Simple reforms can still help farmers while reducing the burden on taxpayers.
The House farm bill, which could get voted on this week, shows a complete disregard for consumers and taxpayers. It ignores many common-sense reforms that have been pushed by the Trump administration, the Obama administration, the independent Government Accountability Office, and organizations across the ideological spectrum. And it would increase dependence on the federal government for a small number of primarily large farmers instead of allowing them to compete in the marketplace like most farmers.
It is first important to dispel a harmful myth: Farm subsidies don’t exist to help small family farms. In 2016, small family farms accounted for 90 percent of all farms but received just 27 percent of commodity payments and 17 percent of crop-insurance indemnities. In contrast, commercial farms, which include the largest family farms, accounted for just 10 percent of all farms, yet received 73 percent of commodity payments and 83 percent of crop-insurance indemnities.
The problem of farm subsidies’ going to the most prosperous farms is actually getting worse. According to a recent U.S. Department of Agriculture report, “In 1991, half of commodity program payments went to farms operated by households with incomes over $60,717 [in constant 2015 dollars]; however, in 2015, half went to households with incomes over $146,126.”
The median income for all U.S. households in 2015 was $56,516, meaning farm households receiving most of the commodity payments had incomes nearly three times the median household income.
We suggest four reforms to help create some common sense when it comes to farm subsidies. These reforms were all introduced as amendments to the House farm bill. Yet only the sugar-reform amendment remains, because the House Rules Committee decided against an open and transparent process, instead choosing to limit consideration of farm-subsidy amendments. Those pushing for farm-subsidy reform are winning the policy debates, so the only solution for special interests was to make sure these other reforms wouldn’t be considered.
1) Reduce taxpayer cost of crop insurance by reducing the premium subsidy. The Trump administration’s budget seeks to reduce the taxpayer share of crop-insurance premiums from 62 percent to a still-high 48 percent. The House Agriculture Committee’s farm bill ignores this sensible request. The Congressional Budget Office finds that a reduction to 47 percent (lower than in the Trump budget) barely reduces the amount of insured acreage, by 0.5 percent, while only 1.5 percent of the land would end up with lowered coverage levels. This would have almost no effect on farmers, yet the net effect on the taxpayer is undisputable, saving $8.1 billion over ten years.
The House should eliminate the egregious sugar program completely, but at a minimum some reform is a must. It’s quite shocking that in this country the federal government dictates how much sugar can be sold.
2) Limit eligibility for commodity subsidies to real farmers. For years, farm aid has famously benefited wealthy non-farmers. This bill opens up more abuse by expanding eligibility to cousins, nieces, and nephews of farmers, regardless of whether they live or even work on the farm. President Trump rightly seeks to limit the number of people who can claim to be actively engaged in farming and therefore eligible for farm subsidies.
3) Reform the federal sugar program. The House should eliminate the egregious sugar program completely, but at a minimum some reform is a must. It’s quite shocking that in this country the federal government dictates how much sugar can be sold. That’s exactly what this program does. As a result, food prices are higher than they otherwise would be. This program costs consumers about $3.7 billion per year, hurting the poor the most, since, compared with higher-income households, a greater share of their income goes to pay for food.
4) Cap the costs of the two major new commodity programs. The last farm bill created two new commodity programs, the Agriculture Risk Coverage and Price Loss Coverage programs. During the last farm-bill debate, the House overwhelmingly passed an amendment that capped the total costs of these programs to ensure that taxpayers wouldn’t have open-ended liability. If this cap had not been removed when the House and Senate worked out a final farm bill, it would have saved taxpayers about $14 billion over the first five years of the programs. A cap on these programs should be included in the new farm bill.
These reforms are common sense, and are widely supported. Only certain wealthy agricultural interests could possibly oppose such reasonable measures. By including these reforms, Congress would be demonstrating that farm policy benefits farmers, while also respecting the interests of taxpayers and consumers.
Stephen Moore is a distinguished fellow and Daren Bakst is the senior research fellow in agricultural policy for the Heritage Foundation.