At a time when there seems to be wide disagreement about almost every issue, there’s wide bipartisan support for one very important issue: Congress should reform the out of control and outdated farm handout system.
Numerous organizations, across the ideological spectrum, are aggressively trying to change the status quo of agricultural handouts, because, among many other things:
The handout system is anti-market and pro-crony. By and large, the $15 billion taxpayer-funded safety net is primarily concerned with insulating agricultural producers from the same ordinary business risks that a mom-and-pop shop has to deal with on a daily basis.
No crop losses are required. The safety net doesn’t even require crop losses. The “safety net” is just a façade to funnel as many handouts to agricultural producers as possible when producers don’t meet revenue targets.
Most subsidies go to the largest producers. Agricultural subsidies go to a small number of producers, primarily the largest producers. Commercial farms, which are 10 percent of all farms (including the largest farms), received 70 percent of government commodity payments in 2015 and 78 percent of federal crop insurance indemnities.
Most subsidies go to a small number of farmers growing a handful of commodities. Most farmers don’t even receive subsidies and most subsidies go towards growing a small number of commodities. For example, based on 2015 payments for the two largest commodity programs (Agricultural Risk Coverage and Price Loss Coverage), 95 percent of the payments went to just five commodities (corn, peanuts, rice, soybeans, and wheat).
Farm households make much more than non-farm households. While the agricultural special interests talk about struggling farmers, farm households consistently have greater income and wealth than non-farm households. Looking at midsize farm households in 2015 (only the smallest commercial family farms), their median income was triple the median income of all U.S. households and their median wealth was 26 times greater!
The agricultural special interests certainly don’t want Americans to know:
• American taxpayers have paid $800 million to the Brazilian cotton industry in recent years to settle a longstanding dispute with Brazil over U.S. trade-distorting cotton subsidies.
• The federal sugar program drives up prices for consumers by as much as $3.5 billion a year and hurts the sugar-using industry, potentially costing jobs.
• Many of the programs are duplicative with commodities that receive payments from the two largest commodity programs also getting assistance from the taxpayer-subsidized federal crop insurance program. Agricultural special interests can’t even be satisfied with one handout program per commodity.
If all of this wasn’t bad enough, the subsidies act as barriers to entry for people trying to get into farming by driving up land prices. They encourage producers to make planting decisions based on maximizing subsidies, not responding to consumer demand. They also discourage innovation and private risk management.
Given all of these problems, it’s easy to see why so many diverse organizations consider changing the status quo to be a major priority. It will be a tough fight because agricultural special interests and their handouts are well-entrenched; they are the proverbial swamp that must be drained.
This fight though is necessary. Taxpayers and consumers deserve a common sense system that at most provides farmers assistance when they experience major crop losses, such as from droughts or floods. Our nation’s farmers and ranchers deserve a system that doesn’t insult them as being inferior business people. Only Congress doing the right thing will put an end to this web of handouts and favored treatment for a bunch of special interests.
This commentary was co-authored by:
H. Sterling Burnett, Ph.D.
Managing Editor, ECN
William M. Christian
Director of Government Affairs
Citizens Against Government Waste
Heritage Action for America
R Street Institute
VP of Government Affairs
The Club for Growth
Senior Policy Analyst
Taxpayers for Common Sense
Campaign for Liberty
Federal Affairs manager
National Taxpayers Union
Taxpayers Protection Alliance
*The opinions expressed in this commentary are those of the authors alone and do not necessarily represent the views of organizations with which they are associated.