March 29, 2024

Common Sense: Richer Farmers, Bigger Subsidies

Just about everyone, that is, except the powerful farm lobby and its allies in Congress, which every five years or so since the Depression has managed to fight off any meaningful reforms and actually increase farm subsidies.

And now they’re doing it again.

Last week House Republicans stripped the farm bill of its food stamp provisions, citing runaway costs and rampant waste and fraud in the $80 billion federal program. Fueling conservative outrage in Congress and the news media was a man who continued to collect food stamps after winning $2 million in the Michigan lottery two years ago.

But the bitter and much publicized debate leading up to the party-line vote tended to obscure what happened to the rest of the bill in the House: many of the same legislators up in arms about government spending and welfare abuse nonetheless voted for an increase in federal subsidies to wealthy farm interests.

“What’s remarkable and extraordinary about the farm bill is that, at a time of record crop prices and federal deficits, the House overwhelmingly passed a bill to increase subsidies,” Scott Faber, vice president for governmental affairs at the Environmental Working Group, told me this week. “Only an evil genius could have dreamed this up.”

The debate over food stamps provided a smoke screen for the agriculture subsidies, he said. “Unless you read the fine print in the agricultural press, you wouldn’t have noticed.”

The Environmental Working Group has long campaigned for changes to farm subsidies, citing among other concerns the negative impact that farm subsidies have on the environment.

“It’s hard to understand how anyone in the House who calls himself a conservative could support this, but many did,” said Chris Chocola, president of the free-market-oriented Club for Growth, which opposed the bill and lobbied against it.

Mr. Chocola is a former congressman from Indiana’s Second District and commutes to Washington from his 40-acre farm near Elkhart. He said he’s spent most of his life in agriculture.

“With the federal debt and deficit we have, to be subsidizing millionaire farmers makes absolutely no sense,” he said.

Many farm commodity prices, farm incomes and farmland values are at or near record levels, notwithstanding a severe drought in some parts of the Great Plains.

Earlier this year, the Agriculture Department projected that farm income in 2013 would be $128.2 billion, the highest since 1973, fueled by “record crop production levels” and “high prices for many crops.” Moreover, surging prices of farmland — 2013 was the third year of double-digit increases, according to the Federal Reserve Bank of Kansas City — have greatly improved farm balance sheets, the department said, and raised the net worth of many farmers.

Despite flush times in the farm belt, the bill the House passed last week provides what the Environmental Working Group calls the most generous farm subsidies in history. It increased crop insurance subsidies and raised price targets for a wide variety of crops, locking in price guarantees at their recent near-record levels.

Under previous incarnations of the farm bill, such subsidies expired every five years unless Congress acted to extend them. It always did, but at least there was an opportunity for periodic changes reform. Under the new bill the subsidies are permanent.

“It’s frightening,” Mr. Chocola said. “They’re locking in historically high commodity prices at taxpayer expense. And maybe the worst is that this is now permanent.”

The Senate version of the farm bill, although it retains financing for food stamps, contains many of the same generous farm subsidies.

Article source: http://www.nytimes.com/2013/07/20/business/richer-farmers-bigger-subsidies.html?partner=rss&emc=rss

Economix Blog: Full Employment: The Big Missing Piece

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joseph R. Biden Jr.

While some important parts of the current economy are showing strength — housing, energy extraction, corporate profitability — demand for labor, or “job creation” if you prefer, remains weak.  That’s a huge problem because most of us depend on our paychecks, not our stock portfolios, so the fact that there’s still about 12 million unemployed (including four million who’ve been jobless for over half a year) in addition to about eight million involuntary part-timers (who want more hours, and can’t find them) should give one pause before declaring all clear on the economic front.

Today’s Economist

Perspectives from expert contributors.

Weak labor demand plays an integral role in these outcomes, but too much of the rhetoric I’ve been hearing lately ignores that reality.  In the immigration debate — and I’m a longtime active supporter of comprehensive reform — advocates in both parties argue that there are lots of job slots waiting to be filled, if only we had greater labor supply.  This claim is most commonly made regarding high-skilled workers, like programmers, but one advocate recently wrote a commentary arguing that we also face a shortage of low-wage workers.  Anyone with even cursory knowledge of employment or especially wage trends among such workers knows that this is not a credible claim.

It’s even worse over in the poverty debate, where contentions about the safety net, a topic I wrote about last week, suggest that the jobs are there for the taking if only SNAP (food stamps) and other benefits weren’t removing the incentives for low-income people to look for work.  (The Southerland amendment to the farm bill, a key reason the bill failed in the House, was very much written in this spirit.)

The extent to which such claims are misguided came back to me as I was working with some new data on the importance of strong labor demand, particularly to low- and middle-income workers.  The data are simply the annual hours of work by income group over the last few decades, with households split into fifths by income, from the poorest to the wealthiest 20 percent, or quintile (e.g., “Q1” in the figure below represents the lowest-income quintile).

The trends reveal the disproportionate impact of strong labor demand on low relative to high income workers.  Basically, using the economic model introduced in “Field of Dreams,” it’s an “if the jobs are there, they will come” story, which is decidedly different than “if they come, the jobs will be there” (economists will recognize the latter as Say’s Law).

A simple statistical model of the relationship between annual hours and unemployment shows that since the mid-1970s, for every point the unemployment rate falls, annual hours of work go up by 3.7 percent for low-income workers from the bottom fifth of the income scale, 1.7 percent (about half as much) for middle-income workers, and 0.8 percent (half as much again) for high-income workers.

But these are broad historical averages.  During the late 1990s, the last time the United States economy was at full employment, low-income workers were remarkably responsive to strong labor demand.  Between 1996 and 2000, for each point the unemployment rate fell, their hours of work rose more than 10 percent.

The figure below provides some historical context.  The first three bars for each income group shows the percentage change in annual hours worked over the last four years of the last three recoveries — if the recovery is going to reach full employment, that’s when it will do so.  The fourth bar in each set shows the most recent years of data, tracking the hours impact of the Great Recession.

Q1 represents lowest fifth of income distribution, Q5 the highest. Source: Author’s analysis of Census Bureau data (Annual Social and Economic Supplement), provided by Arloc Sherman of Center on Budget and Policy Priorities. Q1 represents lowest fifth of income distribution, Q5 the highest. Source: Author’s analysis of Census Bureau data (Annual Social and Economic Supplement), provided by Arloc Sherman of Center on Budget and Policy Priorities.

The first thing to notice is how much more responsive the trends are for lower relative to higher-income households: they go up more in good times and fall further in bad ones.  That doesn’t imply the rich are lazier.  To the contrary, it’s because they’re already maxed out on hours worked and their jobs tend to be much more insulated from changing demand conditions.

The second thing to notice is how much the 1990s recovery stands out.  There was a lot going on in those years — more on that in a moment — but the main factor was full employment: the demand for low-wage work in particular was stronger than it has been for years before or since.  Their average annual hours rose 17 percent, 1996-2000, amounting to almost three more weeks of full-time work.

Third, the 2000s were a uniquely weak period of labor demand.  Employment growth in those years was the worst on record, with data going back to the 1940s.  One is tempted to tell a failed supply-side economics story, but the Reagan years, which look good by this measurement, especially for middle-income families, complicate that explanation (the George W. Bush economics regime hewed much closer to trickle-down theory than did the Reagan team — taxes were actually raised numerous times in the Reagan years).

Finally, the benefits of full employment to the least advantaged are perhaps most clearly shown by the counterexample of the great crash, which slammed low- and middle-income families relative to the wealthy.

What other factors besides full employment, then, were in play in the 1990s?  For one, welfare reform pushed a lot of single mothers into work, a factor much more conducive to the “if they come, the jobs will be there” view that I dismissed above.  But careful research finds that welfare reform explains less than 15 percent of the increase in work among low-income single mothers, who themselves represent less than 20 percent of the bottom fifth in the figure shown above.  That’s not nothing, but it’s a relatively small part of the story.  Moreover, work-based welfare reform was there in the 2000s too, and that period doesn’t look so good.

Opponents of immigration reform should also note that while the 1990s was a period of strong immigrant flows of low-skilled workers, increased labor demand handily absorbed those flows.

I suspect that most objective observers will agree that full employment — strong labor demand, substantial job creation — is a (I’d say “the”) key economic, social, and poverty policy that’s missing from the current agenda.

So how do we get there?  Stay tuned…

(The findings discussed above are from a coming book on the importance of full employment, written with Dean Baker.)

Article source: http://economix.blogs.nytimes.com/2013/07/01/full-employment-the-big-missing-piece/?partner=rss&emc=rss