NCPA - National Center for Policy Analysis


October 24, 2007

These are good times for American farmers, says the Washington Times.  Net farm income in 2007 will be more than $87 billion, a record, according to the Agriculture Department's latest projections.  And in 2006, the average farm household already earned $80,000, about 20 percent more than the average non-farm family.  The boom is driven not only by federal subsidies for corn-based ethanol but also by strong demand for U.S. farm products overseas.  The prices of corn, cotton, soybeans, wheat and rice are on the rise, as are farmers' land values.

It would seem an opportune moment finally to phase out the costly and irrational system of federal subsidies that props up the farm sector -- all in the name of a "safety net" for beleaguered yeomen, of course, says the Times.  A disproportionate share of the dollars goes to a relative handful of agribusinesses:

  • In 2005, 9 percent of farms received 54 percent of all farm program payments, and the operators of those farms had an average household income of $200,000.
  • Among the many perverse effects of this corporate welfare program are the distortion of international trade and a loss of U.S. influence in global tariff-reduction talks; environmental damage from subsidized farming of marginal croplands; and a transfer of income from middle-class Americans to well-off ones.

An alternative exists, in the form of a bill being prepared by Sens. Richard G. Lugar (R-Ind.) and Frank R. Lautenberg (D-N.J.).  Their proposal would replace the existing array of subsidies for favored commodities with government-funded crop insurance that would cover all farms and ranches, whether they grow strawberries or soybeans.  Farmers would get paid if, but only if, their incomes in a given year dropped at least 15 percent below the previous five years' average in their respective counties.

Source: Editorial, "Plowing Old Ground: Congress gets ready to flub farm subsidy reform again," Washington Post, October 23, 2007.

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