By Larry Lindsey

05/14/2002
The Wall Street Journal
A18
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Congress passed, and yesterday President Bush signed, the Farm Bill, which will provide a reliable safety net for farmers and meets important principles laid out by the president. The final bill adheres to congressional budget guidelines available at the time of conference, advances our international trade commitments, and protects the fundamental reforms in the 1996 Freedom to Farm legislation.

The president was committed to a bill that meets the needs of farmers. He and Congress agree that America's farmers and ranchers are vital to our economy. As such, the congressional budget resolution called for, and the administration agreed to, a 10-year spending increase of $73.5 billion on farm programs.

In the face of intense pressure to greatly increase the cost of the bill, the administration insisted that the bill adhere to responsible budget limits and that it avoid any front-loading. The final bill achieved both objectives. The five-year budget cost of the bill was scored at $36.6 billion, 29% less than what the Senate passed.

Conservatives herald the Freedom to Farm Act as the right long-term objective for our farm program. Since its enactment in 1996, however, Congress has added an average of $7.5 billion each year to the level of
spending targeted by Freedom to Farm. The farm bill just passed by the Congress adds $7.3 billion over that level of spending -- maintaining the farm income levels of the last six years.

The president believes America must play a leadership role in international trade and that the farm bill must advance this important principle. Not only does the spending in the final bill live within the limits of the World Trade Organization, but the legislation also contains a newly created circuit breaker that requires an automatic reduction in subsidies if we violate our WTO commitments. Thus, we have finally legislated an assurance of our compliance with our international trade commitments.

Some critics of the bill have likened it to the way Europe treats its farmers. But European support for crops is more than three times as high as U.S. support, with other major industrial countries similarly higher.

Today, a quarter of U.S. farm income is generated by exports, which means that access to foreign markets is critical to a thriving agricultural economy. The administration fought for -- and achieved -- a farm bill that reinforces U.S. leadership, benefits our producers and enhances the ability of our producers to aggressively compete for new markets.

The president believes that markets do a better job of guiding farmers' operating and investment decisions than artificial targets set by government programs or government employees. The legislation that passed Congress preserves the market-based principles of the Freedom to Farm bill. Farmers will have flexibility in making their planting decisions. A return to the old days of acreage allotments, which would happen if no farm bill were enacted, is avoided. Acreage set-asides are avoided. Government storage of "excess" product will not occur.

The farm bill isn't perfect and it did not satisfy all of the president's objectives. But the final bill preserves the president's fundamental principles of providing more stable and predictable funding, preserving our international commitments and avoiding a return to the outmoded farm policies of the past.

Signing the farm bill is important to ensuring certainty in the short run. And it is important to promoting prosperity for America's farmers and ranchers in the long run.

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Mr. Lindsey is assistant to the president for economic policy and director of the National Economic Council.