| I swear, ever since Mark Bittman's taken over his new role at the New York Times, every week has felt like Christmas. Once a week, without fail, someone emails me his column because every week, without fail, it's worth reading. Mark Bittman is a really smart man. And, thankfully, with his platform at the New York Times, he's got a really loud bullhorn. Even better than reading a great column by Mark Bittman is knowing that thousands or even millions of others around the U.S. read it too.
This week, he's got a column on ag subsidies. He says, "Don't end them. Fix them." HELL YEAH.
Oddly enough, I read his email just hours after getting off the phone with a farmer. A farmer who understands subsidies about as well as anyone can understand them. He's with Bittman: A government-provided safety net for our farmers is needed. And what we've got now stinks.
The complexities of the subsidy system are endless (seriously) and even my farmer friend noted that there are some things that just make sense to nobody. Well, they probably make sense to about 5 very highly paid people on Wall Street or something. Like how the relatively new crop insurance scheme gets financed.
But one thing makes very good sense: Paying farmers a set amount whether they need it or not (the so-called "direct payments" that Obama has proposed cutting for the richest farmers) is stupid.
In the past, we had a pretty smart system. We set a "loan rate" that was a certain amount per bushel. Something that served as a fair price floor (or at least, it was supposed to be fair). When prices dropped, farmers could give the government their crop as collateral in exchange for a loan. Let's say the loan rate is $2/bu and you have 200,000 bushels, then your loan is $400,000. If prices recover, you pay back the loan with a little bit of interest and sell your crop. If prices stay low, you keep the loan money and the government keeps the crop.
But today, we have to consider the rules of the WTO when making our ag subsidy policy. And that old system would violate the rules. Direct payments, stupid as they are, do not violate WTO rules. Which, in my opinion, goes to show how stupid the WTO is. At least for agriculture. Why on earth would we sign an agreement that ties our arms from making good policy?
So on top of our already complex and confusing subsidy policies, we've also got government subsidized crop insurance, which insures farmers against yield loss and income loss. It seems to me that crop insurance is essentially an outsourced, privatized subsidization program. That is, we pay the insurance companies no matter what, and then they pay (or you could say subsidize) the farmers who need it. And they keep a profit, courtesy of the tax payers. What's the sense of that?