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U.S. Agricultural Policy Reform in 2007 and Beyond

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As U.S. agricultural policy is revisited in the 2007 Farm Bill debate, the occasion is ripe to reconsider whether our commodity programs and related legislation best serve agriculture and the economy, and what policies might do better. The studies in this working paper series demonstrate that the current programs serve neither the national interest nor the interests of rural people or agriculture as an industry. Congress and the President would do the country an economic favor by substantially reforming these policies.

We recommend a shift to a much reduced government role in markets now influenced by agricultural programs, along with an end to the substantial transfers to producers and other resource owners associated with the supported commodities. This is a less radical reform than it may appear to be. A large fraction of U.S. agriculture already operates in an approximately free market environment. Drawing upon a series of papers on particular policy issues commissioned by the American Enterprise Institute (AEI) in 2006, we provide evidence that the programs now in place have costs far in excess of the benefits they can reasonably be argued to provide, and that U.S. agriculture would prosper no less than at present, and with better long-term prospects for both farmers and the public generally, in the absence of these programs. Before developing ideas for policy change, we outline some of the purposes that advocates have proposed for farm subsidy programs and provide some factual context about modern agriculture in the United States.