Tag: agriculture

USDA’s Budget Boom

Spending at the U.S. Department of Agriculture will be an estimated inflation-adjusted 43 percent higher this year compared to just a decade ago. The following chart shows the dramatic rise in USDA spending from fiscal 1970 to the president’s projection for fiscal 2011:

Most folks probably think of farm subsidies when they think of the USDA. However, farm programs only account for 19 percent of total USDA outlays. The vast majority of USDA spending, 69 percent, goes to food subsidies: food stamps, school breakfast and lunch programs, and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). In fact, spending on food stamps alone this year will account for roughly half of total USDA spending.

Why aren’t these programs housed at the Department of Health and Human Services, the government’s chief welfare bureaucracy? The answer is politics, of course. Every five years or so Congress passes a new “farm bill,” which updates or sets the agenda for USDA programs and policies. Stuffing welfare programs in with traditional farm subsidies engenders broad legislative support for the total legislative package. Including food subsidies helps secure votes from urban and suburban legislators who would otherwise have little or no incentive to vote for farm subsidies.

See here for more on downsizing the Department of Agriculture, including both farm and food subsidies.

The Real Scandal of Farm Subsidies

When the Washington Post published a story in 2007 about how dead farmers had received farm subsidies to the tune of over $1bn, most people were horrified (even “farm subsidy moderate” Rand Paul thought they should go!). Although the article made clear that “most estates are allowed to collect farm payments for up to two years after an owner’s death,” and that the payments weren’t necessarily fraudulent, outrage ensued.

But a follow-up investigation by the USDA has found that all but about $1 million of the payments were completely above board. From the Associated Press:

A 2007 report that the federal government had paid $1.1 billion in subsidies to dead farmers sparked an outcry and has been frequently cited by critics who considered the payments a blatant example of wasteful spending. But a follow-up that found no fraud and determined nearly all the subsidies paid on behalf of dead farmers in recent years were proper has received little attention.

According to the U.S. Department of Agriculture’s Farm Service Agency, just a little over $1 million out of the billions of dollars paid in subsidies in 2009 went to estates or business entities that weren’t entitled to them.

Very little money is going to individuals who have not earned that money. Very little is being paid in error because a farmer has passed away,” FSA Administrator Jonathan Coppess told The Associated Press. [emphasis mine]

Don’t you just love how Mr Coppess uses the word “earned” there?

That’s the real scandal of farm subsidies, readers. Not that they are fraudulent (although that is of course an outrage), but that they are, for the most part, perfectly legal.

RSC Silent on Farm Subsidies

Confirming my ongoing skepticism about the committment of self-identified fiscal conservatives, especially when it comes to cuts to programs that benefit their constituencies, Politico last night posted an excellent story about the Republican Study Committee’s silence on farm subsidies:

Net cash farm income for 2010 is projected to finish near $92.5 billion — a 41 percent increase even after subtracting payments from the government. Yet conservatives are almost tongue-tied, as seen last week with the Republican Study Committee’s proposal to eliminate relatively modest subsidies for an organic food growers program without mentioning the nearly $5 billion in much larger government direct payments to farm country — including to the home districts of many of the RSC’s members.

Indeed, 24 of the RSC’s estimated 165 members hail from the House Agriculture Committee, and total annual direct payments to their districts run more than $1.09 billion a year, according to a POLITICO review of data compiled by the Environmental Working Group.

Farm groups aren’t exactly in a rage to offer up their programs for reform, but the National Association of Wheat Growers at their winter board meeting last week gave us plenty of evidence, as if more were needed, that support for the status quo is solid. An interesting nuance is their argument that, if they do “contribute” to deficit reduction, they won’t be “giving” more than anyone else, thank you very much:

NAWG supports the policy that if federal agriculture programs are subject to budget cuts to achieve deficit reduction, then the same percentage of cut should apply to all federal government programs.

While I might think that almost all areas of the federal budget need be cut, I just don’t buy the argument that farm subsidies are no more damaging, and therefore shouldn’t be cut more, than any other areas of government intervention. The federal government, in my opinion, has a role to play in limited and defined areas of public life.  I strongly disagree with the NAWG’s implication that farm subsidies are just as important/necessary as, say, public funding for national defense or for the control of infectious disease.

Surprise, Surprise

Last year I wrote about the intriguing proposal by the North Dakota Farm Bureau to do away with federal farm subsidies. I expressed at the time my doubt that the proposal would find much traction with the national American Farm Bureau Federation and, indeed, the group voted yesterday (at their annual conference in Atlanta) against the milder proposition to cut direct payments – the approximately $5.2 billion per year of your money that flows to farmers regardless of what, or even whether, they farm. Those payments are becoming increasingly politically contentious at a time of growing unease about record deficits, and some farm groups had said defending (let alone receiving) them was a threat to farmers’ broader interests.

Well, despite some discord among the group, the AFBF – you’ll be shocked, shocked to hear – voted largely for the status quo. From Brownfield (in an article that contains interesting analysis of how support for various programs breaks down on state/regional lines):

By a comfortable margin, the delegates passed a resolution calling for ‘a strong and effective safety net that consists of direct payments, crop insurance and a simplified Average Crop Revenue Election (ACRE) program.

Hopefully Congress can prove me wrong and cut farm subsidies when the farm bill comes up for renewal in 2012.

Post-Election Outlook: Agriculture Edition

My colleagues have done a thorough job of analyzing the policy implications of Tuesday’s federal election outcome as it affects trade policy, health care, immigration, education, and the scope and size of government generally (more here on federal spending). Most of them are cautiously optimistic that a Republican-controlled House is good news for liberty-minded folk. Let’s hope so.

Unfortunately, there are fewer obvious reasons for optimism that Tuesday’s result will mean big changes in agricultural policy, a depressingly bipartisan area of federal intervention. Even Rand Paul, the poster child for the Tea Party, expressed “moderate” views on farm subsidies during his campaign.

On the positive side of the ledger, our friends at the Environmental Working Group make the excellent point that being a friend of Big Farming was not enough to shield many Democrats from defeat. Earl Pomeroy (D, ND) represents the congressional district that ranks Number One in farm subsidy receipts (now there’s a source of pride!) and even he got the boot. As did Senator Blanche Lincoln, chairperson of the Senate Agriculture Committee and shameless architect of a bailout package for farmers that was funded we-don’t-exactly-know-how. At least 15 (possibly 16 if Rep. Jim Costa (D., CA) loses his too-close-to-call race) Dem members of the House Agriculture Committee — friends of the farmer all — are now looking for work. In other words, support for Big Ag is not a sufficient shield.

On the other hand, it’s not clear that their replacements are an improvement as far as agriculture policy is concerned. With a new farm bill due to be written in 2012 (although soon-to-be-former House Agriculture Committee chairman Collin Peterson (D., MN) was trying to get that ball rolling earlier), it is not certain that the fiscal conservatism exhibited during most Republicans’ campaigns extends to farm policy. Indeed, probable new House Agriculture Committee chairman Frank Lucas (R., OK) has said he disagrees with getting rid of the fiscally offensive (but less trade-distorting) direct payments that flow to farmers regardless of what, or even whether, they farm.  That was an area of reform that Collin Peterson was at least willing to look at. (More on the implications for direct payments here).

Chuck Abbott, agriculture reporter for Reuters, has more analysis on the outlook for farm policy. His is a more optimistic take, and I hope he’s correct. For my part, my skepticism is based on statements such as those by the CEO of the Renewable Fuels Association, speaking on a conference call yesterday:

[F]or the most part those that may have been defeated were replaced with equally strong advocates for value added agriculture and ethanol. Does anyone believe that Kristy Noem (R-SD) will not be a strong voice for ethanol?

Exactly. The fight’s not over yet, folks.

Good Time to End Farm Subsidies

The Wall Street Journal reports that the agricultural sector is recovering nicely from the recent recession while the rest of the private sector continues to struggle. The counter-cyclical nature of some farm subsidy programs means that the taxpayer bill for the year could be cut in half to only about $12 billion.

From the article:

For many crops, prices are climbing even as big harvests pile up, a rare combination. Farmland values are up while those for some other kinds of real estate languish. Debt on the farm is manageable. Incomes are rising.

And trade, of which many Americans are growing wary, is for agriculture a boon. Asia’s economic vigor and appetites make the farm sector’s reliance on exports—once thought a vulnerability in some quarters—a plus today.

“The farm economy is coming out of the recession far faster than the general economy,” said Don Carson, a senior analyst.

The WSJ article also notes that farmers will still receive direct payments of about $5 billion for basically just being farmers. This subsidy is particularly insulting to taxpayers as the program was created in 1996 to help wean farmers off of subsidies. Instead, these “temporary” payments were turned into a permanent hand-out in 2002.

Better news for taxpayers would be the abolition of farm subsidies. While they obviously remain popular with the beneficiaries and their patrons in Washington, the general public seems to be increasingly aware that the subsidies amount to little more than legalized theft.

Of course, farm subsidy apologists will respond that the programs must be kept in place in order to cushion farm incomes when times aren’t so good. As a Cato essay on farm subsidies points out, this is nonsense:

Another point to consider is that farm households are much more diversified today and better able to deal with market fluctuations. Many farm households these days earn the bulk of their income from nonfarm sources, which creates financial stability. USDA figures show that only 38 percent of farm households consider farming their primary occupation.

Some USDA programs provide useful commercial services such as insurance. The USDA says that its insurance services are “market-based,” but if that were true, there would be no need for subsidies and the services ought to be privatized. After all, most U.S. industries pay for their own commercial services. Also, financial markets offer a wide range of tools, such as hedging and forward contracting, which can help farmers survive cycles in markets without government subsidies.