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Friday, April 26, 2013

Why Is There a Dole for Farmers?

Uncle Sam is broke. After running up $5 trillion in deficits over the last four years, Washington is borrowing another $845 billion this year. And assuming Congress neither adds expensive new programs nor expands expensive old ones, the federal government will run up another $7 trillion in red ink over the next decade.

Government outlays must be cut. But when the sequester hit, reducing the $3.6 trillion budget by a paltry 2.3 percent, much of Washington reacted in shock and horror. The savagery, the inhumanity!

Of course, the standard response to most any proposed cut is the cry, “What about the poor?” Yet most of the federal budget has nothing to do with the poor. In fact, Congress favors middle-class and corporate welfare, plus a plethora of lesser special interests—like the agriculture lobby.

It’s obvious why welfare exists, even though Uncle Sam does a bad job of helping the poor. But why subsidize farmers because they are farmers? We don’t have an engineers’ support program. Or subsidies for writers. (How I wish.) There are no marketing orders for pharmacists. Or special loan programs for insurance salesmen. 

Farmers have their very own Cabinet department. What accounts for the ability of people who otherwise appear to be rugged individualists to sup so handsomely at the public trough?

Farming remains hard work, but lots of Americans work hard. True, farming gets romanticized more than most other jobs. Some city folk have a sentimental view of a way of life they never have experienced. Imagine the hardy frontier family creating a new life and bounty in the wilderness! Of course, this scenario has nothing to do with rural life today. And even if it did, that would be no reason to tax away the earnings of some hardworking Americans to give to other hardworking Americans.

Nor do agriculture subsidies do much to save family farms, which capture the most public attention. Despite ample government funding, small family farms are disappearing. Their number has dropped 70 percent since Uncle Sam went into the farm business during the Great Depression. Today agriculture is big business, made even bigger by federal intervention. 

Another argument is that food production is essential and business is unpredictable. True, but Americans fed themselves before there was a Department of Agriculture. They fed themselves before there was a U.S. government. Even today two-thirds of American farm production, such as meat, fruit, and vegetables, is not subsidized. New Zealand got rid of all farm supports in 1984, and its farmers prospered.

In fact, government’s role in agriculture almost always has been pernicious. Throughout history political authorities have stolen farmers’ crops and imposed price controls on food. The twentieth-century communist experiments in collectivized agriculture led to mass starvation and death.

Nor are farmers the only businessmen vulnerable to changing markets. As columnist Robert Samuelson noted, “Technological upheaval and foreign competition have convulsed countless industries and their workers: autos, steel, entertainment, newspapers and many more.”

The last argument is that judicious State intervention can improve food production. It’s an inside joke by rural politicians determined to deliver ever-more taxpayer loot to their constituents. Uncle Sam manages to simultaneously keep prices up, drive prices down, generate massive surpluses, and create terrible shortages. Washington pays dairy farmers to add milk cows and then to slaughter milk cows. 

The result is not orderly markets. According to the Heritage Foundation, “Subsidies are intended to compensate farmers for low prices that result from an oversupply of crops, but granting larger subsidies to farmers who plant the most crops merely encourages them to plant yet more crops, driving prices even lower and leading to calls for larger subsidies. Furthermore, while paying some farmers to plant more crops, the Conservation Reserve Program pays other farmers to plant fewer crops.” Only an idiot—or a congressman—could design such a system.

The mishmash of bizarre programs and regulations—non-recourse loans, set-asides, deficiency payments, risk coverage, marketing orders, direct payments, price supports, disaster relief, and more—has but one objective: to transfer tens of billions of dollars annually to farmers.

Uncle Sam is playing reverse Robin Hood. A recent Heritage Foundation study noted that in 2009 farmers had a net worth of nearly a million dollars, twice the national average. Average farm household income in 2010 was more than $84,000, despite significantly lower living costs. In that year, farmers earned more while other American households earned less—$65,500—than in the year before. 

Most federal subsidies are production-based, so they are designed to enrich the wealthiest farmers. The majority of agriculture payoffs go to farms with average annual revenue exceeding $200,000 and net worth around $2 million.

The Agriculture Department forecasts that farm income this year will be the highest in four decades. In March the New York Times reported that “farmers are receiving record prices for their land.” Despite last year’s drought, land prices have doubled in both Iowa and Nebraska since 2009. Yet farms fail at just one-sixth the rate of other enterprises.

The Republican Congress attempted to transform the system with the 1996 “Freedom to Farm Act,” but legislators quickly retreated, lavishing more and more money on farmers. There was a time when Americans might have felt rich enough to fritter away their earnings on people who were wealthier than average simply because they were farmers. But as Samuelson pointed out, “If we can’t eliminate the least valuable spending, then we will be condemned to perpetually large deficits, huge tax increases or indiscriminate cuts in many federal programs, the good as well as the bad.”

Farmers have grown comfortable on the federal dole. However, they would adapt if forced to operate in the marketplace like other businesses. My Cato Institute colleague Chris Edwards observed that “many industries have been radically reformed in recent decades with positive results, including the airline, trucking, telecommunications, and energy industries.” Ending farm subsidies similarly would leave “a stronger and more innovative industry.”


Washington is bankrupt. It’s time to eliminate farm welfare.

  • Doug Bandow is a senior fellow at the Cato Institute and the author of a number of books on economics and politics. He writes regularly on military non-interventionism.