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Commentary

Farmers’ Harvest a Bumper Crop of Subsidies


     
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Farming is a good example of the textbook model of perfect competition—or at least that is what ECON 101 students often are taught. Even economists, evidently, are enthralled by Jeffersonian nostalgia for the yeoman farmer, the rugged individualist toiling from dawn to dusk to scratch a living from the soil.

In truth, America’s farmers are wards of the state.

If you thought things had changed for the better following passage of the landmark “Freedom to Farm Act” in 1996, you’d be wrong. Indeed, that law was intended to phase out federal farm subsidies by 2002, perhaps tolling the death knell of politically influential agri-businesses and their Gucci-shod lobbyists. Soon thereafter, farmers, aided and abetted by delegations representing Midwestern and Plains states, persuaded Washington to authorize “emergency” payments to offset the pending loss of crop price supports.

The predictable result: although Congress reinstated price supports in 2002 to try to end emergency payments, farmers get both.

So, every year since then, billions in price support and other emergency payments are forcibly transferred from ordinary taxpayers’ pockets into farmers’ bank accounts—when it is too wet, when it’s too dry, when crops fail, and when produce prices are too low. Farmers even get money for natural disasters not affecting them, as in 2003, when a nonexistent drought was declared, and 2006, when an earthquake struck Washington state. The old joke about how to starve a farmer—weld his mailbox shut so he can’t collect his government checks—is no laughing matter.

The farm lobby, which spent $80 billion last year to push its agenda, would have you believe that all these payments rescue small, family farms from the brink of bankruptcy. But according to the Department of Agriculture, farmers’ 2006 average household income stood at $77,654, about 17% above average U.S. household income, and is expected to reach $90,000 this year. Citizens Against Government Waste reported that 75% of the payments disbursed under 2002’s $260 billion farm bill went to the richest 10% percent of farmers. The single largest check in 2003 ($69 million) went to Arkansas’s Riceland Foods; other recipients of farm aid that year included Chevron, International Paper, and Caterpillar.

Because current law provides payments to producers with adjusted gross incomes (AGI) of $2.5 million or less, David Rockefeller, Sr., John D. Rockefeller’s heir, cashed government checks totaling $554,000 from 1995 to 2005.

Thanks to federal policies mandating a five-fold increase in ethanol production by 2017, at $5.52 per bushel, the price of corn is more than double its 2006 price. Yet half of today’s farm subsidies go to corn growers.

A legacy of the New Deal, intended to raise farmers’ incomes temporarily during the Great Depression (when 25% of Americans lived on farms), the farm bill has expanded to include funding for food stamps, land conservation, and school lunches, adding political weight to the special interests of the farm lobby, whose members presently represent less than 1% of the U.S. population.

The farm bill Congress votes on this week, expected to cost $289 billion over five years, began as an attempt to reduce agricultural subsidies, in part by limiting eligibility to farmers with AGIs of $200,000 or less. Last July, the House passed, by 231 to 191, a measure preserving the current $2.5 million cap. In December, the Senate countered with $750,000. With an election looming, the subsidy program nevertheless was left largely intact—and extended for the first time to fruit and vegetable growers. President Bush has threatened to veto the bill, but is likely to be overridden by politicians eager to pander to special interests.

Agricultural subsidies benefit some of America’s largest corporations and some of its wealthiest citizens at the expense not only of taxpayers, but of everyone who eats and consequently pays the higher food prices necessary to sustain a bloated, profligate farm program. These subsidies are pure pork.


William F. Shughart II is a Research Director and Senior Fellow at The Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.

Taxing ChoiceFrom William F. Shughart II
TAXING CHOICE: The Predatory Politics of Fiscal Discrimination
So-called “sin taxes”—the taxing of certain products, like alcohol and tobacco, that are deemed to be “politically incorrect”—have long been a favorite way for politicians to fund programs benefiting special interest groups. But this concept has been applied to such “sinful” products as soft drinks, margarine, telephone calls, airline tickets, and even fishing gear. What is the true record of this selective, often punitive, approach to taxation? Learn More »»






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