The Corner

Abolish the Department of Agriculture

I have been writing for months about the Export-Import Bank being one of the worst crony programs in Washington. However, I think the programs under the Department of Agriculture may take the cake. I have written many times about the outrageous sugar program — a racket that protects a politically powerful cartel of domestic sugar-processing companies at the expenses of consumers and taxpayers. Then, there is awful ethanol program. We also have programs like the Dairy Margin Protection Program (DMPP) and the Dairy Market Stabilization program (DMS). DMPP effectively guarantees profits for dairy farmers and DMS is a complicated program meant to drive up milk prices to benefit small-scale dairy farmers.

But that’s just the beginning: There are many more insane programs within USDA. Reuters, for instance, recently reported on the department’s peanut programs. Here is a tidbit:

A mountain of peanuts is piling up in the U.S. south, threatening to hand American taxpayers a near $2-billion bailout bill over the next three years, and leaving the government with a big chunk of the crop on its books. … experts say it is the unintended consequence of recent changes in farm policies that create incentives for farmers to keep adding to excess supply.

And for those who do not believe that incentives matter, here is an example of the perverse consequences of the Washington’s intervention in the peanut business:

First, the U.S. Department of Agriculture (USDA) is paying farmers most of the difference between the “reference price” of $535 per ton (26.75 cents per lb) and market prices, now below $400 per ton. A Nov. 18 report to Congress estimates such payments this year for peanuts exceed those for corn and soybeans by more than $100 per acre. Secondly, government loan guarantees mean once prices fall below levels used to value their crops as collateral, farmers have an incentive to default on the loans and hand over the peanuts to the USDA rather than sell them to make the payments.

The peanut program sounds very much like the sugar program — perverse incentives and all. The government gives an incentive to peanut farmers to take on loans that they wouldn’t have to pay back if the price of peanuts fall under an arbitrary price set by politicians and bureaucrats in Washington. The result of this mad-scientist peanut plan is something like: Overproduce peanuts, depress peanut prices, don’t pay your loans, collect taxpayers’ money.

Through forfeitures, the USDA amassed 145,000 tons of peanuts from last year’s crop, its largest stockpile in at least nine years, according to data compiled by Reuters.#…#That stockpile is enough to satisfy the average annual consumption of over 20 million Americans – more than the population of Florida – and puts the administration in a bind. … As peanut carryover inventories are forecast to hit a record of 1.4 million tons by end-July 2016 and as loans begin to come due next summer, farmers are expected to fork over more peanuts to the USDA. …

Payments to peanut farmers could total between $960 million and $1.9 billion through fiscal 2018, according to estimates from the Congressional Budget Office (CBO) and USDA projections cited in the Congressional Research Service report.

Needless to say, it is time to abolish the peanut program. But while we are at it, we should abolish the Department of Agriculture entirely.

The whole thing is here.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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