A Wolf in Sheep’s Clothing or Just Plain Nuts?

September 18, 2012

Editor’s note: The following is a guest column written by Larry Combest, who served the people of West Texas in the U.S. House of Representatives for nearly 20 years, including as Chairman of the Select Committee on Intelligence and the Committee on Agriculture. He works as a lobbyist for the firm he started with Tom Sell, Combest, Sell and Associates. The firm focuses on agriculture and renewable energy.

What embodies the biggest threat to American free enterprise today?

A $16 trillion national debt? Annual deficits running more than $1 trillion? Washington running the nation off a “fiscal cliff” by failing to prevent huge tax increases or massive across-the-board budget cuts? A contagious economic meltdown in Europe? Iran’s nuclear program igniting a military confrontation and spiraling energy prices?

If you guessed any of these, you could take your place alongside economic experts spanning the ideological spectrum.

But, you’d be wrong according to the American Enterprise Institute (AEI). That’s because the AEI says on its website that it is the 2012 farm bill that embodies not just one but “the two biggest threats to American free enterprise today.” Really, it does.

The good news is, you’re not nuts.

Over a period of years, AEI has devolved from objective, even helpful, analysis of farm policy to fanatic obsession where truth and facts are subordinated to AEI’s mission to end U.S. farm policy.

A recent AEI article written by a Henry Olsen, entitled “The 2012 farm bill: a wolf in sheep’s clothing,” offers only a taste of the hysteria.

The article leads off with the observation that the “agriculture-industrial complex” (insert Twilight Zone music here) argues that “most farms are family-owned, that farming is ‘different’ from other businesses and that government support keeps cheap food flowing to the world.” The article goes on to say that this may have all been true in the 1930s but “it is not true today.”

Of course, the problem is: it is true today.

The most recent census of the National Agricultural Statistics Service (NASS) indicates that 97 percent of farms are family farms.

One look at the impact of this year’s drought offers an obvious example of just how ‘different’ farming is from other businesses, especially in terms of its exposure to risk.

And, while the projection that the United States will export more than $143 billion in farm goods this coming fiscal year – equal to about 17% of total global agricultural trade – may not give a total account of what America’s highly efficient farmers and ranchers do to feed the world, it is more than enough to refute AEI’s claim that U.S. producers, backed by farm policy, do not keep the world’s cupboards stocked with safe and affordable food.

Perhaps aware that he had gotten hold of the wrong end of the stick, the author of the article takes readers on a detour, offering a litany of wholly unrelated factoids that, even if true, would not back up any of his original claims. Boiled down, three of Olsen’s four gotchas are that farmers own a lot of land and land is expensive, few farmers go out of business when prices are high and production is good, and farm policy is generally tailored to producer-need based on risk. Horrors!

But, Olsen’s fourth gotcha takes the cake. Olsen repeatedly complains that Direct Payments are made to farmers regardless of crop prices, stating that farm policies used to help farmers only when prices were low to keep them in business. Apparently, AEI cannot take yes for an answer. In addition to hastening an end to western civilization, the 2012 farm bill also ends Direct Payments and ensures that policies only help farmers when prices are low, just as AEI suggests. Whoops.

But, the go-getters at AEI are not content to hoist themselves on just one of their own petards.

On top of opposing the farm bill, AEI also wants to end crop insurance. AEI reasons that since the government does not help homeowners buy insurance, it should not help farmers buy crop insurance either. To refute this logic, one need look no further than AEI’s own book, entitled, The Economics of Crop Insurance and Disaster Aid, which states:

“Thus, private markets for multiple-peril crop insurance are almost surely infeasible, and the weight of the empirical evidence indicates that area-yield contracts are also not commercially viable…”

In other words, to AEI’s question of why the government helps farmers buy insurance when it does not help homeowners buy insurance, AEI provides its own answer: because otherwise, there would be no insurance for farmers.

That there were no calls for crop disaster aid this past year in the face of one of the worst US droughts in the past 80 years speaks volumes of a policy that enables the federal government to shift insuring production risk away from taxpayers and onto the private sector. $6.6 billion in federal dollars leveraged insurance coverage on $115 billion of liability and $11 billion in indemnities.

AEI also goes on to advocate policies that would increase gas prices and US energy dependence on Middle East oil, invite a second Dust Bowl, and increase milk and sugar prices at the grocery store.

Today, Americans pay less than 9 percent of their disposable income at the grocery store, less than consumers anywhere else in the world. The cost of US farm policy is at record lows — registering at less than a quarter of 1 percent of the total US budget — while foreign subsidies and tariffs are spiraling to record highs. The 2012 Farm Bill would make further reductions, saving a total of $23 billion to $35 billion under the Senate and House versions of the bill, respectively. And, the farm economy is being credited with helping mitigate the harsh effects of the recession, by continuing to create on and off farm jobs and reducing America’s huge trade deficit.

So, in light of all these facts, why, then, does AEI view the 2012 farm bill as posing the two biggest threats to American free enterprise today?

I expect a close inspection at the big bucks donated to AEI by high-powered and monied special interests might turn up more than one wolf in sheep’s clothing.

But, to be fair to AEI, they just might be nuts.

The original article was featured in Jim Wiesemeyer’s September 18th column.