[In 1993, partly as a result of publicity stemming from this article, Congress abolished the wool and mohair subsidies. They were reinstated, in a somewhat different form, in subsequent farm bills.]
National Journal | May 18, 1991
WE KNEW you were wondering, and the answer is no. Mohair is not the hair of a mo. It is the fleece of the Angora goat. There are almost two million such goats in the United States, 84 per cent of them in Texas, all of them resplendently clad in thick coats of pearly fleece. Until now, you have almost certainly never known of their existence. Thus you probably also had not heard that Angora goats cost the U.S. government about $ 60 million last year.
You might not want to keep one of these beasts for a pet. An Angora goat resembles a shiny rag mop with horns and dreadlocks, though its temperament is equable enough. But think twice before you forswear goat ownership. In 1990, if you had clipped your goat, sold the fleece and brought the receipt to your local Agriculture Department office, Uncle Sam would have paid you $ 3.87 for every dollar you earned on the market. Not a bad offer, even by the standards of the frequently generous federal farm programs.
To be fair, the offer varies from year to year depending on the workings of an arcane formula, and last year's payment rate was unusually high -- the highest ever, in fact. The payment rate in 1989, by comparison, was $ 1.90, or nearly two dollars from the government for every dollar from the market. That amount, however, was more than enough to ensure that the federal wool and mohair program wrote some big checks. More than 60 of those 1989 checks were for sums in excess of $ 100,000.
Wait a minute. The federal wool and mohair program?
Yes, there is such a thing -- has been since 1955, in fact. Advocates call it a needed rural development program and contend that it dispenses help to family farms and communities struggling to stay afloat. Critics call it absurd and charge that it has outlived its rationale by 30 years and counting. Few, however, have ever challenged the program head on. If nothing else, the wool and mohair program is a survivor. The relative austerity of the high-deficit, slower-growth years since the mid-1970s has done nothing to change that.
Why? If federal programs had astrologers, they might say that the wool and mohair program has had lucky stars. It is, indeed, a case study in how a small program can stay out of trouble. Over the years, some of the most powerful members of Congress's agricultural community have befriended the program, and its annual cost -- $ 104 million in fiscal 1990 -- has been small enough, at least by farm bill standards, to escape the notice of all but a few budget choppers. (See chart, p. 1170.) Its mechanism is straight-forward and unintrusive, and so avoids the supply-management snafus that have led so many free-marketers to despise and attack the bigger federal commodity programs. Its beneficiaries live and vote in all 50 states, and although some producers get huge payments, many others are little people who genuinely need the money.
Most important of all may be the classic camouflage of small, boring farm program. Except for its beneficiaries, hardly anyone knows that the wool and mohair program exists, and of those who do know, few have much reason to take it seriously. Asked for comment on the program, a Washington farm lobbyist just offered sheepishly: "Baaaaaa."
THE STORY OF A SUBSIDY
WORLD WAR II veterans will remember their heavy woolen uniforms, a staple of the American fighting man's wardrobe. During the war, the Pentagon discovered that U.S. wool producers could deliver only about half the wool the military needed. Nowadays people talk about strategic commodities like machine tools and microchips; back then, it was wool. Congress decided that the nation's wool production needed to be maintained and expanded; it also, not incidentally, wanted to protect domestic producers from the effects of imports. Mohair, a specialty fiber that had no strategic value but had been traditionally viewed as an offshoot of the wool industry, was included in the program. The result was the 1954 National Wool Act.
As farm programs go, this one was a little unusual. Most work by simultaneously jiggering market prices and regulating production, a messy and often self-contradictory process. With wool and $, though, the mechanics have been clean and simple. No supply controls, no manipulation of market prices -- just cold, hard cash. Does Mary have a little lamb? Then Mary gets a government check.
Herein lies another quirk that sets the federal wool and mohair program apart. Most farm programs were designed, more or less, to be income stabilizers. Generally speaking, the more the farmer gets per bushel or per pound from the market, the less he gets from the government. The wool and mohair program, on the other hand, was designed to stimulate production and sales, pure and simple.
As a result, the formula is written so that the farmer's subsidy is a percentage of his market sales. In 1990, for instance, the wool subsidy rate was 127.5 per cent. This means that a farmer who fetched $ 2 for a pound of wool got $ 2.55 from the government (total: $ 4.55), but a farmer in another region, who fetched only $ 1 a pound, got only $ 1.28 (total: $ 2.28). In effect, it is a kind of reverse means-test: The greater your earning power in the marketplace, the bigger your government subsidy check.
Not that you have to earn much. In 1989, according to the Agriculture Department, nearly half of the wool program's beneficiaries received payments of less than $ 100 (the average payment in this class was $ 44). For instance, several thousand Navajo Indian families keep little flocks of sheep averaging 20 head and receive payments in the two-figure range. So important are sheep to Navajo culture that three of them appear in the center of the Great Seal of the Navajo Nation, and sickness among the Navajo is often attributed to being "mutton hungry." Because many of these people live in grinding poverty and in isolation from job markets, a $ 50 check can make a big difference.
The Navajo, however, occupy the small end of a steep payments curve. The big-money action is at the other end. In 1989, the government made nearly 300 wool and mohair payments of $ 50,000 or more; those checks averaged $ 98,000 and accounted for 27 per cent of what the government spent on the program. The top 0.3 per cent of producers got more than a fourth of the haul; the top 1 per cent got almost half. This was not, in short, a program designed with Great Society priorities in mind.
But then a funny thing happened on the way to modernity. Synthetics arrived. In 1960, wool disappeared from the Pentagon's list of strategically critical materials. In any event, the program had not increased wool production. On average, sheep owners get two-thirds to three-fourths of their earnings from lamb, not wool. Wool prices thus do not have a decisive effect on production decisions. Despite the subsidies, wool production went down, not up. Production probably did not go down as much as it would have without the subsidy, but it still went way down, from 265 million pounds in 1960 to 88 million last year.
The idea behind the program was to increase production of a strategic commodity, with mohair along for the ride. The reality was that it did not increase production and the commodity stopped being strategic anyway. The national-interest rationale for the program (as opposed to the other rationale, which was to support wool and mohair farmers' way of life) had vanished. But did the program itself vanish? That is another story.
IN DEFENDING the wool and mohair subsidy program, proponents make three major arguments. The first is that the program is self-financing, because the money paid to producers comes out of receipts from a tariff on imported wool. This, however, means only that the subsidies are paid for by wool taxes rather than income taxes. It does not mean that the program costs nothing.
The second argument is that other countries also offer subsidies, and the United States should not unilaterally disarm. "Wool and mohair, lamb and mutton, are an important industry for the United States that shouldn't be sacrificed to foreign competitors who are subsidizing their industry," said Rep. Charles W. Stenholm, D-Texas, whose Agriculture Subcommittee on Livestock, Dairy and Poultry has jurisdiction over wool and mohair.
Europe does indeed have high subsidies for lamb. But Australia and New Zealand are the dominant players in the international wool market, accounting together for 85 per cent of all exports. And their wool subsidies, according to the Organization for Economic Cooperation and Development, account for only 4 per cent of producers' receipts, as opposed to 42 per cent in America. The main reason for their success in the U.S. wool market is their efficiency, not their treasuries: Australia's and New Zealand's sheep produce almost twice as much wool per head as do America's.
As for mohair, America's only major competitor in the world market is South Africa. And South Africa, according to embassy agricultural attache Andre Vandervyver, has no government subsidies for mohair. Asked if the U.S. program is fair, he replied, "Obviously, when you don't subsidize and someone else does, you think it's unfair."
The third justification for the wool and mohair program gets to the core of the issue. Farmers say they need the money. Indeed, they say they depend on it.
Take Gerry Devlin. Besides being a Montana state senator, he runs a family ranch in the eastern part of the state where he raises sheep, cattle and grain. His father and grandfather worked the ranch, and so do his sons. In 1989, he said, his earnings per sheep came to about $ 91, of which almost $ 10 came from federal wool payments. That 10 per cent amounts for his profit margin on sheep. Without those payments, he said, "we would have a grave exodus from the sheep business; I would be one of the first."
Mohair farmers say they are in much the same position. Mohair prices have dropped sharply in recent years, leaving growers to rely on government payments. At the Mohair Council of America in San Angelo, Texas, executive director Brian J. May said that without federal mohair checks, "this whole area would have been a disaster. If you were to take the Wool Act out of this industry, it would crash." And the arid range country of west Texas, where the nation's Angora goats are overwhelmingly concentrated, apparently is not suitable for raising anything but goats. "We're not going to cut up these rocks and cactus out here for real estate," May said, "because no one's going to move here."
So, when you get right down to it, the and mohair subsidy is a program to sustain a traditional industry and a rural way of life, its proponents argue. Larry D. Meyers, a farm lobbyist who represents the wool and mohair people in Washington said: "It's a rural development program, is really what it is. Urban areas have human support programs also." And who, after all, wants to take aim a federal benefits for the American family farm?
THE ANGORA REBELS
REP. CHARLES E. SCHUMER, D-N.Y., that's who -- at least when the family farm turns out to be taking in tens of thousands of dollars in federal cash. He and Rep. Richard K. Armey, R-Texas, formed an odd-couple coalition last year of free-market conservative and urban liberals who joined forces to challenge what they regarded as the farm bill's excesses. Schumer delegated to himself the wool and mohair program and proposed limiting subsidies to $ 50,000 per farmer.
"I went after the program because it had outlived its need," he said recently in an interview. "It's very difficult to find a reason for this subsidy. Second, it goes to such a small number of people, who do quite well." Since the program began, he said, 80 per cent of the payments have been made to fewer than 6,000 producers. The program is, he said, a "subsidy for the wealthy."
The producers strongly object to such characterizations. Yes, they get big checks; they also run big operations with big expenses to pay. "They may be landrich," Meyers said, "but they're cash poor." Nonetheless, after years in which the program had gone fundamentally untouched by opposition of any kind, by 1990, the program's supporters understood that they would have to make some concessions. During the 1980s, all the other farm programs had been slapped with annual limits on the amount of cash benefits that any one farmer could collect. Meanwhile, as medicare and lowincome housing programs were being scoured for savings, the government was sending $ 200,000 checks to a handful of mohair farmers. "We're not proud of getting these checks," an industry source said. "It's embarrassing."
And politically perilous. Realizing as much, the wool and mohair industry undertook a strategic retreat. A $ 50,000 cap would effectively gut the program, they believed. Instead, Stenholm approached Schumer with a compromise: payments limits beginning at $ 200,000 per farmer and dropping to about half that amount in 1994. Schumer, whose relations with Stenholm are warn, agreed. "We didn't win too many votes," he said. "So I thought it would be better to compromise and get something."
The Senate followed a parallel course. The Senate Agriculture, Nutrition and Forestry Committee voted for a $ 50,000 payment cap, on the floor, Sen. Alan K. Simpson, R-Wyo., successfully substituted a $ 250,000 limit and a freeze on the support price. (Wyoming is the nation's No. 2 wool-producing state.) At the end of the day, the finished farm bill limited wool and mohair payments to $ 200,000 in 1991, dropping to $ 125,000 in 1994.
As the sheep and goat farmers saw it, the bad news was that their program had for the first time been successfully attacked by outsiders. The good news was that $ 125,000 is still a lot of money. In fact, it is three and a half times the U.S. average family income.
"I was disappointed," Schumer said, "but if at first you don't succeed, try, try again."
SCHUMER IS likely to be trying again for a long time. Some federal programs, such as social security and the home-mortgage tax deduction, survive serious challenge because they are too important to too many people. Others, such as the Strategic Petroleum Reserve and foreign aid, have a compelling case for serving vital national interests. Still others, such as infant-feeding programs and the missile defense program, become partisan rallying points. The wool and mohair program has none of those advantages. Yet a survivor it certainly is. To understand why, consider the following:
Favorable geography. "You look at a map, and they've got a hell of a geographical spread," said Macon T. Edwards, a longtime farm lobbyist who used to represent the wool growers. Every state in the union has at least somebody raising sheep, and therefore at least some interest in the wool program. Beneficiaries are not so thinly dispersed, however, as to be politically ineffective. About 60 per cent of the combined wool and mohair program benefits go to Texas, a political powerhouse.
A favorable beneficiary spread. A program that has many beneficiaries getting tiny amounts of money can run into political trouble: The benefits may be too small to energize a strong lobby. A program that has mainly a few very large beneficiaries has the opposite problem: Inevitable populist attacks on the ladling of federal gravy to millionaires and big businesses.
The wool and mohair program comes close to an ideal solution. It has thousands of small (often needy) beneficiaries who tug at taxpayers' heartstrings. During last year's farm bill debate, a Montana woman wrote Schumer to say: "My daughter raised a small flock of sheep as a 4-H project. The wool incentive payment, selling of wool and lambs, together provided the biggest share of her college education." But the program also has big beneficiaries who have both the motive and the means to run an effective lobbying operation.
Texans in high places. The wool and mohair program was a favorite child of W. R. Poage, the Texas Democrat who ruled the House Agriculture Committee until 1975. The committee's current chairman, E (Kika) de la Garza, is also a Texas Democrat and also a strong supporter of wool and mohair. Even more important is the support of Livestock, Dairy and Poultry Subcommittee chairman Stenholm, a straight-shooting Texas who commands broad respect on both sides of the aisle, and whose congressional district ranks sixth in the nation in wool production.
A low profile. The $ 105 million that the program cost in fiscal 1990 may sound like a lot of money, but it accounts for less than 2 percent of farm program spending. Budget reduces have bigger fish to fry. So do ideologues and economists, who find more that annoys them in the other commodity programs. As important advantage for the wool and mohair program has been its simple design: cash for fleece. The program doesn't offend economists by causing gross market distortions and artificial surpluses and shortages, as so many other farm programs do; it doesn't offend free-market conservatives by telling farmers how much they can grow, setting prices in Washington or otherwise looking like "socialism"; it doesn't draw attention to itself by going haywire, as the honey, dairy and sugar programs (among others) have done at various times; it has not become an international trade issue, as the larger farm programs have. All the program does is to write some checks. And so hardly anyone cares enough to try to kill it or maim it.
Powerful Texans, salt-of-the-earth beneficiaries in 50 states,obscurity: Wool and mohair growers could hardly ask for luckier stars. Yet they feel less than entirely secure. After the 1990 experience, an industry source said, a majority of Texas's mohair farmers fearfully expect the program to die in the 1995 farm bill.
Judging by the record since 1954, they may be overworried. What began as, in effect, a 1950s industrial policy for fiber is still going strong as a new century approaches. Those weighing the merits of temporary assistance for strategic U.S. industries might consider the lesson of the wool and mohair program. "There's nothing more permanent in this town," farm lobbyist Edwards said, "than a temporary program."