Put farm subsidies out to pasture
Current policy hurts farmers and the environment.

By Brian M. Riedl
from the August 1, 2007 edition

Reprinted with permission of the author.

Republican and Democratic congressional leaders rarely agree on a major issue. Yet both House Speaker Nancy Pelosi (D) of California and minority leader John Boehner (R) of Ohio have gone on the record as opposing the current $25 billion farm-subsidy system, which Congress is in the process of rewriting.

Changing the system won't be easy. They will have to battle the powerful agriculture lobby and its allies on the House Agriculture Committee, who are once again employing Norman Rockwell imagery to assert that farm subsidies are an all-American necessity that ensures an adequate food supply and alleviates farmer poverty.

But two seemingly arcane aspects of farm policy undermine both claims. First, farm subsidy eligibility is restricted to growers of only a few crops. Second, once a farmer's eligibility is established, subsidies increase with the size of the farm. This makes farm subsidies just another narrowly targeted corporate welfare program.

On the first point, producers of just five crops – wheat, cotton, corn, soybeans, and rice – receive nearly all US farm subsidies. In fact, only one-third of the $240 billion in annual farm production is targeted for subsidies. All other farmers – including growers of fruits, vegetables, livestock, and poultry – receive nearly nothing.

This raises the question: If farm subsidies are necessary to produce an adequate food supply with stable prices and thriving farmers, why haven't the growers of nonsubsidized crops experienced these problems?

Walk into any supermarket and you will find yourself surrounded by farm products, from apples to oranges, beef to chicken, that are produced and distributed without farm subsidies. Yet their prices and supplies are relatively stable, and the farmers' incomes are just as high as those of subsidized farmers. The free market works for all other farm production, and it can surely work for producers of wheat, cotton, corn, soybeans, and rice.

These crop eligibility restrictions also undermine the second justification for subsidies: alleviating farmer poverty. If that were the purpose, there would be no reason to favor one crop over another. After all, lawmakers would never create a welfare program that was restricted to workers in certain industries. Creating a farmer-poverty program that serves only growers of certain crops (regardless of income) makes no more sense. Today, a rice agribusiness can collect millions in aid while a low-income apple grower gets nothing.

Furthermore, most farmers are not poor. According to the Department of Agriculture, the average farm household earns $81,420 annually and enjoys a net worth of $838,875 – both well above the national average. Farm incomes are setting records, and the industry's business failure rate is among the lowest.

Of course, some family farmers continue to struggle. But if subsidies were really designed to alleviate farmer poverty, then lawmakers could guarantee every full-time farmer an income of 185 percent of the federal poverty level ($38,203 for a family of four) for under $5 billion annually – one-fifth the current cost of farm subsidies.

Instead, federal farm policies specifically bypass family farmers. Subsidies are paid per acre, so the largest (and most profitable) agribusinesses automatically receive the biggest checks. Consequently, commercial farmers – who report an average annual income of $200,000 and a net worth of nearly $2 million – collect the majority of farm subsidies. Fortune 500 companies, celebrity "hobby farmers," and even some members of Congress collect millions of dollars under this program.

These farm policies are more than merely ineffective – they impose substantial harm. They cost Americans $25 billion in taxes and an additional $12 billion in higher food prices annually. Environmental damage results from farmers overplanting crops in order to maximize subsidies. By undermining the nation's trade negotiations, subsidies raise consumer prices and restrict US exports. Cotton subsidies undercut African farmers, keeping them in desperate poverty.

And as Michael Pollan, author of "The Omnivore's Dilemma," has written, farm subsidies contribute to serious health problems and rising healthcare costs by subsidizing corn and soy (from which sugars and fats are derived) rather than healthier fruits and vegetables.

Even small farmers are harmed. Excluded from most subsidies, they must endure the lower crop prices, higher farmland costs, and industry consolidation that result from subsidies to agribusiness.

Lawmakers would be hard-pressed to enact a set of policies more destructive to farmers, taxpayers, consumers, the environment, trade, global antipoverty efforts, and even our health than the current farm policies. Is Congress paying attention?

• Brian M. Riedl is a senior fellow at the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation. ©2007 Los Angeles Times.