NCPA - National Center for Policy Analysis


January 31, 2006

In 2006, Congress will begin writing a new farm bill to replace the protectionist and subsidy-laden 2002 legislation that is set to expire in 2007. Congress should seize the opportunity to do ourselves a big favor by eliminating farm subsidies and trade barriers, a change that would benefit all Americans in six important ways, say observers.

Rescinding farm subsidies will:

  • Lower food prices for American families; if American farm subsidies and trade barriers were significantly reduced, millions of American households would enjoy higher real incomes.
  • Lower costs and increased exports for American companies; when government intervention raises domestic prices for raw materials and other commodities, it imposes higher costs on "down-stream" users in the supply chain.
  • Increase budget savings and equity for U.S. taxpayers; the Office of Management and Budget estimates that taxpayers shelled out an expected $26 billion in direct agricultural subsidies in fiscal year 2005.

Other benefits include:

  • More environmentally friendly land use; a central if unstated purpose of American farm policy is to promote production of commodities that would not be economical under competitive free market conditions which often means emphasizing crops better grown elsewhere, requiring more chemical assistance.
  • Larger markets for U.S. farmers and economic diversity for rural America; if the United States rescinded farm subsidies, the result would be a surge of innovation, productivity, and output.
  • A more hospitable world; the collective effect of American farm policies is to depress the income of agricultural producers worldwide, exacerbating poverty in areas, such as sub-Saharan Africa and Central Asia, where people are heavily dependent on agriculture.

Source: Daniel Griswold, Stephen Slivinski and Christopher Preble, "Six Reasons to Kill Farm Subsidies and Trade Barriers: A no-nonsense reform strategy," Reason, February 2006.


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