The farm bill going through Congress right is sold, as always, as a “fiscal responsibility” bill. If you read the headlines or press releases about the farm bill, you would think that the spending is being cut in half and that all subsidies are terminated. Nothing is further from the truth, of course. Here is the Senate version of the bill.
Deep cuts? The Senate farm bill would “reduce” the deficit by $23.6 billion over 10 years. Let’s put this number in perspective: This year alone, the Department of Agriculture (USDA) spends over $20 billion in subsidies to farmers and the USDA will spend over $150 billion in total. Needless to say, this farm bill’s $2.3 billion in savings a year doesn’t impose deep cuts or isn’t fiscally responsible at all.
It is a shame because farm subsides are yet another example of the bipartisan cronyism that infects Washington. As I explained this morning in my piece for the Washington Examiner, there is no justification for extending our current regime of agricultural subsidies as they are have become poster child for government welfare to the affluent.
Farm households have higher incomes, on average, than do nonfarm U.S. households. Figures from the USDA show that in 2010 the mean farm household income was $84,400, up 9.4 percent from 2009. This is 25 percent higher than the average U.S. household income of $67,530 as reported by the Census Bureau for 2010.
Second, farm subsidies tend to flow toward the largest and wealthiest farm businesses. According to the Environmental Working Group database, in 2010, 10 percent of farms received 74 percent of all subsidies. These recipients are large commercial farms with more than $250,000 in sales and mostly produced crops tied to political interests. The Cato Institute’s Tad DeHaven and Chris Edwards calculate that more than 90 percent of all farm subsidies go to farmers of just five crops — corn, wheat, soybeans, rice and cotton. For every federal dollar spent on farm subsidies, 19 cents goes to small farms, 19 cents to intermediate (middle-income) farms and 62 cents to the largest commercial farms.
I also mention that these subsidies are in complete contradiction of other programs supported by the USDA. Think about this, on one hand USDA administers some $80 billion in food stamps supposedly to help with the high cost of food, while pushing policies that maintains the price of food, such as sugar, artificially high by imposing U.S. import quotas and a no-recourse loan program. It is common in Washington of course, but crazy nonetheless.
But that raises another question: why are food subsidies housed in the USDA? They represent 74 percent of the Department’s budget (see USDA FY2012 budget p. 2). By contrast, farm programs account for $22 billion of the $151 billion agriculture spending. Food subsidies should probably be transferred to the Department of Health and Human Services (better suggestions are welcomed) and undergo serious reforms on their way there.
Now that being said, if Congress wants to be fiscally responsible, it should also abolish all farm subsidies and terminate the various policies that protect farmers from competition. End this cronyism already.