High Food Prices or Low Food Prices: What Do We Want?

The WSJ should be asking this question in its analysis of the progress of the new farm bill in Congress. It reports that complaints of White House spokesman Tony Fratto that the bill would be raising food prices when we actually want lower food prices. Actually, much of the effect of the bill would be to lower food prices. By providing subsides to people engaged in a wide range of farming activities, it is encouraging people to enter farming. This leads to more output in general. On the other hand, the subsidy to ethanol, does directly pull land out of food production and shifts it into the production of biofuels. The restrictions of importing sugar has the effect of raising sugar prices in the United States, but lowering them for the rest of the world. From the vantage point of people outside the United States, these barriers might be viewed as positive (except in the case of sugar producers). It would be helpful if the analysis sought to assess the the goals of U.S. agricultural policy and whether this bill was helping to meet them.

--Dean Baker