The New York Times

July 8, 1990, Sunday, Late Edition - Final

SECTION: Section 3; Page 11, Column 2; Financial Desk

LENGTH: 608 words

HEADLINE: FORUM; Our Disastrously Archaic Farm Policy

BYLINE: By JAMES BOVARD; James Bovard is author of ''The Farm Fiasco.''

(c) 1990 The New York Times, July 8, 1990

BODY: Our 60-year farm-policy civil war is increasingly devastating to American competitiveness. The Department of Agriculture will reward farmers for keeping idle almost 60 million acres this year - equivalent to shutting down all the crop land in California, Colorado, Kentucky, Louisiana, Montana and Wisconsin. Paying farmers not to work has become the foundation of American farm policy.

In 1933, President Franklin D. Roosevelt sought to solve the farm emergency by paying farmers to slaughter their pigs, plow their cotton under and reduce their plantings. Paying farmers to reduce their plantings was a temporary, ''emergency'' measure that became institutionalized because politicans and bureaucrats could not think of any better way to control farmers. In 30 of the last 34 years, the Department of Agriculture has tried to balance supply and demand by rewarding farmers not to grow on their land - through set-asides or acreage reduction programs.

Set-asides are a political response to what Washington perceives as ''excess capacity'' - too many acres producing a given crop. Yet, a 1988 Department of Agriculture study by Dan Dvoskin concluded that excess capacity exists for commodities which have traditionally been given the most subsidies. Subsidized crops have four times as much excess capacity as unsubsidized crops.

Set-asides have become a drag on farmers. The Agricultural Policy Working Group, a private research institute in Washington, estimates that set-asides, by forcing farmers to leave good land unplanted, increase the average cost of production for a bushel of corn by 33 cents. Since the variable cost of production in the most efficient corn-growing areas is only $1.25, this has a big impact on American competitiveness. A recent Department of Agriculture study concluded that acreage reduction programs alone have added about 7 percent to farm land values. But Government cannot drive up land values without increasing farmers' costs, and thus decreasing competitiveness.

Set-asides presume that the United States is the Saudi Arabia of wheat and feed grains - and that we can cut back our production, drive up prices and increase our profits. If nobody else in the world had any farm land, this policy might make sense. But, in recent years, while Uncle Sam has bled taxpayers to bribe farmers not to work, foreigners have planted fence row-to-fence row and are taking over world markets. The European Community has boosted its wheat exports by 40 percent since 1985, while the United States has had almost no gain.

Set-asides are intended to drive crop prices higher than they would be otherwise. Yet, at the same time, farms have been shut down to drive up crop prices, the United States has also spent billions of dollars since 1985 on export subsidies to make American crops cheaper overseas. Export subsidies are the antidote to set-asides and other Federal programs making American crops uncompetitive on world markets.

Every acre of Government set-aside land is an indictment of the failure of Federal planning. It means that Government attracted too much capital to agriculture. Permanent set-asides mean Government perpetually attracts too much capital to agriculture, and then, instead of allowing a natural adjustment and the capital to flow out, perpetually intervenes to keep some of that capital idle.

(c) 1990 The New York Times, July 8, 1990

Paying farmers not to work is economic insanity. It is easier for politicans to shut down American agriculture than to straighten out the tangle of self-defeating Federal farm policies. The sooner we abolish our tangled farm programs, the more competitive American agriculture will be.