Ending Farm Subsidies

January 8, 2014

There is more than just food stamps in the farm bill that needs to be reformed, says Matthew Mitchell, a senior research fellow at the Mercatus Center.

  • Eighty percent of farm bill spending is spent on food stamps, and much of the media attention has focused on that area.
  • However, the other 20 percent of the bill contains subsidies and price supports that do nothing but transfer money to wealthy farmers while raising grocery and tax bills for everyone else.

Farm household income exceeds average household income, and it has done so for the last 15 years.

  • In fact, the average farm household earns 53 percent more than the average U.S. household.
  • But on top of this, of the $17.5 billion that is paid to farmers annually, 80 percent of that goes to the wealthiest 15 to 20 percent of farmers.
  • According to a 2011 U.S. Government Accountability Office study, over 50 farms each received more than $500,000 in subsidies for crop insurance premiums.

The majority of economists object to these subsidies, and for good reason: there is no market failure that would justify the policies. Moreover, the farm bill policies create "deadweight losses," in which the cost of the policy on consumers exceeds the benefit conferred on the farmers.

  • Americans pay twice the amount that world consumers pay for sugar due to agricultural price supports.
  • Taxpayers pay $1.1 billion in loans to sugar producers annually.
  • Of those funds $600 million went to just three firms last year.

The farm bill generally packages these subsidies in the same bill as food stamps, and legislators are hesitant to vote against food stamps. Food stamps should be removed from the farm bill so that these price supports and subsidies can be eliminated.

Source: Matthew Mitchell, "Ending Farm Subsidies: Unplowed Common Ground," Mercatus Center, January 6, 2014.

 

Browse more articles on Tax and Spending Issues