Slash farming 'welfare'

Shutterstock.com

The current Farm Bill costs taxpayers about $20 billion a year in farm-oriented conservation and straightforward subsidy programs, of which $2.5 billion goes to private crop insurance companies. About 80 percent of the rest flows to the largest 15 percent of U.S. farms, whose owners are typically more than ten times wealthier than the average U.S. household.

If prices for major crops like corn and wheat moderate towards their long run trends, the Senate and House proposals for a new farm bill will substantially increase the federal subsidies that flow mainly to very wealthy farmers. The new programs, which all potentially violate U.S. trade commitments, would cover “shallow losses” and one of those would also substantially increase federal payments to insurance companies.

So what should happen in a new farm bill? The current “welfare for doing nothing” Direct Payments program and a related shallow loss program known as ACRE should be terminated, reducing the budget deficit about $5 billion a year. Crop insurance subsidies should be rolled back to pre-2001 levels (when farmers paid about 50 percent of the full cost of their crop insurance) and capped at $40,000 per farm, saving about $3 billion a year.

One area where spending clearly needs to be increased, by about $1.5 billion a year, is on publicly performed agricultural research, which has very substantial payoffs for U.S. consumers and farmers, and agricultural productivity throughout the world.

Implementing these reforms, with no cuts to nutrition programs, would reduce  farm bill spending by about $5 billion a year ($50 billion over ten years), 25 percent more than the nutrition program cuts currently included in the House Farm Bill proposal. Such changes would also be fairer, and increase the competitiveness of U.S. farmers in global markets.

Vincent H. Smith is a professor of economics at the Department of Agricultural Economics, Montana State University.


Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Vincent H.
Smith

What's new on AEI

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 01
    MON
  • 02
    TUE
  • 03
    WED
  • 04
    THU
  • 05
    FRI
Wednesday, September 03, 2014 | 9:00 a.m. – 10:30 a.m.
From anarchy to Augustus: Lessons on dealing with disorder, from Rome’s first emperor

We invite you to join us for two panel discussions on how Augustus created order from chaos 2,000 years ago, and what makes for durable domestic and international political systems in the 21st century.

Wednesday, September 03, 2014 | 12:00 p.m. – 1:30 p.m.
Multiple choice: Expanding opportunity through innovation in K–12 education

Please join us for a book launch event and panel discussion about how a marketplace of education options can help today's students succeed in tomorrow's economy. Attendees will receive a complimentary copy of the featured book.

Thursday, September 04, 2014 | 12:00 p.m. – 1:30 p.m.
How conservatives can save the safety net

Please join us for a luncheon event in which our panel will discuss what conservatives can learn from how liberals talk and think about the safety net and where free-market economics, federalism, and social responsibility intersect to lift people out of poverty.

No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.