The Future of U.S. Agricultural Policy: Reflections on the Disappearance of the "Farm Problem"

The Federal Agricultural Improvement and Reform Act (FAIR) of 1996 continues direct subsidies on feed grains, wheat, cotton, and rice, replacing target prices with declining but fixed annual income transfers and eliminating all production controls. Tobacco, sugar, and peanut quota-based programs were continued with minor changes. Major changes were made in dairy policy including elimination of price supports and reduction of the number of marketing orders. Associated with the Act were hearings and media rhetoric some of which suggested that direct budget subsidies would or should end when the Act expires in 2002. The permanent 1949 legislation would, of course, have to be repealed for this to occur. Several interesting responses followed passage of the 1996 Act. Some general and agricultural economists, who have been consistent critics of the farm programs, celebrated with expressions implying that, now freed of distortions, agriculture would roll through the next millennium in an ideal state of grace (equilibrium?) apparently devoid of any necessity for national policy attention. Indeed, some express the belief that the 1930s farm legislation was an epic error from the start—a view common among general economists. A few agricultural economists have lamented that agricultural policy analysts would have little or nothing to do after 2002! However, especially cynical policy types noted that the 1949 permanent legislation had not been repealed and, as usual, commodity interests would use it as a club in 2002 to negotiate new and even more ingenious subsidies for politically deserving commodities. Some cynics were unkind enough to observe that, given then expected market conditions, the 1996 Act provided larger expenditures for farm subsidies than would have a simple extension of the 1990 Act. All of this leaves one wondering if anyone truly understands where we are in policy for agriculture.