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Title: What is Happening to U.S. Farm Policy: A Chronology and Analysis of the 1995-1996 Farm Bill Debate
Published in: Working Papers Series
Author/s: David Orden*, Robert Paarlberg, and Terry Roe
Year: 1996
Number: 96-4

This paper presents a chronology of the 1995-96 farm bill debate, which was historic in several dimensions. Victories in the 1994 mid-term elections gave Republican majorities control of Congress for the first time in forty years. An omnibus budget reconciliation bill became the principal vehicle around which the Republicans organized their political agenda. In the highly-partisan atmosphere that followed, the debate on farm policy centered on the level of spending, the structure of the main commodity programs, and the programs for dairy, sugar and peanuts. The initial challenge faced by the new agriculture chairman in the House of Representatives was to find policies consistent with the election-year Republican rhetoric, while simultaneously putting together the committee votes to pass a farm bill. A “Freedom to Farm” plan to eliminate annual acreage set asides and provide fixed income transfers decoupled from production. Decisions and market prices became the centerpiece of his proposals. Proponents of the traditional commodity programs seemed to hold a strategic advantage against the proposed decoupled payments through September 1995. The Clinton administration had endorsed the traditional programs, and the Senate agriculture committee approved a bill that extended existing support mechanisms (with larger budget cuts than sought by the Democrats) after a reform initiative to lower target prices lacked Republican support. Meanwhile, opposition to Freedom to Farm from cotton and rice interests created an historic deadlock. The House agriculture committee did not pass any bill for inclusion in the budget legislation. The strategic balance in the farm bill debate shifted when market prices increased sharply in late 1995. The existing policy equilibrium continued to lose adherents and Congress passed the Freedom to Farm legislation in November. When the Republican budget initiative (including the new farm policies) subsequently collapsed (in January 1996), a bipartisan coalition emerged to enact the Federal Agriculture Reform and Improvement (FAIR) Act, again including Freedom to Farm. Notwithstanding the intervening steps, this may be the first time ever that legislation included in a budget reconciliation bill without approval from an authorizing committee has become law. The budget reconciliation bill passed by Congress in November 1995 but vetoed by the president was credited rhetorically with reducing farm program expenditures by $12 billion over seven years. But rising market prices by the time the bill passed implied that income transfers to farmers would be at least $3-5 billion more over the first two years under the new legislation than they would have been with the 1990 law. The strong bipartisan coalition in favor of the FAIR Act emerged only when it was clear that a net short-term windfall for farmers was involved, and with continuation of other farm policy interventions and reauthorization of environmental programs with new funding. When the president signed the FAIR Act in April 1996, the short-term benefits of decoupled payments for farmers were larger than estimated the previous November. Permanent legislation for support programs based on supply controls is maintained in the F AIR Act, and there is no guarantee that a transition to lower support costs has been initiated. The dairy, sugar and peanut programs escaped significant deregulation. Thus, regardless of claims that the F AIR Act brings an end to farm programs that have existed since the Great Depression, the amount of reform may well prove less than historic.