May 8, 2002

May 8, 2002 | Commentary on

Saving the Poor Rich Farmers

They may call it "farm legislation." In reality, what Congress is sending President Bush amounts to a new welfare bill -- and one with a hefty price tag.

Once it's signed by the president, it will, along with last year's crop insurance bill, provide farmers with a record $191 billion in direct federal subsidies over the next decade. (And that's the least it would cost. New government estimates show the total could be much higher.)

But that isn't the only expense. The bill continues several price-support programs that greatly inflate certain food prices. These programs would cost consumers $271 billion, bringing the total cost of farm policy to $462 billion. That's more than what Congress expects to spend on K-12 education and environmental protection -- combined -- over the next 10 years. That breaks down to an average of nearly $4,400 per tax-paying household.

Worse, two-thirds of all farm subsidies go to large farms and wealthy agri-businesses, most of which earn more than $250,000 a year. Among the landed gentry on the agriculture dole: 14 members of Congress, 15 Fortune 500 companies, and celebrities such as Sam Donaldson and Ted Turner. These mega-corporations and multi-millionaires will rake in as much as 160 times the median annual farm subsidy of $935.

In fact, recent studies by the government's own auditors have shown that farm subsidies are America's largest and most expensive corporate welfare program.

Why have farm subsides grown so much -- from $6 billion in 1996 to $30 billion in 2000? Because of how they were designed. Farm subsidies are supposed to compensate farmers for low prices caused by overproduction, but to receive more subsidies, farmers must plant more crops. This leads to more overproduction, which drives prices down further and induces calls for even larger subsidies.

Then, while paying these farmers to grow more crops, the federal government turns around and pays other farmers not to farm 40 million acres -- the equivalent of idling every farm in Ohio, Indiana, Michigan and Wisconsin.

American consumers get stuck with the bill, of course. They're forced to shell out as much as three times the market price for some foods and foot the bill for export subsidies so that consumers in other countries can buy our food for less than Americans themselves pay.

Perhaps the most nonsensical of all farm programs is the federal dairy program. In the 1930s, when most of the nation's milk was produced in the Midwest, policymakers worried that milk would spoil during the long train ride to the coasts. So to encourage milk production on the coasts, Congress mandated that the price dairy farmers receive (and consumers pay) would be fixed at levels that increased the further away you got from Eau Claire, Wisconsin.

Today, however, the dairy capital of America is California, not Wisconsin. Milk no longer travels cross-country by train, and 70 years of technological innovation have decreased travel times by leaps and bounds. Yet this Depression-era policy still adds as much as 20 cents to the price of a gallon of milk.

Advocates of the current farm bill say they're just trying to help struggling family farmers. But they could do that far more cheaply. Congress could guarantee every full-time farmer a minimum income of 185 percent of the federal poverty line ($32,652 for a family of four) for "only" $4 billion per year -- one-fifth the cost of direct subsidies in the new bill.

So why would lawmakers, who are already having a tough time funding the war on terrorism, homeland defense and the exploding costs of Social Security and Medicare, throw so much money at counterproductive farm subsidies for people who don't need them? Because most House members have at least one major crop in their district grown by farmers who vote, and control of the Senate (which over-represents rural populations) will depend on several close races in farm-heavy states.

In that context, farm subsidies represent little more than political payoffs, with both parties bidding for the "farmer's friend" label heading into the November elections. No one -- including President Bush, who has promised to sign the bill -- is putting sound policy before irresponsible politics. If the president fails to veto it, we'll know that his talk of restoring fiscal sanity to Washington is nothing more than talk.

Brian Riedl is the Grover M. Hermann fellow in federal budgetary issues at The Heritage Foundation (, a Washington-based public policy research institute.

About the Author

Brian M. Riedl Grover Hermann Fellow in Federal Budgetary Affairs
Thomas A. Roe Institute for Economic Policy Studies

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