• reauthorize the Federal Agricultural Improvement and Reform (FAIR) Act of 1996 (known as the “Freedom to Farm Act”), replacing deficiency payments with a fixed schedule of decreasing payments that reach zero in 2008; • eliminate government crop insurance programs; and • eliminate government support of producer cartels in the milk, tobacco, peanut, and sugar markets.
Since the New Deal, the government has taken steps to guarantee that prices for crops sold by farmers do not fall below a politically determined level that in most years has been above, and in some years far above, the free-market level. And the government has created explicit producer cartels in milk, peanuts, sugar, and tobacco.
From 1973 to 1996, the principal legislated price for grains and cotton was the “target” price, fixed periodically by Congress. The guarantee to farmers was fulfilled by “deficiency” payments equal to the difference between the target price and the nationwide market price. Payment was made for a quantity administratively assigned to each farmer (and not affected by the quantity the farmer actually harvested). The nationwide price was not adjusted to reflect the circumstances of any individual or area. Thus the growers of wheat in North Dakota, who received an average price of $5.05 per bushel in 1995, got the same payment per bushel as Illinois growers, whose price averaged $3.89. Deficiency payments totaled $30 billion, or $6 billion per year, from 1991 to 1995.
The deficiency payment program created surpluses that were exacerbated by U.S. agricultural export promotion programs. The budgetary costs of both price support and export programs led to continuing pressure in Congress to regulate farm output in order to reduce U.S. production