Samuelson: Our Giveaway Farm Programs
The farm legislation now proceeding through Congress symbolizes much of what's wrong with Washington. It's government by inertia. We do today what we did yesterday, because politicians draw their power from distributing benefits, and various interest groups feel entitled to receive them—even if they serve no defensible public purpose. Our extravagant farm programs capture the absurdity as well as any other.
Since 1970, farm subsidies have totaled $578 billion, according to the Historical Tables of the U.S. budget. What has the public gotten for this vast outlay? Not much. Food would be produced without subsidies. Roughly 90 percent of commodity payments go to farmers raising grains and oilseeds (wheat, corn, sorghum, soybeans), cotton and rice; they represent about a fifth of farm cash receipts. Meanwhile, meat, vegetable and fruit producers get no direct subsidies. Does anyone truly think that, without subsidies, Iowa's cornfields and Kansas's wheat fields would go fallow?
If subsidies vanished, some high-cost farms would cut production or switch crops. Some land values would drop because one source of income (federal payments) would disappear. Still, food supplies would be ample. The proof: the rest of agriculture that manages without federal largesse. In 2005, meat output (beef, chicken, pork, veal) totaled 86.8 billion pounds; vegetable and melon output, 47.7 billion pounds, and potato output, 12.4 billion pounds.
Well, maybe farm subsidies "saved" the family farm? Not exactly. Farm subsidies date to the Great Depression of the 1930s. In 1932, there were 6.7 million farms, and the farm population was 25 percent of the nation's total. By 2002, the number of farms had dwindled to 2.1 million, and the farm population was about 2 percent of the total. More mechanization, better seeds and cultivation practices have enabled fewer, bigger farms to produce more food.
The life cycle of many government programs is this: they often start for good cause or with good intentions; then they perpetuate themselves by creating a protective web of interests—constituents who believe they have property rights in benefits, politicians whose power derives from renewing or expanding the benefits, and lobbies that exist to influence crucial politicians. Farm programs adhere faithfully to this cycle.
President Franklin D. Roosevelt signed the Agricultural Adjustment Act (AAA), the genesis of modern farm programs, on May 12, 1933. Conditions were dire. In 1932, farm income was a third of its 1929 level; agricultural prices were down more than 50 percent. Historian Arthur M. Schlesinger Jr. wrote: "The seething violence in the farm belt over the winter—the grim mobs gathered to stop foreclosures … —made it clear that patience was running out." The head of the Farm Bureau Federation warned: "Unless something is done for the American farmer we will have revolution in the countryside."
No one understood what caused the Depression or how to cure it. But falling prices—deflation—had clearly hurt both farms and businesses. The AAA empowered the government to control crop production and pay farmers to limit plantings. With hindsight, we know the theory was wrong; it was stingy money (regulated by the Federal Reserve) that depressed purchasing power and prices. But the AAA made stabilizing farmers' incomes a political matter.
The policies continued after World War II, justified by the notion that farmers' incomes were low and that farmers—subject to erratic weather and wild swings in crop prices—were more vulnerable to market forces than most Americans. Neither assumption now holds. In 1934, per capita farm income was 33 percent of non-farm incomes; in 2004, farm household incomes (a slightly different measure) were 26 percent above the U.S. average. Nor are farmers uniquely vulnerable to economic instability. Competitive pressures—from trade, new technologies, corporate takeovers, deregulation—have increased insecurity for almost everyone.
Government has a legitimate role in agriculture to ensure food safety, promote research and development and oversee the environment. But most of today's farm programs are simply income transfers from consumers and taxpayers to farmers. It's not just that these programs are unnecessary and costly. They actually damage American interests. Global trade negotiations are now stalled in part because countries won't end farm subsidies and protections. The United States—still the world's largest food exporter—would be better off if all countries did, though some U.S. producers (sugar, cotton) might suffer.
Farming has now become the economy's most pampered, protected and subsidized sector. Mandates for ethanol, which raise corn demand but save little oil, are the latest unjustified promotion. That's in addition to the subsidies in the farm bill: easily $50 billion from 2008 to 2012 in the bill passed by the House. The Senate soon gets its turn. By passing a lavish farm bill in 2002, Republicans signaled they weren't serious about controlling the budget. Now Democrats are having their turn.
