Search This Blog

Monday, December 6, 2010

Do We need the Department of Agriculture?

"Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all. We disapprove of state education. Then the socialists say that we are opposed to any education. We object to a state religion. Then the socialists say that we want no religion at all. We object to a state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting persons to eat because we do not want the state to raise grain. — Frédéric Bastiat (The Law)

There is a building in Washington, D.C. on the south side of Independence Ave SW just east of the Potomac River. The building is three stories high and covers 9 acres of valuable Washington real estate. It has 7 cells within the frame of the building running in a north and south direction. Each cell is approximately 420 feet long. In each cell is a central hallway lined with giant 12 foot oak doors that lead to the numerous offices, bureaus and agencies that are housed there. The building is the main office of the Department of Agriculture. I know, I have been there and seen bureaucracy at its worst.

The Department of Agriculture provides an array of subsidy programs for farmers and imposes extensive regulations on agricultural markets. It operates food assistance programs, such as the food stamp and school lunch programs, and it administers many rural aid programs. The Forest Service also forms part of the Department of Agriculture.

The department will spend $142 billion in 2010, or about $1,200 for every U.S. household. It operates 237 different subsidy programs and employs 96,000 workers in about 7,000 offices across the nation. It oversees more than 10,700 pages of regulations. It also has offices in most foreign counties and a liaison officer at all U.S. embassies and consulates.

Of the $142 billion 59% will be allocated to subsidies to individuals and businesses (including the Queen of England), 26% to states, 10% for purchases and operating costs, and 5% for salaries where the pay averages $80,000 per year with a guaranteed pension and health care.

The USDA provides the following services and products.

Agricultural Subsidies:
The department provides up to $30 billion annually to farmers of corn, cotton, rice, soybeans, wheat, and other crops. It also aids farmers with research, loan, and insurance programs.

Agricultural Regulations and Trade Barriers: The government regulates domestic markets for products such as sugar and milk, and it imposes trade restrictions on various farm products.

Rural Subsidies:
The department operates a range of subsidy programs for businesses and individuals living in rural areas.

Food Subsidies:.
Most of the department’s budget goes toward food subsidies, including the food stamp and school lunch programs.

Forest Service
: The Forest Service oversees 193 million acres of forests and provides subsidies to businesses and state governments. This also includes the USDA firefighters.

Timeline for the growth of the USDA
  • 1789: The U.S. Constitution goes into effect. The federal government’s enumerated powers do not include the creation of farm and food subsidy programs.
  • 1820: The House of Representatives creates an agriculture committee. The Senate follows suit in 1825.
  • 1840: The first Census of Agriculture is completed.
  • 1862: The U.S. Department of Agriculture is established. President Abraham Lincoln calls it the "people's department."
  • 1862: The Morrill Act provides grants of federal land to the states. The states are to use the proceeds of land sales to create colleges focused on agricultural studies.
  • 1867: A new Washington office building for the USDA is completed.
  • 1881: Congress establishes a Division of Forestry in the USDA.
  • 1887: The Hatch Act provides subsidies to the states for agriculture research.
  • 1890: A second Morrill Act begins regular appropriations for the land-grant colleges.
  • 1891: The Forest Reserve Act allows presidents to set aside forest reserves out of public lands. These reserves are managed by the Department of the Interior.
  • 1900: There are 11 million Americans employed on farms and 2,900 employed by the USDA. A century later there are 3 million employed on farms and 105,000 employed by the USDA.
  • 1905: The Federal Forest Transfer Act moves control of the forest reserves from the Department of the Interior to the USDA’s new Forest Service.
  • 1905: Major scandal hits the USDA when an employee seeking personal gain leaks advance cotton market information to a speculator.
  • 1911: The Weeks Act authorizes federal subsidies to the states for forest fire prevention and it allows the Forest Service to purchase private lands for national forests.
  • 1914: The USDA opens state and regional offices across the country.
  • 1914: The Smith-Lever Act begins subsidies to the land-grant colleges for agricultural research.
  • 1916: The Federal Farm Loan Act creates cooperative “land banks” to provide loans to farmers. Legislation during the 1930s expands this Farm Credit System, and today the FCS is a 50-state network of financial cooperatives with assets of $90 billion. 1929: The Agricultural Marketing Act creates the Federal Farm Board to subsidize agricultural cooperatives. The cooperatives stockpile commodities to raise prices and disrupt markets in various other ways. After spending $500 million, President Hoover’s Farm Board boondoggle is abolished in
  • 1929: The Federal Reserve System precipitates the Great Depression by allowing the U.S. money supply to shrink by one-third between 1929 and 1933. Agricultural commodity prices fall even more than general prices, which puts farmers in a squeeze. Two large cost items for farmers—mortgage interest and property taxes—remained relatively high compared to plunging receipts from farm sales.
  • 1930: A rising protectionist sentiment is stimulated by President Hoover’s call to increase agricultural tariffs to help farmers. Congress responds with the Smoot-Hawley Act, which greatly increased tariffs on both farm and industrial products. Other countries retaliated and U.S. agricultural exports plunge 60 percent by 1933.
  • 1933: The Agricultural Adjustment Act, and subsequent New Deal laws, creates the forerunners of today’s major farm subsidy programs. The main thrust of the AAA is to limit production in order to raise commodity prices. To the same end, the government plows under 10 million acres of crops, slaughters 6 million pigs, and allows fruit to rot in the orchards, even while millions of Americans are going hungry. Some elements of the AAA are struck down as unconstitutional in 1936, but most of the law’s central planning techniques survive in various forms in today’s farm programs.
  • 1934: The Jones-Connally Act extends the AAA to cover additional farm products.
  • 1934: The Jones-Costigan Act imposes controls on U.S. sugar production and sugar imports.
  • 1934: The Tobacco Control Act imposes quotas on tobacco production.
  • 1935: The Federal Surplus Commodities Corporation begins large-scale food welfare activities with the distribution of surplus farm products to schools.
  • 1935: USDA employment more than triples between 1929 and 1935, reaching 85,000. USDA employment reaches 100,000 by 1958 and peaks at 138,000 in 1978. Today, the USDA employs 105,000 workers.
  • 1936: The Rural Electrification Act initiates extensive rural subsidies that continue in various forms today.
  • 1937: The Agriculture Marketing Agreement Act establishes federal “marketing orders” for dairy products, fruits, vegetables, and other products. Marketing orders are producer cartels designed to limit competition and raise prices. They are currently in effect for 30 commodities.
  • 1938: A new Agriculture Adjustment Act establishes most of the policies of the 1933 Act on a permanent basis, including production controls and price supports for wheat, corn, cotton, rice, tobacco, and peanuts. The 1938 Act also creates the Federal Crop Insurance Corporation to provide subsidized insurance for adverse weather, insects, and other farming hazards.
  • 1946: The National School Lunch Act creates a permanent subsidy program to provide food to schools, building on the surplus commodities program of 1935.
  • 1946: The Farmers Home Administration is established to make loans for farms, rural housing, and other activities.
  • 1949: A new Agriculture Adjustment Act extends crop price support and subsidy policies, adds subsidies for the dairy industry, and puts farm programs into permanent law. Since 1949, farm legislation has included expiration dates, which prompts Congress to pass renewed congressional authorizations every five or so years.
  • 1954: The Agricultural Trade Development and Assistance Act creates various export subsidy programs designed to unload into foreign markets excess production caused by U.S. price supports. Unfortunately, many other countries with government-caused overproduction followed suit, and they also dispose of their surpluses on foreign markets.
  • 1964: The Food Stamp Act creates what has become one of the largest welfare programs, a program that is known for major fraud and abuse. The program currently costs federal taxpayers more than $35 billion a year.
  • 1973: With soaring prices for agricultural commodities, the mid-1970s would have been a good time to end farm programs, as some people proposed. Instead, the farm bills of 1973 and 1977 take a business-as-usual subsidy approach.
  • 1985: Despite the Reagan administration’s proposals to cut farm subsidies, the poor shape of farm finances during the 1980s prompts Congress to pass the expensive Food Security Act of 1985. This law added new farm subsidy programs, including the Export Enhancement Program and the Conservation Reserve Program, which pays farmers not to farm.
  • 1996: Congress changes course in farm policy with the passage of the Federal Agriculture Improvement and Reform Act—the “Freedom to Farm” law. The law is designed to allow farmers greater planting flexibility and better align producer decisions with market supply and demand. But Congress reneges on reform, and passes large supplemental farm subsidy bills four years in a row beginning in 1998. When the 1996 law was passed, subsidies were expected to cost $47 billion over 1996 to 2002, but they ended up costing $121 billion.
  • 2002: The Farm Security and Rural Investment Act reverts to old-style subsidy increases and price supports as farm-state politicians reject the modest reform proposals of the Bush administration. An expensive “countercyclical” price support program is added, and existing programs are expanded to cover additional crops. The 2002 law increases projected subsidy payments by 74 percent over 10 years.
  • 2008: The Food, Conservation, and Energy Act expands farm subsidies, and it is enacted over a presidential veto.
  • 2010: The passage of the Growing Safe Food Act of 2009. Introduced by Senator Dick Durbin (D-IL) and passed in the last days of the 111th Congress the bill amends the Agricultural Research, Extension, and Education Reform Act of 1998 to establish a national food safety training, education, extension, outreach, and technical assistance program for agricultural producers, and for other purposes. It is estimated that the passage of this bill will add over 5,000 inspectors to the already bloated staff of the USDA. None of these jobs will be outsourced. It will also regulate school bake sales.
As you can see from the timeline most of these Congressional actions had little to do with agriculture and more to do with tariffs, subsidies, regulations and price fixing. In later years the USDA’s regulations were and are instrumental in driving the small farmer out of business and enhancing the reach of major agribusinesses like Archer Daniels Midlands.

Take as an example the issue of ethanol. The conversion of corn into ethanol takes more energy than is saved by its use. It drives up the price of corn for the big producers like ADM and makes money for the commodity traders in Chicago.

Today the USDA has gone far afield from its original mission of saving farms. It now is involved in all manner of activities from providing school lunches to delivering police cars to communities across the land — all in the name of agricultural grants. It seem as though no one really knows what goes on behind those 12 foot oak doors.

All agricultural and rural subsidies in the Department of Agriculture’s budget should be abolished to save taxpayers more than $30 billion annually. In addition, agricultural trade barriers should be repealed. Current agricultural and rural policies are economically and environmentally damaging, and they create unfair transfers of wealth.

The department's food subsidy activities—food stamps, school lunches, and WIC—are properly local and private functions. They should be devolved to the states, with each state determining appropriate policies for its own residents. Such reforms would save federal taxpayers about $98 billion annually. Some states may decide to fund food subsidies on their own, but competition between the states would likely result in smaller, more innovative programs.

Forest Service subsidies to state governments and private businesses should be ended. Congress should also explore options to transfer the national forests to the states or to new independent trusts that would be self-funded from forest-related receipts.

The table shows that these reforms would eliminate more than 90 percent of the USDA’s budget, saving federal taxpayers $131 billion annually, or about $1,100 per U.S. household. Under the proposal, the USDA would retain responsibility for animal and plant health inspections, food safety, grain and packing inspections, and conservation activities.

Agricultural Subsidies          
      Farm Service Agency           $16,584
      Risk Management Agency           $7,033
      Foreign Agricultural Service           $1,604
      Nat. Inst. of Food and Agriculture           $1,483
      Agricultural Research Service           $1,369
      Agricultural Marketing Service           $1,272
      Agricultural Statistics Service           $162
      Economic Research Service           $80
Food Subsidies          
      Food Stamp program (SNAP)           $72,482
      School Lunch and related programs           $17,307
      Nutrition program (WIC)           $7,704
      Other           $452
Rural Subsidies          
      Rural Housing Service           $1,928
      Rural Utilities Service           $613
      Rural Business Coop. Service           $297
      Rural Development            $296
Forest Service          
      State and private forestry grants           $515
      Land acquisition           $74
      Explore options to restructure forests           n/a
Total proposed cuts           $131,255
Total department outlays           $142,016

Source: Estimated fiscal year outlays from the Budget of the U.S. Government, FY2011.

No comments:

Post a Comment