Policy Analysis No. 56

Government Crop Programs: High Cost and Few Gains

By Clifton Luttrell
July 9, 1985

Executive Summary

During the Great Depression of the 1930s the U.S. government embarked on a series of massive programs to increase the income of the nation’s farmers. The effect was to remove the production of “basic” crops from the competitive market and, instead, to place the major economic decisions about crop production and marketing in the hands of the federal government.[1] Although these programs have varied over the years in response to new experience, political pressure from farm groups, and changes in the administration and Congress, their general features have remained virtually unchanged. They have shown remarkably little consistency, however, in their economic impact: some have increased crop supply, some have reduced supply, and still others have increased demand. In some instances, all three effects have operated at the same time.

While the social or real cost of the programs is extremely difficult to measure, estimates place it in excess of $9 billion annually at the 1983 level of government outlays.[2] Yet, despite their high cost, the programs have had few successes. Gains to families on smaller farms have been minimal, and farmer protests are as vociferous as ever. Indeed, journeys to Washington by groups of farmers to harangue Congress and the administration for special assistance are being made with increasing frequency.

This study traces the development of government crop programs from their beginnings, with the Agricultural Adjustment Act of 1933, to the present, with special reference to the programs for food grain (wheat and rice), feed grain (corn), and cotton. It outlines the attempts made to generate higher returns for farmers and explains why these efforts failed. Finally, it offers some recommendations for future disposition of the programs.

Read the Full Policy Analysis

Clifton Luttrell is an economist recently retired from the Federal Reserve Bank of St. Louis.