Fewer than two percent of Americans farm for a living, and only a third of those farmers receive subsidies. Yet the interests of subsidized and protected farmers dominate every farm bill discussion in Washington. The broader interests of the United States and the other 98 percent of Americans are systematically ignored.
The biggest losers from U.S. farm policy are taxpayers. From 2000 to 2005, Congress spent an average of $17 billion a year in direct payments to farmers. That’s real money, even in Washington. Most of those payments did not go to small “family farms,” but to large operations and agribusinesses, including some Fortune 500 companies. Indeed, according to the Environmental Working Group, the top 10 percent of recipients collected two-thirds of the payments on offer, and the top 5 percent collected 55 percent.
Trade barriers and domestic price supports also force tens of millions of families to pay higher food prices. According to the Organization for Economic Cooperation and Development, U.S. farm programs transferred an average of $10.5 billion a year from U.S. food consumers to producers from 2003 through 2005. That amounts to an annual food tax of $140 for a family of four — a regressive tax that falls most heavily on poor families that spend a larger share of their budgets on food.
Artificially high food prices also drive up production costs for the U.S. food processing firms, reducing their competitiveness and jeopardizing jobs. A recent report from the U.S. Commerce Department shows that import quotas have cost thousands of American jobs in sugar-using industries. Tens of thousands of U.S. bakeries, restaurants, and other businesses suffer lost sales and reduced profitability because of artificially high prices they must pay for food commodities.
Overproduction caused by farm subsidies also harms the environment through increased soil erosion, overuse of pesticides and fertilizers, “dead zones” in the Gulf of Mexico, and the waste of fresh water resources.
Moreover, none of these programs has delivered the “rural development” that every farm bill promises. In fact, farm payments have sapped vitality from rural communities by consolidating production in a few capital-intensive commodities, slowing growth and job creation. An analysis by a center at the Federal Reserve Bank of Kansas City found that, within U.S. counties, “[farm] payments appear to be linked with subpar economic and population growth.”
Abroad, U.S. farm programs drive down global commodity prices by blocking imports and promoting overproduction, hurting some of the world’s poorest farmers, perpetuating poverty, and needlessly creating ill will toward the United States. They have also proven to be a stumbling block in World Trade Organization negotiations, complicating the task of opening global markets not only to U.S. farm exports but also to manufacturing and service-industry exports.
Farm producers claim we must hold on to our subsidies and trade barriers as bargaining chips. To open our farm market before other countries open theirs, they say, would be “unilateral disarmament.” But U.S. farm programs are not an asset, they’re a liability: a ball and chain costing the U.S. economy billions of dollars a year. Congress should reduce farm subsidies and trade barriers regardless of what other countries do. We do not need a permission slip from abroad before we enact reforms that promote our own national interests.
Earlier House Agriculture Committee hearings featured a handful of non-farm-sector witnesses, but the lopsided lineups help explain why farm bills remain essentially of the farm lobby, by the farm lobby, and for the farm lobby.
With midterm elections approaching, and phrases like “special interests” back in circulation, congressmen should remember who they were really elected to serve.
— Daniel Griswold is director of the Center for Trade Policy Studies at the Cato Institute in Washington, D.C., and co-author of the Cato study, “Ripe for Reform: Six Good Reasons to Reduce U.S. Farm Subsidies and Trade Barriers.”