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Farm Subsidies

Subsidies are usually enacted as a way to support individuals or institutions in a specific sector of the economy. “They are designed to overcome deficiencies in the market, support disadvantaged parts of society, and positively distort activities such as pushes towards renewable energy and recycling.” With this in mind, I’m sure many people would be upset to find that the almost $1Trillion farm bill (almost 50% more costly than the previous 2008 farm bill) that was just passed will end up subsidizing people such as David Rockefeller, Jimmy Carter, and Bruce Springsteen. Now there are many people who will be receiving subsidies from this bill who are truly in need, but I don’t think I’d put these individuals in the “needy” category. Another surprising statistic of this farm bill is that 80% of the farm bill spending has nothing to do with farming. And when looking at the spending that actually is going to farmers, one would see that 75% of subsidies are to be received by the largest 10% of farm businesses. Through the insurance system put in place by this bill, the top 1% of policy holders receive a mean annual crop subsidy of $227,000, while the bottom 80% of policyholders receive a mean annual subsidy of $5,000. I think this a clear case of political manipulation of economic theory. Instead of ensuring that taxpayers’ money is going to support poor farming families who otherwise wouldn’t be receiving what most would deem a fair income, we are spending the better half of a trillion dollar subsidy on corporate farming companies or wealthy individuals whose large farming operations already provide a very healthy, some would say lavish, income.

Politicians will try to frame this bill in a positive light by describing how the new law shifts from giving farmers direct payments which they’d receive for doing basically nothing, to an insurance model where farmers get paid if crops fail or prices fall too far. Not only does this negate the forces of normal market corrections, but it also is set up to lock in high prices when farming is profitable, such as today. For comparison, the value of farm assets in 2008 was about 1/3 of what the value is today according to the Congressional Research Service.

On the other hand, while the risk of crop failures are underwritten by taxpayers, they are provided by insurance companies, so essentially the insurance companies enjoy a subsidy too. Vincent Smith, of Montana State University found that between 2005 and 2009, for every dollar in crop insurance that went to farmers, there was $1.44 going to insurance companies.

While I agree with the principle behind farm subsidies, I completely disagree with the implementation of this policy. It is clearly an effect of agriculture lobbyists’ influence and politicians who know that the majority of Americans will either assume farm subsidies are only going to poor farmers who need subsidies or will be easily distracted by the swindle of “efficiency” talks politicians will boast to their constituents about the shift in the law from flat payments to an insurance system. Regardless, I hope more people catch on to this and demand a rewrite of this ridiculously inefficient and unethical law.



  1. gjeong gjeong

    I really hope the bill is designed to help the poor, not the rich.
    Has the Congress not thought about the issue that you raised?
    While I agree that farm subsidies are needed to support poor farmers and families, helping the rich does not make sense at all.
    One question to you is: you said about 80% the subsidies are spent on something else. What are they?

  2. kuveke kuveke

    The issue has come up a few times in the NYT so I’m not completely surprised by unnecessary farm subsidies I’m sure a bunch of the subsidized crops are also crops that the public wouldn’t be happy to know are subsidized. On the other hand I hadn’t thought about the spillovers before. Its almost unbelievable that insurance companies are subsidized more than the farmers themselves. Now I’m wondering what other industries see subsidy spillovers and can think of a few that might off the top of my head. Its tough to incentivize people to learn and care about issues like these that at first glance may seem complicated or unrelated to their lives.

  3. James dillard James dillard

    I agree with your comments regarding the exorbitant nature of the subsidy but there will most likely be positive externalities from this subsidy as well. Unfortunately there may be some people who receive funding who may not necessarily mean it but that is the nature of government spending. Nothing is perfect. There should be additional caveats which can help prevent these occurrences, however, if sound economics are behind this bill then I am still for it. It is important we help farmers and make farming a profession worth continuing otherwise we may find ourselves amongst rising grocery prices and further inflation of food prices.

  4. What is “the principle” behind farm subsidies? Cynically, I’d state that it is that those with political leverage should be able to use that to become rich – even a small farm state has two senators, and they have to deliver on farm interests or won’t get reelected.

    In any case, because the legislation includes multiple programs, there is no single principle, right? With which do you agree?

  5. evans evans

    Answering comments in numerical order: 1: I’m sure Congress, or at least the people designing the bill, thought about how this bill works and who it helps. They know who funds their campaigns and they know who they are designing the bill for. As for other congressmen, I’m sure they didn’t even read it and just think “Farm bill subsidizes poor farmers. That sounds good.” and never really look at the data to see that the bottom 80% of farmers are receiving an average of about $5,000 while the top 1% get around a quarter million dollars. Once again, I’m sure it is these top 1% who’ve lobbied and funded these congressmen, and sure enough they are benefiting the most from it.
    3: I agree that government spending is not perfect, and that there are likely to be some receiving funding that do not need it. But when 75% percent of the subsidies are going to the largest 10% of farm businesses (who at that size are clearly commercial farmers turning a decent profit) I would say we need to rethink our plan. And if Congress can’t figure a plan out that works better than 3/4 of subsidies going to the richest 1/10th of farmers, I think we need to rethink the men and women running our country.
    4: I think it is absolutely true that those with political leverage use it to get rich. And I do like the basic principle of subsidizing farmers who are producing food/plants that we need as a country, but are not receiving a decent compensation for doing so. However, I think that it should not be that hard to implement a cutoff line around an average/above average salary, above which farmers will not be given subsidies. Especially when you consider that the average farm household income is already 25% higher than the average household income in America. Clearly there are other industries that could use this subsidy money.

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