Set the Record Straight on U.S. Farm Spending
By Jerry Nordick, President, Minnesota Assn. of Wheat Growers
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the Minnesota
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Wheat Growers,
North Dakota Grain
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South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
Let's look at farm subsidies first. I think there are three primary perspectives to consider as to why they exist:
The global perspective: No other trade sector faces as many complexities on a global scale than agriculture.
Overseas it is the most often used government policy tool (i.e., the politics of most favored nation status, trade and political tiffs and indirect embargoes) since the U.S. is a significant farm exporter and many countries are farm import dependent. As such, the U.S. ag sector needs protection from government-triggered market disruption.
Further, domestic support was established for many years to compete with the much heavier farm subsidization in other countries. GATT will help in this regard, but unilateral farm support cuts beyond what GATT requires may suffocate our global competitiveness and increase the U.S. trade deficit.
The low-cost, stable food supply perspective: Through commodity supports the U.S. farm program has allowed Americans to enjoy a food supply that is more stable and affordable than in any other country of the world.
According to USDA statistics, Americans spend less than 10 percent of their income after taxes on food, compared to 16 percent in France, 19 percent in Japan, 30 percent in the Former Soviet Union, 37 percent in Mexico, 48 percent in China and 53 percent in India.
Domestic farm policy provides a low cost, stable food supply which helps support nutritional needs for the poor; and for the middle class, frees more income to be spent on other goods and services.
The economics perspective: Agriculture is the only major industry which economists say approximates "pure competition." That is, a large number of independent sellers offering a standardized product with no control over product price.
As a price taker, the farmer also faces inelastic demand (People don't eat more or less with a decrease or increase in food prices); unstable production from the effects of pests and weather; and input expenses which for the most part do not track the farm economy.
A LOOK AT THE USDA BUDGET
Many people STILL don't realize that food stamps and nutritional programs are included in the USDA budget, and in fact make up over 60 percent of the USDA budget pie.
Commodity price supports and international trade make up about 21 percent of the USDA budget. Natural resources and the environment is about 8 percent; rural development, about 4 percent; and all others including food safety and inspection services, as well as ag research, is about 3 percent.
Agriculture, including food and nutrition programs, represents less than five percent of total federal spending; farm price supports alone less than one percent.
Government spending on commodity price supports is about $10 billion. Compare that with funds allocated to the President, which in 1993 was about $11.5 billion; and to what is spent on direct foreign aid, at $9 billion in 1993.
Agriculture spending is dwarfed compared to spending on social security, Medicare and Medicaid at about $600 billion, and defense, over $300 billion.
And look at this: the new postal rate increase that went into effect Jan. 1, 1995 will generate $4.7 billion for fiscal 1995, according to the Postal Service's Board of Governors. That amount is equal to almost half the budget for commodity price support programs.
Close to $2 billion is spent on the U.S. wheat program. That is about one-third of annual spending on the Environmental Protection Agency and less than half of what the government spends on the Railroad Retirement Board.
About $1 billion more is spent on the forest service than on the wheat program. In fact, of USDA's workforce of 113,000 employees in 1992, about 42,000 alone were in the Forest Service.
Nevertheless, USDA is already ahead of many other federal agencies in its streamlining efforts; USDA reorganization should save an estimated $3 billion over the next five years.
Disaster relief has been eliminated and federal crop insurance reformed. The Export Enhancement Program and other export programs will be ratcheted down under GATT.
While spending on other federal entitlements has grown, federal farm spending has been reduced by over 50 percent since 1986. Rep. Charles Stenholm (D-Texas) notes that if the 11 biggest entitlement programs had taken cuts like agriculture has since 1980, the United States would have a balanced budget today.
It's maddening that some federal lawmakers and members of the media still use agriculture as an example of where budget cuts can be made, when they should instead be singling out agriculture as the model for spending reform on which other federal budget items should be judged.
Give credit where credit is due. That's a key message the MAWG and the NAWG will be delivering to Congress.
We've armed you in this issue of Spring Wheat with information to help set the record straight: letter-writing tips, statistics relating to the farm bill, and addresses to our Congressional delegation.
The MAWG challenges you to send out at least one letter, with your opinion on the farm bill and potential farm spending cuts, before spring planting- a simple goal that will give wheat growers a powerful grassroots voice if enough of us accept the challenge.