One would expect a classical economist to oppose governmen-tal subsidies to any business in the private sector, including agricul-ture.
But not so fast, says the chief economist for Wells Fargo & Co.
From the economists point of view, Why subsidize (agriculture) at all? asked Sung Won Sohn, who was in Montana this past week for public presentations as to why he thinks national econom-ic recovery is underway.
The subsidy question is inade-quate, Sohn argues. Having an adequate food supply is funda-mental, something all govern-ments understand, at least intel-lectually.
Sohn related how, on a trip to Saudi Arabia, he observed wheat fields in production in the desert. It was costing them $10 a bushel to produce what they could buy for $2.50, he said. The Saudis made it clear that they did not ever what to be in the position of importing 100 percent of their grain, Sohn said.
No nation does. Every country wants enough food for national security and economic security reasons as well, he said.
But the problems with U.S. agriculture is not a matter of scarcity, it is a matter of having too much.
U.S. farmers are the most pro-ductive in the world, he said. So much so that virtually every com-modity produced in America these days, from grain to cranber-ries to almonds are in surplus sup-ply and price depression.
On the plus side, agriculture is good for the nations balance of trade payments Food is a large export item, second only to air-craft, Sohn noted.
Farm bill lasts one year The 1996 Freedom To Farm agriculture legislation was intend-ed to wean farmers from govern-ment subsidies with seven years of declining transition payments and the elimination of federal control over acreage and crops. The gov-ernment also promised to aggres-sively market U.S. food products overseas. The 1996 Farm Bill last-ed that one crop year. Since, ad hoc disaster payments in the multi-billions have kept U.S. farm-ers, especially grain farmers, afloat.
Although the current farm law runs through the 2002 crop year, Congress, especially the House, is fervently writing the next farm bill. It is safe to say that every idea ever proposed for a farm bill since the Depression is included in the document working its way through the House Agriculture Committee. Additionally, every commodity support group wants its share of the subsidy goodies including groups that in the past have averred or panned federal support.
Sohn would keep the frame-work of the current farm law, with some modifications. He said he hopes that Congress does not throw out the planting flexibility in the 1996 law.
The new law should provide farmers with income security without annual disaster relief, he said. It should be an insurance program, a revenue insurance that covers the weather and low prices.
Id rather see federal revenue insurance and the market be the components of the next farm bill, Sohn said. It should move further away from any interference with planting decisions, he added.
One of the major complaints of the current legislation is that large corporate farming operations get the majority of the federal funds. To counter that, Sohn suggested targeting farm benefits to the low-income end of the spectrum. That assistance would be reduced, in proportion to increased revenue a farmer receives in the market place. Large, corporate entities would get little or no federal help.
These are some ideas to explore, he said.
Given the success of the current farm, it surely could not hurt.