Federal Policy Changes During the Farm Crisis

By the time Congress got involved in the mid to late 1980s many felt it was too little too late. By then the damage was largely done.  Still, Washington's response brought about some of the most profound policy reforms the agricultural sector had ever seen.

John Block: I was absolutely in tune with President Reagan's agenda and he wanted less government and less taxes and I supported that and I was willing to make cuts in farm programs sometimes, in food programs.

President Ronald Reagan: We're doing a great deal to help farmers but I have pleaded and warned repeatedly that just as your families don't have a blank check for whatever your needs may be neither can government, and that means taxpayers, bail out every farmer hopelessly in debt or every bank which made imprudent or speculative loans and bet on higher inflation.

Senator Tom Daschle: So you had a philosophical chasm really between those who believed the government's role should be limited if not completely non-existent and those who really felt that at times like this you needed the government to create the kind of stability and the kind of certainty and the kind of framework necessary for survival.  That clash occurred in public policy debates for months and months.

Some key pieces of legislation from the 1980s included the Food Security Act, more commonly known as the 1985 Farm Bill.  It allowed for lower commodity price income supports and created several conservation programs.  Then in 1986, Congress introduced Chapter 12 Bankruptcy.

Senator Charles Grassley: For the same reason that if you had to have a special law for farm bankruptcies in the 1930s I thought it was legitimate to have a special law for farm bankruptcies during the 1980s.  And I think it did serve and now it is a permanent part of the tax code.

And in 1987 the Agriculture Credit Act authorized a $4 billion financial assistance package for financially vulnerable institutions of the Farm Credit System.

Senator Tom Harkin: Basically what we did, it's simple, simple language.  As we said to the farmers with all this debt and they were paying these high interest rates leftover from the early 80s and the late 70s, come in, we're going to restructure it, we'll buy back your loans, those debts, we'll stretch it out over 20 years and we'll give you a lower interest rate.  Basically that's what happened, we just restructured all those loans.  And then we gave the Farm Credit System enough money to be able to do that.  And that stopped the bleeding.  Of course by that time a lot of people said it was too late for them because a lot of them had already been thrown out of agriculture.  So we did lose a lot.  I wish we could have done it earlier.  But the forces just weren't all lined up to do that.

While President Ronald Reagan said he wanted to bring a market oriented approach to farm policy, his administration ended up expanding federal involvement in American agriculture.  In fact, Reagan's farm programs cost more than the combined farm expenditures of every president from Franklin Roosevelt to Jimmy Carter.