Monday, November 05, 2007

Credit where credit is due 

Minnesota Senator Amy Klobuchar has discovered a new place to engage in class warfare: The new farm bill. Arguing that the 75-year-old plan is still has strong arguments for support, the only thing she can find wrong is that it gives money to people who do not need it.

Nearly 600 residents of New York City, 559 residents of Washington, D.C., and even 21 residents of Beverly Hills 90210 received federal farm checks in the past three years. Some collected hundreds of thousands of dollars.

Last time I checked, there wasn't a lot of farmland in those communities.

We can fix this and do better for our farmers by using the new Farm Bill to close loopholes, tighten payment limits and enforce tougher income eligibility standards.

First, the current Senate and House Farm Bill proposals eliminate the "three-entity rule." This will end the practice of dividing farms into multiple corporations to multiply payments.

Second, a long-standing bill proposed by Sens. Byron Dorgan and Charles Grassley would limit annual payments to $250,000.

Third, nonfarmer millionaires should be precluded from receiving payments.

Let's understand something about economics here. Farming, like most economic activity, requires four factors of production: land; labor; capital; and entrepreneurship. The entrepreneur puts his or her own resources at risk of loss in return for the opportunity for profit. If you wish to support farmers, then whomsoever accepts that risk receives the benefit, be it a rich or poor person. There are already rules in place to guarantee that the person actually have something at risk (whether or not they are an active or passive investor.) If they have these rules in place, why does it matter if the person who is at risk is rich or poor?

Sen. Klobuchar worries that subsidy payments to rich farmland investors will "undermine public support for every farm program." If the reasons for supporting farmers are sound, I fail to see why, unless the Democrats fear their class warfare message will spill over into their own constituencies. Selling the "riskiness" story is difficult, because there are plenty of riskier investments than farming (remember those Internet stocks you owned seven years ago?) And a majority of farmers do not get any subsidies; the chicken farm you smelled going out to hunt deer this weekend did not receive a subsidy for its operations.

So why are some farmers aided and others not? Could the reasons be political rather than economic? It will be interesteing to follow the debate on the new farm bill that opens today.

Labels: ,