Farmers with Benefits
The perpetual subsidy machine.
Apr 29, 2013, Vol. 18, No. 31 • By ELI LEHRER
American farmers did well in 2012, to say the least. They benefited from record-high commodity prices, burgeoning organic produce markets, and high sale prices for farmland. As they have for two decades, farm families took home more annual income—about $20,000 more on average—than non-farm families. And they could count on many friends in Congress: While facing a “fiscal cliff,” the uncertain sustainability of entitlement programs, and the near certainty of tax increases, members of both parties came together around bills that would have spent at least $950 billion on agricultural subsidies over the next 10 years—an increase of more than $300 billion from the most recent (2008) farm bill.
And you should see us milk the system
While gridlock and the press of other issues resulted in Congress deciding to kick the can until September of this year, the fundamental contours of the debate remain the same: Most conversation in Congress revolves around how much federal largess to farmers should grow, and hardly anybody questions whether or not the subsidies ought to continue.
The coming debate over a major farm bill, and the programs intended to benefit farmers in particular, matters not just for the financial stakes—although they’re significant. It’s also a test of the Republican party’s mettle when it comes to dealing with the size, scope, and negative consequences of federal activity. If the GOP and, for that matter, Democrats honestly concerned about good governance cannot hold the line against ever-growing subsidies to farmers in the bill, they cannot claim much credibility to reform other parts of the federal edifice. Quite simply, the current farm bill, now approaching its first round of major committee discussions, ought to be a crucible for anybody concerned about the country’s finances.
That said, support for farm programs runs deep. For roughly five decades, farm subsidy programs have expanded as a result of a deeply corrupt log-rolling agreement that folds subsidies to farmers into a massive bill with food and nutrition programs for the poor. As a result, urban, mostly Democratic members of Congress have supported significant subsidies for farmers in return for rural, generally Republican members’ support of programs like the Supplemental Nutrition Assistance Program (SNAP), better known by its former name of food stamps.
As an exercise in client politics, there’s no doubt this bargain has “worked”: Not only do both types of programs garner votes for their supporters, but SNAP and more than a dozen other federal nutrition programs create a larger market for the products that farmers grow. In raw dollar terms, it’s pretty clear that the nutrition programs and their liberal supporters get the better deal: The current farm bills devote more than 75 cents of every dollar in the bill to them. (Of course, the nutrition programs also have far more direct beneficiaries.)
Nutrition programs are costly, prone to fraud, and in need of serious management improvements. That said, there’s little doubt that their fundamental purpose of feeding people, particularly children, who would otherwise go hungry has widespread support. While there’s plenty of merit in reforming them in ways that save money—the House Republican-passed budget which block-grants the program to states offers one potential model—getting rid of them altogether appears impossible and arguably inhumane.
The direct farm support programs can’t claim anything like such a public purpose. Although they’re significantly smaller, somewhere around $300 billion over the 10-year period of the farm bill, farmer support programs have outlived their usefulness. The dairy price supports program (governed under a 1949 law based on policies first adopted in the 1920s) serves as a case in point. In the early 20th century, the program may have had a purpose: Practical refrigerated trucks didn’t exist, and as a result, milk couldn’t be sold more than about 70 miles from the dairy that produced it. Policymakers had reason to think that cities might have a hard time sustaining supplies of fresh milk. Thus, they dreamed up a Rube Goldberg series of equations to assure a commercially viable price for milk in every market—variables have included things like a city’s distance from the dairy center Eau Claire, Wisconsin.
A few refrigerated trucks were already on the market by 1949, however, and, just a few years after the bill passed, technological problems with transporting milk long distances had been solved. But the system remains in place and makes all dairy products more expensive. Other programs send U.S. tax money to Brazil in a blatant payoff to prevent the South American giant from bringing World Trade Organization complaints against the United States for our own even larger sugar subsidy and import restriction program.
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