Republican and Conservative political analysis and commentary

Yesterday, the U.S. Senate rejected two amendments that would have placed limits on federal farm subsidies. The first bill would have closed loopholes that allowed individuals to recieve higher payments and would have limited annual payments to $250,000 from $360,000. The second bill would have banned payments to those make over $750,000 a year.

The problems inherent in the federal farm subsidy program earns this week's Friday Look.

We have this 19th century romanticized ideal in America of "a nation of farmers" who need government support to survive. The only problem is that it's a myth. This is the 21st Century and the average farmer doesn't live in poverty. 

Farm subsidies distort the market. Internationally, it drives down the world price of food and undercuts developing markets. Farming is the one area where the developing world has a comparative advantage, but they are unable to get a fair price against our subsidized crops. This hurts us domestically because, with limited international competition, prices are higher. Consequently, the poorest people in our country, whose largest percentage of their household budget is food, are hit the hardest.

To think of it another way, imagine the government subsidized computer production. Those computer manufacturers could now charge a much lower price on the world market and drive their competitors out of business. Once their competition was gone, they could charge higher prices; but just low enough to prevent competitors from effectively competing against them. A similar thing is happening in the world food market.

Another problem with farm subsidies is that  the money comes from taxpayers. Thus, the subsidies essentially work like a form of income redistribution that takes money from the federal taxpayer and gives it to the farmer (or farmland owner). That's money that could be better spent, such as retiring some of the national debt.

A third problem with farm subsidies is that the majority of the money doesn't go to the small farmer but to agribusiness. According to EWG's database, from 1995-2005 the top 10 percent of subsidy recipients recieved 73% of all subsidies. Farming today is big business. 

Now this is not to say that farmers should have no support. Family farmers have their own problems such as a lack of (or expensive) health insurance and threats of losing their farm from the Death Tax. Similarly, one poor crop yeild could put a family farm out of business. However, a policy such as government subsidized crop insurance would better serve these interests than a market distorting subsidy.

Also see:
City Slickers and Farm Subsidies 
Who Benefits from Farm Subsidies 
Agricultural Subsidies: Criticism