It has been clear for some time that farmers are on the front line of number of recent trade fights as well as the recent market disruptions from pandemic. And, with fewer people filling up their gas tanks, the demand for ethanol made from corn has cratered.
This week, however, the New York Times ran a long front-page article that calls USDA’s farm relief programs excessive. The article notes that the Trump administration’s $28 billion efforts in 2018 and 2019 to compensate farmers for losses from its trade wars were devised hastily and heavily political. It worries that the administration’s new program to send farmers tens of billions more to offset losses from the coronavirus pandemic faces questions about how the money will be allocated and “whether there is sufficient oversight to guard against partisan abuse of the program.”
Months before an election in which some farm states are major battlegrounds, Democrats and other critics of the administration’s agriculture policies are expressing concern that the new subsidies, provided by Congress with bipartisan backing, will be doled out to ensure continued backing of one of the president’s key voting blocs.
Given the track record with the trade relief program, “I think Congress should be concerned in terms of letting USDA just write checks with no oversight,” said Joseph Glauber, a top economist with the department for 22 years who is now with the International Food Policy Research Institute. “Are these programs politically motivated? The short answer is yes,” he said.
Bill Northey, USDA’s undersecretary who oversees the aid, denied that motivation, saying “nothing could be further from the truth.”
The Agriculture Department has set aside $16 billion for relief from economic damage caused by the pandemic. But both administration officials and many members of Congress consider that only a down payment on farm losses that some estimate could climb to $40 billion.
The Times calls the new program the latest example of the “outsize clout wielded in Washington by operators of the nation’s roughly two million farms -- and the eagerness of politicians to help them.”
It concludes that despite decades of talk about weaning farmers off subsidies, USDA remains “a font of funds from administration to administration -- and “now could take that assistance to a new level.” When the president's tariffs on China and other countries set off trade reprisals in early 2018, the president also seized on the USDA's ability to borrow from the Treasury to pay $12 billion in trade relief. That more than doubled what the administration was already paying out through other programs meant to protect farmers from falling prices, the Times said.
Not only has the Trump administration showered farmers with money, the article notes a study from Kansas State University that concludes that farmers were paid up to as much as eight times their estimated losses from trade friction in 2018. Payments were even more generous in 2019, ranging from one-and-a half to 33 times estimated losses, after the department loosened how it calculated the trade damage to farmers, the researchers found.
The trade relief payments drove up net farm income by 12% in 2019, according to Glauber. Without them, it would have fallen by 5%, he said.
Both the Kansas State economists and the Democratic staff of the Senate agriculture committee found regional disparities in the disbursement of the aid.
“It’s stunning really. These are states that have positive political relationships with the president,” said Senator Debbie Stabenow, D-Mich., the ranking Democrat on the Senate agriculture committee. She said she wanted to help farmers recover losses, but “the reality is that the administration up to this point has not distributed financial support in an equitable way.”
Economists say the Agriculture Department, under intense pressure from both the White House and Congress to deliver coronavirus checks to farmers, seems again engaged in major guesswork in trying to calculate losses. “They are basically running in the dark,” one analyst told the Times.
President Trump is likely to be firmly behind rising demands to bolster the program when the $16 billion runs out, possibly by drawing on another $14 billion for the Commodity Credit Corporation authorized in the stimulus bill, the Times said.
The president routinely cites his administration’s generosity to farmers as a political selling point. “Under three years of my administration, net farm income has already gone up nearly 50 percent and will now be rising even faster,” he proclaimed in January.
That was a slight exaggeration, NYT says. The combination of subsidies and higher commodity prices in 2017 drove up net farm income 42% in Trump’s first three years in office, according to Glauber.
So, we will see. Clearly, many politically sensitive producers worry about the role of government in the farm sector — even though there are many groups that are receiving subsidies just now. These payments clearly can reduce market pain. In addition, they are important supports that should be watched closely as they emerge, Washington Insider believes.
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