Under the continuing New Deal approach, five commodities -- corn, soybeans, cotton, rice and wheat -- got about 90 percent of last year's $19 billion in subsidies. This is a perverse incentive for overproduction of the five, which depresses prices, which triggers federal supports.
Lugar, who proposes capping annual farm assistance at $30,000 per recipient, is attempting reform at a time when federal energy policy is making matters worse. By subsidizing corn-based ethanol, the government is making the "crop specific" approach to subsidies increasingly irrational: Ethanol enthusiasm has produced a one-year increase of 12 percent in acres planted in corn, the price of which has risen 20 percent in a year. So farmers are planting fewer acres in soybeans, which therefore also are being made more expensive by federal policy. Furthermore, U.S. agriculture subsidies, which have the World Trade Organization properly frowning, are becoming major impediments to further liberalization of global trade, and hence to the huge potential growth of U.S. farmers' incomes from exports.