May 20, 2013

May 20, 2013 | Factsheet on Agriculture

Farm Bill: Ripe for Reform

Time to Free Farmers and End Costly Depression-Era Subsidies

  • With budget deficits soaring, Congress should reduce unnecessary spending in the farm bill. The Congressional Budget Office estimates that direct spending under the Senate and House 2013 farm bills would be $955 billion and $940 billion for the 2014-2023 period, respectively.
  • Farm subsidies shift the costs of agricultural risk to taxpayers and entice farmers to take even greater risks. 
  • These subsidy programs hurt farmers by imposing contradictory policies that tie their hands and reduce their ability to utilize their land as they deem fit.  By allowing free markets to work, farmers and taxpayers can both benefit through less burdensome government intrusion into farm policy.
  • Crop insurance costs are skyrocketing.  From 2000-2006, the average annual cost to taxpayers for subsidizing crop insurance was $3.1 billion.  That cost is expected to grow to $8.9 billion from 2013-2022.
  • Unlike other farm programs that have subsidy caps, there is no limit on the amount of premium subsidies that farmers can receive under the crop insurance program.
  • While the House and Senate farm bills would, as of now, eliminate the direct payment program, new programs in both bills would likely negate any savings.   
  • The farm bill subsidies disproportionately benefit large and profitable businesses.  About 75 percent of large farms with incomes of $250,000 to $999,999 receive subsidies, compared to 24 percent of farms with incomes of $10,000 to $249,999.
  • About 61 percent of farms function without taxpayer subsidies.

Tariffs, Mandates, and Quotas Increase Food Prices

  • Americans pay two to four times higher prices for sugar than consumers in other countries as a result of government “protections” for the sugar industry, including quotas and tariffs.
  • Consumers pay hundreds of millions of dollars more for milk, butter, cheese, and a variety of other dairy products because of government-imposed artificial limits on dairy production.
  • Biomass subsidies to promote “renewable” fuels divert corn supplies from food manufacturing to ethanol production and displace soybeans and other crops, thereby propelling food prices upwards.
  • The increases in food prices fall most heavily on the poor.

A Path for Reform

  • Meaningful reform requires lawmakers to consider food stamps and other nutrition programs in separate legislation from farm programs.  This would allow policymakers to give the proper attention to each and not force distinct issues into one cluttered bill.  
  • Food stamps should be reformed along the lines of other modern welfare programs (such as Temporary Assistance for Needy Families) within the Department of Health and Human Services.
  • Congress should begin the process of fully eliminating farm subsidies by restricting eligibility and imposing income limits and subsidy caps.
  • The repeal of flawed farm policy such as direct payments should not be offset by the creation of new “safety net” programs, such as the proposed “shallow loss” and price loss coverage programs.
  • Farmers already have a variety of private-sector options to mitigate agriculture risks, including diversifying product lines, leveraging assets, and maintaining cash reserves.

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