Economists Question ACRE's Worth

Economists Question ACRE's Worth

Working paper says that ACRE is a disaster.

The Average Crop Revenue program pays farmers a subsidy when the revenue per acre for a particular crop falls below recent statewide historical averages. The program was implemented by the 2008 Farm Bill. Two agricultural economists have released a working paper that says from the standpoint of fairness, deficit reduction, and trade relations, ACRE is a policy disaster that should be terminated quickly. They also say that Congress shouldn't allow any look-alike programs, which suffer similar problems, to replace it.

Vincent Smith, an agricultural economist at Montana State University and a visiting scholar at the American Enterprise Institute; and Barry Goodwin, an agricultural economist at North Carolina State University; say ACRE is poised to be a federal budget nightmare, with frequent and large subsidy payments going as high as $10 billion a year.

Smith and Goodwin say that the congressional deficit-reduction Super Committee should therefore pay special attention to the budgetary risks posed by Farm Bill initiatives that place ACRE, or ACRE-like programs like the recently proposed Agricultural Risk and Revenue Management program, at the center of a new and "reformed" US farm program in place of the $5 billion subsidies that farmers currently receive through the Direct Payments program.

The two economists add that ACRE is also a Pandora's box invitation for other countries to successfully file WTO complaints against the United States, damaging trade relations and hurting our agricultural exporters. They ask, do we really want to force US taxpayers to fund programs that increase the global competitiveness of other countries' farmers so that U.S. farmers can continue to enjoy ACRE subsidies? Smith and Goodwin concluded that ACRE is a potentially expensive exercise in farm policy design. In the absence of direct payments or a substantial reduction in their size, many producers are likely to enroll in the program as the current required 20% reduction in direct payments is their only effective cost of ACRE participation. The consequence is that ACRE participation is likely to increase substantially from the 2009 level of 13% of eligible land.

To view the working paper The ACRE Program: A Disaster in Waiting, click HERE.

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