Rich farmers don't need farm bill's welfare

Reuters

Farmer Matt Johnson inspects the leaves on a popcorn plant near grain storage bins in his popcorn crop fields on his family's farm in Redkey, Indiana June 28, 2012.

Article Highlights

  • For a long time, the average family farm has had a higher income than the average American family. #FarmBill

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  • Fundamentally, the House Agricultural Committee’s farm policy proposals do not pass any reasonable fairness test.

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  • Because payments under new programs could reach $20billion/year when prices fall, they could be federal budget busters.

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By most standards, farmers are rich. For a long time, the average family farm has enjoyed a higher income and has been six or seven times wealthier than the average American family. And the average farmer does not receive most of the farm subsidies that flow from the federal government. Eighty percent of those funds go to the largest 20 percent of farms that have much higher household incomes and are many times wealthier than the average taxpayer. That trend will continue this year when U.S. Department of Agriculture predicts that farm incomes will be higher than ever before.

"Fundamentally, the House Agricultural Committee's farm policy proposals do not pass any reasonable fairness test." -Vincent H. Smith The House farm bill has two new welfare programs for well-off farmers: a price support program called Price Loss Coverage and a new "Supplementary Coverage Option" crop insurance program in which taxpayers would pick up 70 percent of the premiums. These programs will shovel most of the subsidies to wealthy farmers because they are tied to the amount of land a household farms. Families in real poverty will get very few benefits because they don't farm much land. However, crop insurance companies are likely to scalp about half a billion taxpayer dollars to manage the new insurance program.

Fundamentally, the House Agricultural Committee's farm policy proposals do not pass any reasonable fairness test. Worse, because payments under the new programs could balloon to as much as $20 billion a year when crop prices fall, they have the potential to be federal budget busters. And, because both programs encourage expanded crop production, they could cause the United States to violate its World Trade Organization commitments on domestic agricultural subsidies, with subsequent penalties that hurt U.S. exports.

Congress should require the House and Senate Agricultural Committees to do better, especially given the urgent need for major federal budget reform. Let's not pass a new farm bill right now which the main purpose of is to give substantial subsidies to wealthy farmers just because some lobbyists claim that food stamp payments and programs that benefit the environment will stop on October 1 if no legislation is passed. That is simply not the case, as a recent Congressional Research Service Report clearly explains. Instead, the House and Senate Agricultural Committees need to be more fiscally responsible, do a better job for their country, and cut off farm subsidies that flow from less well-off taxpayers to very well-off farmers and landowners.

About Vince Smith:

Vincent H. Smith is scholar at the American Enterprise Institute, a professor of Economics in the Department of Agricultural Economics and Economics at Montana State University, and codirector of Montana State University’s Agricultural Marketing Policy Center.

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About the Author

 

Vincent H.
Smith
  • Vincent H. Smith is Professor of Economics in the Department of Agricultural Economics and Economics at Montana State University and co-director of MSU’s Agricultural Marketing Policy Center. He received his Ph.D. from North Carolina State University in 1987 and his bachelor’s and master’s degrees from the University of Manchester in 1970 and 1971. Dr. Smith’s current research program examines agricultural trade and domestic policy issues, with a particular focus on agricultural insurance, agricultural science policy, domestic and world commodity markets, risk management, and agricultural trade policy. He has authored nine books and monographs and published over 100 articles on agricultural and other policy and economic issues. His work has been recognized nationally through multiple national awards for outstanding research programs. In 2008, he became a Distinguished Scholar of the Western Agricultural Economics Association. Currently he is a Visiting AEI Scholar and co-director of AEI’s agricultural policy initiative. Dr. Smith is married and he and his wife, Laura, have two children, Karen and Meredith.
  • Email: uaevs@montana.edu
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