Farm Subsidies: Inexcusable Waste

March 20, 2013

Subsidies are typically economic assistance or tax benefits for businesses and industries to support their growth and limit their decline. Agriculture subsidies for farmers were introduced in the 1930s to help struggling small family farms. Today, they represent a form of corporate welfare that must be eliminated, says Veronique de Rugy, a senior research fellow at the Mercatus Center.

  • On January 2, the same day President Obama signed the fiscal cliff deal, he also extended a 2008 farm bill another nine months that rewards wealthy dairy farmers with milk subsidies.
  • The Department of Agriculture spent $22 billion on subsidy programs in 2012, though only 2 percent of Americans are directly engaged in farming.
  • An average farm household earned $84,400 in 2010, already above the average nationwide household income.

Most subsidies go to only a handful of farmers who produce wheat, corn, soybeans, rice and cotton.

  • The Environmental Working Group reports that since 1995, just 10 percent of subsidized farms --the largest and wealthiest operations -- have raked in 74 percent of all subsidy payments.
  • Sixty-two percent of farms in the United States did not collect subsidy payments.
  • In 2011, more than $4 billion was spent on direct payments to farmers through a temporary initiative in 1996 that is still around.
  • In 2010, roughly 90,000 direct payments went to wealthy investors or absentee landowners.

Efforts to end farm subsidies have been politically unsustainable. If direct payments are eliminated, as some members of Congress are now proposing, it is likely that crop insurance will expand to compensate farmers for their loss. Crop insurance guarantees farmers against poor yields or declining prices and the government pays about 66 percent of the premiums at a cost of $7 billion annually.

  • In addition to direct payments and crop insurance, farmers also receive price support loans for marketing, conservation subsidies that pay farmers not to farm and export subsidies that aid farmers in foreign sales.
  • Subsidies are also combined with import quotas to create industries whose products are more expensive than world prices.
  • Large amounts of farm land are rented to young farmers who incur a higher cost of renting and buying due to subsidies.

Farm subsidies are a massive waste of taxpayer dollars and hurt the poor while benefiting the rich.

Source: Veronique de Rugy, "Farm Subsidies Must Die," Reason Magazine, March 12, 2013.

 

Browse more articles on Tax and Spending Issues