I Wouldn’t Bet the Farm on ‘Bidenomics’

‘Bidenomics” will take us back to the future, to hear White House national security adviser Jake Sullivan tell it. In an April speech at the Brookings Institution, Mr. Sullivan heralded a “new Washington consensus” based on a robust “vision of public investment” that rejects the mistaken belief that markets always allocate capital efficiently.

Much of the public investment that Mr. Sullivan fondly recalls from America’s “postwar years” ended up in agriculture. Given the administration’s interest in reviving that tradition, a recap of farm policy as I’ve experienced it over the past 50 years might be helpful.

I was in high school in 1973 when President Richard Nixon embargoed soybean exports to slow the increase in food prices. Seven years later, I had just begun to farm when President Jimmy Carter embargoed grain exports to the Soviet Union to protest its invasion of Afghanistan. President Ronald Reagan lifted that embargo but was faced with the consequences of a farm policy that for many years had held the price of grain above market-clearing levels. The resulting surpluses meant countless plywood bunkers full of rotting corn across the Midwest. We solved that problem in 1983, when Uncle Sam paid us to leave as much as 50% of our land idle in the infamous payment-in-kind program. Farm policy was a mess; we farmers went fishing.

That mess also was evident in how the government ran farm policy elsewhere. Beginning with the Great Depression, Washington paid farmers not to sit idle but to farm crops that were already in excess. The government doled out subsidies for crops commensurate with their acreage base—the historical average of land planted for each crop. Even though prices at the grain elevator and in the futures market were telling us to stop farming certain crops, no one dared heed the numbers for fear of losing handouts. We therefore continued to plant exactly as much corn as we had the year before.

As we say in Missouri, that was crazy as a bedbug. No matter how much our families valued hard work and thrift, we always passed down the imperative of “protecting your base.” Washington’s industrial policy aided that ethic and thankfully was amended when Congress passed the Freedom to Farm Act in 1996.

Two years earlier, Congress reformed the crop-insurance program. It did so by increasing subsidies in the hope that insurance would help prevent future ad hoc disaster programs and that subsidized insurance would help support farm incomes without distorting markets. That hasn’t always been successful—government is prone to a special kind of generosity when droughts and floods come in even-numbered years—but crop insurance has become the major financial support the federal government offers farmers.

In January 1994, the North American Free Trade Agreement went into effect, followed by other trade pacts, which significantly increased commercial opportunities for American farmers. Those arrangements have borne great fruit: U.S. agriculture exports stood at $196 billion in 2022, up from $62.8 billion in 1997.

In his Brookings speech, Mr. Sullivan lamented that this era of policy “championed tax cutting and deregulation, privatization over public action, and trade liberalization as an end in itself.” Yet farm policy during this time moved haltingly toward letting farmers plant in response to market signals, and the results were quite positive. The changes ended the half-century-long policy of paying farmers to store government-created surpluses of grain and led to a massive increase in exports. We’ve hardly seen a return to the free market in agriculture, but attention to the market has led to a globally competitive and productive agricultural sector.

Government investment in agriculture has invariably had unintended consequences. Critics say federal programs often subsidize successful farmers at the expense of taxpayers. Supporters say the programs have saved family farmers, protecting hardworking people who wouldn’t have survived without government help. Economists have found that the excess profits that come from farm programs are bid into land prices, artificially inflating them and thus favoring established farmers over new entrants. Some observers complain that certain agricultural policies, like ethanol mandates, encourage demand, while others, like subsidized crop insurance, increase supply.

The architects of government farm programs believed their efforts were necessary for the common good. The policy mishmash they produced reveals how difficult it is both to define the common good and craft policies that foster it.

The recent past hasn’t been a triumph of free markets, but neither was the era of public investment for which Mr. Sullivan yearns. One thing is certain: The experiences of farmers like me have been vastly improved by respecting how markets allocate capital in a productive and efficient manner.

Mr. Hurst is a corn, soybean and greenhouse farmer.