Economy & Business

Congress Finds Bipartisanship in Farm Welfare

A combine harvester in a wheat field in Dixon, Ill., in 2013. (Jim Young/Reuters)
Where is gridlock when you need it?

Who says bipartisanship in Washington is dead? Republicans and Democrats have once again unified in support of shoveling $20 billion in annual subsidies to wealthy agribusinesses. A House–Senate conference committee is expected to finish the latest farm-bill reauthorization within the next month. And while the legislation is currently bogged down by partisan disagreements over its welfare benefits for low-income families (SNAP, or food stamps), the welfare benefits for large corporations are enjoying a bipartisan lovefest. Indeed, corporate welfare was the glue that held the legislation together through its initial passage in the House and Senate.

Which is a shame, because farm subsidies are simply the most illogical, destructive, and incoherent waste of money in the federal budget. These massive special-interest handouts survive on several arguments straight out of the 1930s.

The first argument from subsidy defenders is that subsidies keep small, struggling family farmers afloat. Norman Rockwell imagery aside, farm subsidies are America’s largest corporate welfare program. By purposeful design, most farm welfare goes to the largest 10 percent of farms — the commercial farms whose owners report a median household income of $200,000 and a median household net worth of $2.8 million. Small farms not only receive few subsidies, but they are actively harmed by the rising land prices and industry consolidation that results from Washington subsidizing their larger, wealthier competitors.

Over the past few years, the farm economy has cooled off from the historic boom that prevailed earlier in the decade. Yet farmers’ incomes still far exceed the national average (despite often living where the cost of living is lower), the farmer poverty rate is just 2 percent (compared with 14 percent across the economy), and farm debt-to-asset ratios are healthier than those in most industries. Farm subsidies today are distributed to large agribusinesses, celebrity hobby farmers, members of Congress, and even wealthy Beverly Hills and Manhattan families who passively own farmland elsewhere.

The second argument is that subsidies are necessary to shield farmer income from weather and crop unpredictability. This is also not true. Households working smaller, non-commercial farms receive an average of 92 percent of their income from non-farm sources, and the volatility of the remaining 8 percent can be addressed with crop insurance. Households operating large commercial farms — which collect the bulk of the subsidies — earn incomes averaging $200,000 per year even when including the lean years. Those households can flatten the yearly peaks and valleys with basic (unsubsidized) crop insurance, as well as futures and options markets. And even if we accept this point for the sake of argument, the current policy of giving annual large subsidies to farmers even in the good years makes no more sense than sending each family an annual homeowners’ insurance check even in the years with no damage claims.

Next, defenders argue that farm subsidies allow the farm economy to produce cheap, domestic food. In reality, more than 85 percent of all direct subsidies are allocated to just six crops: wheat, cotton, corn, soybeans, rice, and peanuts. By contrast, producers of fruit, vegetables, beef, poultry, and pork have managed to survive without significant direct subsidies. And the U.S. continues to be a strong net exporter of food. There is no threat of losing our domestic food supply.

For every farm policy, there is an equal and opposite policy. Commodity programs incentivize farmers to plant more crops, while conservation programs pay the same farmers to plant fewer crops. Government subsidies for crop insurance have been shown to encourage farmers to “farm their insurance” by taking unnecessary risks, skimping on crop protections, and planting on poor-quality land under the knowledge that any crop failures will be bailed out. These crop-insurance payouts are often duplicated by disaster-aid payments.

Nor does U.S. farm policy save consumers money. The percentage of family income spent on food has fallen to 10 percent, and crop prices are just one of many factors affecting food prices. Furthermore, conservation programs, import restrictions, and a host of other policies raise the prices of several foods. Thus, studies show that eliminating most farm policies would not hit American consumers in the pocketbook.

When the case for farm subsidies collapses, defenders typically offer the final justification that $20 billion in farm welfare is less than 1 percent of the $4 trillion federal budget, and thus not worth the trouble of eliminating. But with 83 percent of all federal spending going to Social Security, Medicare, antipoverty programs, defense, veterans’ benefits, and interest on the debt — and with the costs of these top-priority programs rising — farm subsidies provide low-hanging fruit for savings within the remaining 17 percent of the budget. That is, unless lawmakers would rather eviscerate remaining programs such as homeland security, infrastructure, health research, education, military retirement, and national parks. And really, even $1 is too much for corporate welfare that serves no public purpose.

However, Congress is intent on keeping the gravy train rolling. Republicans support farm socialism because they depend on the votes of rural America. Democrats go along because the same legislation authorizes $70 billion in annual food-stamp spending. President Trump’s tariffs are denting farmer incomes and thus creating additional momentum for subsidies.

So, with a budget deficit approaching $1 trillion, Republicans and Democrats will continue to come together in bipartisan support of welfare for rich agribusinesses. Where is partisanship and gridlock when you need it?

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