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| Agriculture |
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The logic of supplemental payments for disasters and low prices has arguments on both
sides. Government guarantees minimum prices for many commodities and pays about 75
percent of the cost of crop insurance for producers. We've been trying to move in a
direction to better control large fluctuations in government expenditures in low price and
weather disaster years. We have tried develop policy to encourage producers to take steps to
manage their own risks.
Unfortunately, the supplemental disaster payments tend to undercut the effort to get
producers to buy crop insurance. The Senate proposal now pending would pay almost
identical amounts to farmers who took out crop insurance and those who didn't. If the
government is willing to have a disaster bailout for those who don't buy the insurance, it
certainly doesn't encourage future purchases of that insurance.
The question then is if insurance is not available on some specialty crops, should
government pay those farmers when a disaster occurs? For example, Michigan dry bean
producers lost 86 percent of the crop in 2001, making it the leanest crop since records
began to be kept in the early 1900s. Severe spring weather this year led to a 95 percent
reduction in the tart cherry crop, a 94 percent loss in plums, 75 percent in sweet cherries,
75 percent in grapes, 74 percent in peaches, and 40 percent in apples. None of these
producers had access to crop insurance, with the exception of a pilot program available to
sweet cherry producers in just three Michigan counties.
If we're going to have a disaster payment this year it needs to be limited and the costs needs
to be offset. That means we need to reduce expenditures for other programs to come up
with the money for farm disaster payments. With the government expecting to run a $157
billion deficit in the fiscal year ending We already are borrowing money to pay for expenditures for the next fiscal year starting October 1. Ultimately, we are going to have to decide how much debt we can place on our children and grandchildren, and for what reasons. Approving a huge bailout for farmers without reducing other expenditures doesn't meet the test of good fiscal policy. More Information: For more on my thoughts and comments on agriculture, please see my:
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During
my final term, Congress passed and the President signed a new farm bill that increased
funding by more than $70 billion over the next ten years. Part of the rationale for the
increase was that the new farm bill would help assure that the United States would
continue to be able to produce its own food. Additionally, in the 1990s, Congress passed
legislation to start a crop insurance program to help insure against low commodity prices
or natural disasters. The goal was to accommodate budgeting to have fixed annual subsidies
for insurance, rather than huge disaster payment in some years. Now, however, the Senate
has added $5.9 billion of "crop assistance" to the Interior Appropriations bill in order to
cover disaster losses and low prices. 
September 30, and a $145 billion deficit in the fiscal
year beginning in October, we need to do a better job of controlling spending. The
Administration's budget and the House budget resolution would increase discretionary
spending by 13 percent over last year. While the bulk of this is for defense and homeland
security, there should be enough to cover other needs as well. The Senate is paying for
"crop assistance" payments and other popular goodies by asking for an even higher level of
spending. 
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