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.