The Farm Bill is once again up before Congress for reauthorization, and with it comes a throng of lobbyists armed with pitchforks to defend their various carve outs and subsidies.
Back in June, the Ohio Farm Bureau participated in the American Farm Bureau Federation’s advocacy fly-in event in Washington D.C. where they shared personal stories with lawmakers to gin up support for the bill’s reauthorization. Meanwhile in Indiana, Senators Todd Young and Mike Braun made an appearance in Tippecanoe county to discuss various aspects of the Farm Bill with local farmers. Unsurprisingly, one of the main topics of conversation during this visit was crop insurance.
Many believe the Farm Bill ensures the stability of the American food supply while providing financial assistance to struggling family farms. In reality, the Farm Bill typifies D.C. pork barrel politics, feeding substantial subsidies to powerful farm interests, while generating campaign contributions and votes for incumbent politicians.
Elected officials face a powerful “electoral incentive.” That is, regardless of their individual motivations or goals, incumbent politicians constantly operate in the shadow of the next electoral cycle. Thus, to pursue whatever other goals they have in mind, incumbents must first get themselves reelected. The Farm Bill is instrumental in overcoming these challenges of reelection as it creates opportunities for politicians and farm interest groups to trade votes and campaign funds for crop subsidies, protection from imports, cheap credit, and other benefits.
According to data collected by the Environmental Working Group, 63% of Ohio farms and 52% of Indiana farms did not collect subsidy payments in 2017. Of those farms that did, the top 10% of beneficiaries received the majority of total commodity payments. In Ohio the top 10% of beneficiaries (approx. 3,500 people) received $159,851,948 in total commodity payments—that’s $45,374 per beneficiary. Whereas in Indiana the top 10% (approx. 3,700 people) of recipients received $158,598,498 in total commodity payments, equivalent to $42,225 per person. In providing generous subsidies to such a narrow group of recipients, subsidies also inadvertently contribute to the process of economic consolidation.
There’s also the issue that these subsidies distort agricultural markets and waste resources. The value of agricultural subsidies come to be reflected in the value of land, equipment, and other specialized resources that farmers utilize. By increasing the amounts that farmers can pay for these inputs, commodity payments have the effect of raising the prices of these inputs over time. Farmers who own these specialized resources are benefited because the value of their property increases. However, higher prices for some, means higher costs for others. For succeeding generations of farmers, the benefit of these subsidies gets wiped out through the increased costs entailed in purchasing or renting these specialized resources. For consumers, increased costs of production translate to higher prices at the supermarket.
There is also the added issue that recipients of subsidies become dependent on them. Should the value of commodity payments be reduced or eliminated, farmers who had previously benefited from subsidies now face the prospect of having the value of their assets fall. In this sense, agricultural subsidies represent a trap for their recipients.
Subsidy programs contribute to the misdirection of resources by supporting the prices of farm products above their free-market levels. By preventing prices from adjusting to reflect the values consumers place on agricultural outputs, subsidies keep scarce resources (i.e., land, labor, and capital) locked in lines of production when they could be put to better use elsewhere.
Scarce resources are also wasted in the process of obtaining and maintaining these various subsidies. Lobbying, contributing to a politician’s campaign, and other expenses associated with currying favor with elected officials may represent worthwhile investments from the standpoint of potential beneficiaries, but constitute waste for the rest of society. The resources that are diverted into the pursuit of economic privileges cannot be used to produce goods and services that are valued by consumers.
The Farm Bill is estimated to cost U.S. taxpayers $1.5 trillion dollars or more over the coming decade, of which commodity payment programs makeup $69 billion. Given the recent downgrade by Fitch in the U.S. credit rating, it is simply irresponsible to add this much new spending to the already swollen budget. Government deficits and debt matter, and eventually taxpayers will have to pay back every dollar borrowed today.
To reduce the fiscal impact of the Farm Bill, lawmakers should start by trimming the fat: one estimate indicates that cutting subsidies would save $20 billion a year. Farm subsidies simply make the rich richer, while providing nothing to the rest of society. We can do without them.