Agricultural Policy in the United States

Evolution and Economics

James L. Novak, Larry D. Sanders, Amy D. Hagerman

• Publisher: Routledge
• Year: 2022
• eBook ISBN: 9781000586589
• Edition: 2
• Topic: Economics
• Subtopic: Agribusiness
• Index: Economics

Agricultural Policy in the United States: Evolution and Economics traces U.S. agricultural policy from its colonial roots to the present, using economic concepts to analyze and interpret political and economic consequences. It also examines the processes by which agricultural policies are developed, and the government structure which supports the implementation of legislation passed by Congress. The book includes arguments for and against common tools of U.S. agricultural policy, without influencing the reader in a particular direction. Each chapter contains questions and exercises to support students' learning, and technical economic material is contained in optional appendices. This second edition examines the Agriculture Improvement Act of 2018 and sets the scene for future policy developments. Additionally, it looks at trade wars and the impact of Black Swan events like the COVID-19 pandemic on agricultural resilience.

1IntroductionWhat Is Agricultural Policy and Why Does It Exist?

DOI: 10.4324/9781003229780-1

All of those concerned with the passage of past and current farm bills have had a single goal in common. That goal was to keep farmers in business through bad economic times and to benefit consumers by keeping food on their tables at a price they could afford. As agricultural policy evolved over time, advocates for programs and missions expanded, including providing environmental protection, food safety, rural infrastructure development, risk management, consumer protection, and social equity.

The authors of this text have brought together the history (the economic evolution) that makes sense of the social, political, and economic foundation of agricultural policies which resulted in the farm bills.

What is Agricultural Policy?

Agricultural policy, as it is currently constituted, concerns the legislative process and the laws passed affecting the profitable production and distribution of agricultural commodities, the conservation of natural resources, the provision of consumer food and nutrition, bio-energy, rural infrastructure, and other policies which are described as Titles of the legislation commonly called the farm bill. In addition to farm bills, there is other legislation important to agricultural policy. This includes bills important to the reconciliation of Federal budget spending and authorizations and appropriations important to the implementation of farm legislation. The implementation of the laws is what is called agricultural policy.

Agricultural policies can be passed and regulations implemented at the local, state, or Federal level. Since most local and state laws affecting agriculture must conform to federal minimum standards, this text will concentrate on federal law. Individual state governments have Departments of Agriculture or similar agencies which relate to agricultural policy. For specific state policies regarding agriculture, check their websites.

Historically, public and media attention has focused on a few areas of agricultural policy, such as those affecting corn, cotton, soybeans, and food stamps. Other areas of agricultural policy are generally ignored or remain unknown to the public at large. This text will attempt to be comprehensive in its coverage of all of the various areas of agricultural policy.

Why Does Agricultural Policy Exist?

Why does agricultural policy exist? It exists in a Democracy because a segment of the population perceives (for various reasons) a policy (law) is needed and presents this need to its legislators. Once persuaded, elected representatives enact laws which become public policy. Those persuading legislators to pass laws generally include groups or a broad coalition of groups who support each other’s agenda.

From the start of its history, the enactment of agricultural policies has not been without controversy. It must be noted there have been, and currently are, groups or individuals who oppose the enactment of laws supported by others.

Despite controversy, in the twentieth and twenty-first centuries, agricultural interest groups have been successful in getting laws passed related to agriculture. These included the passage into law of federal subsidies which provided income support for farmers, and funding for rural development and environmental enhancement. Among other policies implemented as a part of agricultural policy, interest groups have lobbied for, and have successfully obtained the addition of, food safety inspection legislation, food and nutrition programs for the poor, school lunch programs, and other consumer protection programs. Environmental group interests have allied with farm interests to add conservation programs for wildlife, soil, and water preservation. Compromising and combining political clout has allowed various groups to get what they want in what have been and are still called the farm bills.

Market Failure

An economic justification given for government interference with the operation of the market is the correction of market failure. Market failure is defined as an inefficiency or failure in the operation of the market. From an economic standpoint, ideal government interference in the market would be the maintenance of economic efficiency and equity. Some interests have maintained that government policy interferes with the market’s efficient operation and is unwarranted. Others have interpreted government policy as being needed to correct market failures. Market failures are externalities that take place outside the private decision-making process. Because solutions to market failures force the producers of the failures to internalize their costs, they are put at odds with the government enforcement. If government chooses regulation more opposition can result. If the government chooses subsidies, there is generally less opposition. Divisions of interests have led to controversy over what path the government should take when interfering with the market.

In agriculture, a total failure of supply, or even low supply leading to high consumer prices, can lead, and has led, to social unrest. Black Swan events such as hurricanes, Pearl Harbor, disease outbreaks, and other unexpected events can, as the year 2020 shows, significantly impact both supply and demand. Government intervention is often sought (and often criticized) when some aspect of the provision of supply or the demand for goods or services fails.

In the main, the call for government protection can be explained in terms of basic supply and demand. Excess supply, given demand, has led to low prices and the call by farm interest groups to protect farmer incomes. As an illustration, Figure 1.1 shows corn prices versus U.S. production and the variability that occurred over the period 1973–2008. With the exception of the past few years listed in the figure, a counter-cyclical movement of prices and yields can be seen from the chart. Such counter-cyclical price and yield movement can also be shown for livestock. Legislative responses to negative low prices and/or low yields has generated the passage of disaster assistance, loan programs, crop and livestock insurance, and other policies to keep farmers in business and to keep the long-term supply of food plentiful and consumer prices low.

Figure 1.1U.S. Corn Price and Production, 1975–2008

Another issue for the market’s efficient operation is that of the safety of imported and domestic food supplied to consumers. Animal disease outbreaks (such as an avian influenza pandemic) and food-borne contaminants are currently, and historically have been, of concern to the American public. In response to disease outbreaks, calls were made by the public for government regulations regarding food safety. A relatively recent concern involves that of terrorist attempts to do harm to the public through the food supply and the calls for the Federal government to provide safeguards.¹

Despite inefficiencies in the market, debate has continued over whether U.S. agricultural legislation should be enacted. Today, increasingly, agricultural policies enacted into law are being tested by legal challenges from those opposed to them.²

Arguments Presented for U.S. Agricultural Policy

Much of the recent media attention about agricultural policy, especially as it related to supporting U.S. farmer incomes, has been negative. Despite that, reasons cited to continue to have a U.S. agricultural policy have included the following arguments:

• There are economic inefficiencies unique to agriculture which cannot be, or will not be, corrected by the market.
• Agriculture is increasingly globalized, requiring government’s policing of imported food and maintenance of a domestic food supply.
• Technology change has caused shifts in supply and volatility in farm income which require the government to stabilize.
• Environmental protection of wildlife, land, and water is necessary by the government because the agricultural market does not currently value them.
• Agricultural risks mitigation by private sector insurance is a failure of the market.
• Politics.
• Unequal market power between farmers and processors and attempts at monopolization have necessitated government regulation.
• Farm family poverty is reduced through the provision of price and income supports.
• Foreign governments attempt to enhance their economic advantage through subsidizing their farmers to the disadvantage of U.S. farmers.
• Production of surplus commodities through subsidizing U.S. farmers ensures a cheap food supply for the populace, keeping them well fed and happy.
• Rural infrastructure development is expensive and often not worth doing by the private sector. The government is needed to take on this task.
• Small farmers benefit from agricultural policies which keep them in business. A nation of small and independent farmers enhances the goal of a free market.³

Arguments Presented against Having a U.S. Agricultural Policy

Just as many and varied reasons are provided against the U.S. government program protection for agriculture. These have included:

• U.S. subsidies to agriculture cause surplus production which is dumped on world markets, hurting poor Third World farmers.
• Large farmers get the majority of the farm program support payments and they don’t need them because they are rich.
• The U.S. has large budget deficits to take care of and can no longer afford agricultural subsidy programs.
• Farm bills favor the production of unhealthy commodities (foods such as corn syrup) to the detriment of healthy foods (like green vegetables).
• Commodity support programs keep inefficient farm units in business.
• Landlords (landowners) benefit from government-provided subsidies more than do farmer land renters.
• Without policy the farm economy would be hurt but would recover in 3–5 years with higher prices.
• U.S. taxpayers subsidize U.S. farmers, which reduces their income. By eliminating farm subsidies, taxpayers would bene...

Table of contents

• Cover
• Half-Title Page
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• Preface
• Acknowledgment
• 1 Introduction: What Is Agricultural Policy and Why Does It Exist?
• 2 Economic Concepts Applied to Agricultural and Food Policy
• 3 Who Makes Agricultural Policy and How Is It Made?
• 4 A Brief History and the Evolution of Agricultural Policy
• 5 Early Twentieth-Century Agricultural Legislation
• 6 McNary-Haugen and the Permanent Legislation to the 1950s
• 7 The 1960s to Mid-1980sTransition and Farm Crises
• 8 Planting Flexibility and Direct Payments, 1985–1996
• 9 Twenty-First-Century Agricultural Legislation
• 10 International Trade: Is It the Future of U.S. Agricultural Policy?
• 11 Agricultural Policy Since 2014
• 12 The Future of Agricultural Policy: A Policy Shift to Risk Management
• Index