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March 20, 2008

Old McDonald Had a Scam

By

Should Taxpayers continue subsidizing millionaires? That's the question Congress is mulling over as it considers reauthorizing farm subsidies doled out by the Department of Agriculture.

The agriculture budget totals $25 billion - more than we spend on the Office of Elementary and Secondary Education. Farm subsidies are typically portrayed as a vital lifeboat for small, struggling family farmers. It's a feel-good, Norman Rockwell image. Yet farms have come a long way since subsidies were introduced as a temporary solution to alleviate the effects of the Great Depression. Today, the average farm household earns $81,420 annually and has a net worth of $838,875 - both well above the national average. Farm incomes are setting records, and farms have one of the lowest failure rates of any industry.

Although most farmers generally are thriving, it's the wealthiest who benefit most from subsidies. And why not? Federal farm policy deliberately targets them for assistance. Payments are based on acreage, so the largest agribusinesses automatically get the largest subsidies. Consequently, commercial farmers, who report an average income of $200,000 and net worth of nearly $2 million, now collect the majority of farm subsidies, while small farmers are largely excluded. This has earned farm subsidies the title of America's largest corporate welfare program.

President Bush has proposed limiting farm subsidies to those earning less than $200,000 annually. Yet many in Congress are strongly resisting. The House-passed farm bill would allow subsidies for full-time farmers earning up to $1 million annually. Even that's too restrictive for the upper chamber. The Senate-passed bill refuses any income test for full-time farmers.

The status quo has benefited the rich and well-connected. The Environmental Working Group's farm subsidy database reveals that, from 1995 to 2005, farm subsidies have been distributed to Fortune 500 companies such as John Hancock Life Insurance ($2,849,799) and Westvaco ($534,210); as well as celebrity "hobby farmers" such as David Rockefeller ($553,782), Ted Turner ($206,948), and former NBA star Scottie Pippen ($210,520). Subsidies even flow to members of Congress who vote on farm legislation, such as Senator Charles Grassley, Republican of Iowa ($225,041), and Representative John Salazar, Democrat of Colorado ($161,084).

You don't see many farms in Boston, nowadays. Yet Boston "farmers" received $643,464 in farm subsidies between 2003 and 2005.

Although no income-eligibility test exists for full-time farmers, limits do exist on how much subsidies a farmer may receive annually. However, an industry of lawyers exploits loopholes, rendering these limits meaningless. Farmers can simply divide their farms into numerous separate entities and then collect subsidies for each farm.

For example, The Washington Post reports that Tyler Farms in Arkansas has collected $37 million in farm subsidies since 1996 by dividing itself into 66 legally separate corporations. Other farmers evade payment limits by signing up family members, such as the Georgia farmer who reportedly collected thousands in additional subsidies by listing his 2-year-old daughter as a co-farmer.

Instead of closing these loopholes, the House- and Senate-passed farm bills go in the opposite direction: They simply repeal the limits on the total farm subsidies a farmer may receive. This would tilt the system even further toward large agribusinesses.

It gets sillier. Most subsidies are based on land's historical use, even if no longer used for farming. So when 75 acres of Texas farmland was recently converted into a housing development, the homeowners on these $300,000 properties became eligible for annual farm subsidies for their lawns. Residents never asked for these subsidies and have stated that as nonfarmers they do not want the government mailing them checks.

Small farmers are harmed the most by farm subsidies. Excluded from most subsidies, they must endure the lower crop prices, higher farmland costs and industry consolidation that result from subsidies to agribusiness.

Congress gets one opportunity every five years to modernize farm policies. Instead of continuing to subsidize millionaires and agribusinesses, lawmakers should target the truly needy by limiting subsidies to low-income farmers, and by enforcing real caps on the amount of subsidies a farmer may receive.

Alas, such proposals face strong opposition from the House and Senate agricultural committees, the same lawmakers who are trotting out the Norman Rockwell, family farmer imagery.

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Roe Institute for Economic Policy Studies at The Heritage Foundation (heritage.org).

First appeared the Boston Globe

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