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Fertile Ground for Farm Subsidy Cuts

With […] a growing consensus that federal spending at current levels is unsustainable, political support for farm subsidies is waning fast. What’s more, high crop prices and clear injustices are building bipartisan support for significantly cutting agricultural subsidies in the 2012 Farm Bill.

The New Deal introduced an enormous number of agriculture subsidy programs paved with good intentions to help struggling farmers, create a stable food market and alleviate poverty. While many other industries have been deregulated since the Depression-era reforms, agricultural subsidies have grown. Now considered by some to be America’s largest corporate welfare program, it is obvious that the government has failed to meet its original goals.

The glaring injustices built into farm subsidy policies explain why so many on both the political right and left routinely describe them as immoral. Subsidies reward large commercial enterprises — in good times and bad — and shut out small farmers. Developing countries that desperately need to boost agricultural exports cannot compete with subsidized, over-produced crops from wealthy nations. Subsidies also drive up the cost of food for the poor and working families.

Iowa farmer Mark W. Leonard, in a 2006 Wall Street Journal interview, described how he brought a farmer from Mali to talk to local church gatherings about the adverse effects of subsidies. “From a Christian standpoint, what it is doing to Africa tugs at your heartstrings,” he said. The bottom line is that the large, commercial farmers win and everyone else loses.

Rural communities dependent on farming seem to have the long end of the stick, but this isn’t true. According to an Iowa State University study, the most highly subsidized areas in the United States are seeing little to no economic growth. In counties where farm payments are the biggest share of income, job creation is very weak. This can possibly be attributed to highly subsidized agribusiness buy outs of family farms. It is ironic that farm payments are intended to foster growth but instead they appear to be linked with subpar economic performance.

Though meant to support the incomes of farmers and promote rural economic growth, subsidies are making rich farmers richer. Subsidies don’t usually end up where they are most needed because the top 10 percent of recipients receives 74 percent of the payments. Instead of helping those most in need, farm payments are just another failed government welfare program.

Agricultural subsidy programs are funded by taxpayers’ dollars and end up raising the cost of food for the domestic consumer. In other words, we are paying for subsidies twice over. Even though price supports are intended to stabilize food production and thus prevent wild price swings, a Heritage Foundation research report found that consumers actually end up spending more on food in the long run when all price distorting effects are considered. Commodity subsidies encourage overproduction and lower prices, but the Conservation Reserve Program encourages underproduction and raises prices. Tariffs raise the price of imported food. For example, the sugar program operates as a cartel by controlling prices and limiting imports, which significantly raises the cost of sugar.

It is poor budgetary stewardship on the government’s behalf to fund a program with taxpayer dollars that makes food more expensive for consumers. According to the Heritage Foundation, the Organisation for Economic Co-operation and Development estimates the average household spent “$216 in annual taxes in addition to $104 in higher food prices.”

Subsidy payments are commodity specific, so unless you’re growing corn, wheat, soybeans, or another subsidized crop, you’re on your own. Jack Thurston, co-founder of FarmSubsidy.org told Time Business, “The bigger you are, the more subsidies you get. It is the reverse of what you think a subsidy is.”

Because farm payments often encourage overproduction and consolidation of agribusinesses, the price of land is inflated, which makes it very difficult for would-be farmers to enter the market. Rather than giving them a fair opportunity, subsidies undermine the entrepreneurial spirit of young domestic farmers.

Commodity price supports, export subsidies and tariffs drive commodity prices below the world price, which makes it difficult for foreign countries to compete. Surpluses of overproduced U.S. crops are dumped on the international market at prices well below the cost of production, creating even more price volatility. Many poor nations have few other options outside of subsistence farming. Subsidies keep poor nations poor and dependent on developed countries.

There is no doubt that farming is a difficult, volatile business filled with risk and uncertainty — and so are many other successful industries that do not receive any government hand outs. Farmers receiving payments should be careful not to view the government as a savior, who will reduce risk, create certainty and save the day if something bad happens. This is a dangerously dependent position to be in, and it is morally problematic when it comes at the expense of everyone else.

A farmer from Mississippi by the name of Lanier, in a recent call in to NPR, said he doesn’t need the government to help him run his business: “I’m not going to be very popular with this comment, but my family has farmed [6,000] to 8,000 acres every year. We own about five of that and lease the rest depending on what we think the market conditions will be. But, quite frankly, we don’t need these subsidies … we being the larger farmers; we’re getting paid seven digits to not farm areas of our farm. That’s ludicrous. […] We cry, hey, it’s a risk. But tell me what business there is out there that doesn’t have a risk.”

Agricultural subsidies make little economic sense and they display many of the problems that characterize other large welfare programs: injustice, dependency and a slew of unintended consequences.

But, good news might be just around the corner. Recent reports suggest agricultural subsidies will see drastic cuts in the upcoming farm bill due to high commodity prices and the budget crisis. Americans should be cautiously optimistic that America’s largest corporate welfare program will take a big hit in 2012.


Elise is from Fairfax Station, Virginia. She graduated in May 2011 from James Madison University in Harrisonburg, Virginia with a BBA in Economics and a concentration in European Business.

(This article is a product of the Acton Institute — www.acton.org, 161 Ottawa NW, Suite 301, Grand Rapids, MI 49503 — and is reprinted with permission.)


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  • There is an old farm joke that goes, “Q: What’s the fastest way to bankrupt a farmer? A: Weld his mailbox shut.”

    I’m just hoping that the process of getting weaned from subsidies isn’t going to be too painful for our family farmers.

  • U.S. farmers are by far the most productive farmers in the world. Perhaps the greatest American born in the XX Century, Norman Borlaug, was a farmer and he may have been the one human being who saved more lives than any other human being, not counting Jesus of course. There was a time when the Soviets bragged about increased productivity in their collective farms. Even in those days we could beat the USSR at producing food with just the output of California or Kansas alone.

    Subsidies are for farmers what welfare is for ordinary people. They come with lots of strings attached as my fellow Virginian and author of this nice article surely knows. In the inner city if you want your free welfare apartment you must stay poor. The moment one makes one dollar over the line one ends up on the cold, hard street. That has the effect of freezing a person in perpetual poverty.

    Subsidies for farmers work the same way. The strings attached to the subsidies are designed to limit productivity and sustain artificially high prices in the commodity markets. That is not capitalism really, it is a form of control that can be compared to the Soviet control over the collective output: central planning with a twist.

    If the government stops that practice farmers may very well have to return to basics: produce what the market demands, produce it as fast as possible, and produce it in the largest quantities possible to make money. The good side of that is that we may see a dramatic drop in the price of certain commodities. Of course speculators will find a way to burn production to sustain prices. One day they will have to answer to God for that. I am sure they will be surprised to find out that God supports free market as opposed to our present “free pens to fleece the fools” system.

    Just like the Soviet system finally collapsed when Boris Yeltsin climbed to that tank in 1991, America is about to see the collapse of the crony liberal capitalism system that was imposed gradually on us after the Civil War.

    Indeed a “new world” is being born but not the “new world order” the Rockefellers dreamed about. After a few pangs of distress people will see (indeed they are seeing) that we are many and we don’t need centralized commanders whose only talent consists in giving a few stinking speeches per day. The prayers of America are being answered and we are walking into a great future of true liberty. We just have to fight one more time to eradicate evil from our land.

    America! America!
    May God thy gold refine
    Till all success be nobleness
    And every gain divine!