.) said that if administration officials are willing to change their minds, "you better believe I'm going to take them up on it." "I'll continue working with the administration and my colleagues in the Senate," Burns said. Johanns has argued that bigger operations collect too big a share of government payments. According to his department, 8 percent of producers receive 78 percent of subsidies. The administration still supports the payment limit plan, Agriculture Department spokesman Ed Loyd said. "We are signaling a willingness to work with Congress to achieve these savings," Loyd said. The cuts Bush proposed in February would total $8 billion over 10 years, as calculated by the non-partisan Congressional Budget Office. Last month, House budget writers cut Agriculture Department spending for 2006 by $5.3 billion; their Senate counterparts cut it by $2.8 billion. Republican committee chairmen have suggested reductions in spending on land conservation and nutrition programs, such as food stamps, also run by the Agriculture Department. "The goal is deficit reduction. We have to keep our eye on the ball," Johanns said after the Senate committee hearing. "The president's got good proposals out there. There may be some other ideas. We'll look at those ideas. We'll try to factor those in."
I've always opposed agricultural subsidies as one of the worst economic policies ever invented. But while its easy to see how the US loses from them, I was never too satisfied with the explanation of how developing countries are impacted. From an economic theory perspective, I wondered how this would work. A strictly textbook approach would say that subsidisers are the losers, so developing countries should benefit from our subsidies - they can buy good at below cost and perform some other economic activity instead. Their gain, our loss. So how are subsidies bad? I always figured it was because there wasn't always an alternative industry in many of these countries. Anyway there is a really insightful article by the economist http://www.economist.com/finance/displayStory.cfm?story_id=3786899 which looks into the different impacts on developing countries.
Subsidized imports can make prices cheaper for consumers in devloping countries,which again makes it harder for local traders to compete. The problem seems to be that many people in developing countries in Latin America and Africa make their living largely from agriculture so they don't have too many other industries to go into. I've also heard it pointed out that the problem for some devloping countries is that they can't afford to subsidise their agriculture products,which I guess would even things out. Countries like Mali in west Africa export cotton in it's "raw" form. They aren't developed enough to manufacture and export cotton made products on a large scale such as clothing and other things. This lack of development also puts a limit on other industries workers can go into to. I guess many in developing countries would say that they need to be able to make a living through trade first so that they can eventually get to the point of being able to expand to other industries.
Being able to afford subsidies wouldn´t ¨even things out¨, because the point is subsidies are economically self-destructive. Rich countries can afford to have damaging economic policies, but poor countries can´t. The problem has to be that poor countries cannot for some reason take advantage of cheap subsidised goods while turning their production towards unsubsidised goods. Because if they could, that would make them a net winner. Even in agriculture, not all goods are subsidised. Just some. So they would just have to choose unsubsidised goods to compete in. I guess that is somehow not possible, or at least not done.
As far as this. Here's where I read that about countries not being able to subsidize being part of their problem. She didn't elaborate on what the effects would be for poor countries being able to subsize though. I just assumed that she ment that it would off-set any negative effects of U.S subsidies in some way. VICKI HUDDLESTON, U.S. Ambassador to Mali: Obviously in the United States, as a democracy, we have cotton farmers. Cotton farmers see the price of cotton going down. They can't produce at that price, so they go to their representatives and say, "we need to be subsidized so we can continue to produce cotton." The problem in developing countries like Mali is, the government can't afford to subsidize cotton. http://www.pbs.org/newshour/bb/international/july-dec03/farmers_9-09.html
But subsidising the most doesn't make you a winner. The object of an economy is not to make cotton, it is to create value. Subsidised industries destroy value.
End the farm subsidies, but diminish them gradually with an inevitable end. That way farmers can transition to the new global realities a little better and use whatever resources they have more productively. If farmers need the government to prop up their businesses in the face of foreign competition, obviously the farmers are not efficient enough and can use the land for better things (land in the U.S. is very valuable and can serve many purposes). This will help consumers -- less of a tax burden and lower prices of products with prices that aren't artificially inflated. Less government support pushes businesses to run more efficiently and can boost international trade by promoting more rivalry (which also increases efficiency).
