Direct payments in the farm bill
The purpose of direct payments, included in the 1996 farm bill, was to cushion the impact of low agricultural commodity prices. Initially, direct payments, referred to as transition payments, offered financial aid to farmers as they made the seven-year transition to a stated goal of the farm bill; open, supply-and-demand oriented “free” markets.
In World Trade Organization (WTO) negotiations it became clear that direct payments, those unrelated to actual commodity prices or government manipulation of surpluses and planted acreages, were actually WTO compliant. At that point, the purpose of direct payments changed from their transitional nature to that of providing an agricultural subsidy to which trading partners could not object.
By 2002, our approach to government incentives for agricultural commodity producers had been altered thanks to WTO. However, no provision had been made for ending the payments when farms became profitable, partly because such a connection would have been against WTO rules, but mostly because the payments were immensely popular among those involved in big agribusiness, agricultural producers and landowners who factor the payments into farmland rents.
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