Farm Subsidies at Record Levels As Congress Considers New Farm Bill

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After six decades of rising subsidy levels andexpansive regulatory controls, it appeared thatWashington's role in agriculture would bereduced with the enactment of the 1996 FederalAgriculture Improvement and Reform Act. Thatact aimed to decrease subsidies over seven yearsand to move farming toward greater reliance onmarket supply and demand.

Unfortunately, that promise collapsed in anorgy of supplemental spending bills that haveincreased federal farm subsidies to all-timehighs. Total direct subsidy payments to farmershave soared to more than $20 billion per yearthe past three years, up from an average of $9billion per year in the early 1990s.

There is little justification for the specialhold that the agricultural industry has on tax-payers' wallets. Other industries, such as thehigh-tech industry, are also risky and subject tolarge price swings but do not receive large-scalegovernment subsidies. Moreover, farm householdshave higher incomes, on average, than dononfarm U.S. households, and subsidies areskewed toward the largest and wealthiest farmbusinesses. Farm subsidies also subvert theirown goal: farmers demand subsidies because oflow market prices for their products, but subsidiesthemselves contribute to lower prices.

As Congress works to reauthorize farm programs,it threatens to move further away fromreform by institutionalizing high levels of farmwelfare. Instead, Congress should push the farmsector back into the market economy by repealingfederal farm subsidies.

Chris Edwards and Tad DeHaven

Chris Edwards is director of fiscal policy studies and Tad DeHaven is a fiscal policy research assistant at the Cato Institute.