Abstract
U.S. farm policy underwent dramatic change in 1996, when Congress passed and the president signed the Federal Agricultural Improvement and Reform (FAIR) Act. Under FAIR, targetprice deficiency payments and annual landidling programs are to be eliminated for at least the next seven years, and are to be replaced with a fixed schedule of production flexibility contract payments, completely decoupled from future market prices or planting decisions. What triggered this radical policy instrument change? The necessary conditions were twofold: Republican Party control of both the House and Senate in 1995-96, plus a rapid runup in market commodity prices. Other factors, including the 1986-94 Uruguay Round of GATT negotiations, acute federal budget pressures, and the possible emergence of a new market-oriented farm policy consensus proved far less important to the outcome. The crucial role of rising market prices explains why changes to the traditional farm price-support policies were enacted while other farm programs, and most nonfarm social entitlements, remained impervious to modification by the new political majorities in the 104th Congress. Two questions then arise. First, what would a counterfactual 1995-96 farm bill have looked like without either high prices or Republican control? Second, if market prices should fall in the years ahead, or if Democrats regain control of Congress, will the provisions of FAIR be able to survive?
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