Most farm subsidies go to substantial and successful operations and provide little support for the farms they were once intended to benefit. Many of the programs create barriers to more efficient agriculture in the United States, interfere with international trade and have adverse effects on farmers in developing countries. The American Boondoggle series is an AEI project that reviews the implications of important basic facts and analyses as guidance for the 2012 Farm Bill.
American Boondoggle Series
American Boondoggle: Fixing the 2012 Farm Bill, by Barry K. Goodwin, Vincent H. Smith and Daniel A. Sumner
The average farm family currently is much wealthier and earns substantially more income than the average nonfarm family, and has a far lower debt-to-asset ratio than other family-owned businesses, thanks to the generosity of their elected representatives. But farm program subsidies could be eliminated, or at least reduced from current levels by about $8 billion to $10 billion without affecting the U.S. food supply or the viability of U.S. agriculture.
Premium payments: Why crop insurance costs too much, by Vincent H. Smith
Since 2007, under the federally subsidized crop insurance program, the government has paid nearly 60 percent of the $5.6 billion in annual crop insurance subsidies to agricultural insurance companies and their agents. Since 2005, on average, the agricultural insurance industry has received $1.44 for every dollar farmers have received in crop insurance subsidies.
Stuck in the mud: How farm policy undermines free trade, by Tim Josling
Agricultural exports reached $97 billion in 2009, double its 1999 level. The income is vital because the rate of growth in the domestic market for farm and food products is too slow to sustain farm incomes absent regulations requiring the use of agricultural goods to produce energy. Yet, while trade is key to agricultural incomes, trade policy is not a major focus of congressional farm policy initiatives.
Something for nothing? Direct payments and Title I farm programs, by Bruce A. Babcock
The one positive aspect of current farm programs is that they do no harm, in that they do not cause farmers to significantly change the crops they plant or how they grow their crops. But doing no harm is insufficient justification for continuing to spend more than $5 billion a year on Farm Bill programs.
Picking on the poor: How US agricultural policy hurts the developing world, by Daniel A. Sumner
Many of those affected by U.S. trade and domestic agricultural policies are among the poorest people on the planet. Current subsidy programs tend to reduce worldwide commodity prices, hurting farmers in the developing world. A typical small farm in Africa would have gained more than $100 per year in the absence of U.S. subsidy programs.
Corn belt moonshine: The costs and benefits of US ethanol subsidies, by Christopher R. Knittel
The Government Accountability Office has estimated that federal subsidies on biofuels add up to roughly $6.7 billion per year. Aside from the questionable reduction in greenhouse gas emissions from biofuels rather than than oil-based fuels, the total cost to Americans is much higher when including economic waste. For every $1.00 of wealth received by a farming region under the subsidies, another roughly $0.45 is wasted.
For want of a nail: The case for increased agricultural R&D spending, by Julian M. Alston and Philip G. Pardey
In 2008, only 2 percent of total R&D spent on science was directly related to food and agriculture. However, U.S. public investment in agricultural R&D has proved successful, with benefit-cost ratios around 20:1. A failure to increase publicly funded agricultural R&D will have long-term consequences for the sustainability of U.S. agriculture in a competitive global environment and for the natural resources on which it depends.
Agricultural disaster aid programs: A SURE invitation to wasteful spending, by Myles Watts and Anton Bekkerman
“Disaster” aid covers much more than real disasters: The Supplemental Revenue Assistance Payments (SURE) program creates a definition of “disaster” that is so loose that virtually any drop in crop production triggers federal aid. In addition, if one county is declared a “disaster area,” then farmers in all adjacent counties are also eligible for disaster aid. As a result, farmers in virtually every county in the U.S. were eligible for disaster aid from the SURE program in either 2008 or 2009.
We're not in Kansas anymore: Is there any case for ag subsidies?, by Barry K. Goodwin
The conventional wisdom that agriculture is at an economic disadvantage is incorrect. Every year since 1996, farm households have had an average income above that of all households, and the average farm household income in 2008 was more than $80,000. As a result, a large share of agricultural subsidies goes to a small segment of society that tends to be wealthier, less financially leveraged and of higher income than the nonagricultural sectors of the economy.
Sweets for the sweet: The costly benefits of the US sugar program, by Michael K. Wohlgenant
United States families pay nearly twice the world price for sugar and other sweeteners because of federal government policies intended to protect domestic beet and cane sugar producers from cheaper foreign competitors. The sugar program costs U.S. consumers an average of $2.4 billion per year — with producers benefiting by about $1.4 billion per year — and causes world market prices to be about 8.5 percent lower than they would otherwise be.
Milking consumers and taxpayers: The folly of US dairy policy, by Joseph V. Balagtas
The federal government has created an array of policies — production controls, subsidies and marketing orders — that increase the price of milk for U.S. consumers and increase the income of milk producers. Milk marketing orders costs consumers $420 million per year and raise dairy farm income by $293 million, leaving an excess cost of $127 million of pure economic waste that deprives the economy of growth and jobs.
The ACRE program: A disaster in waiting, by Barry K. Goodwin and Vincent H. Smith
The U.S. Average Crop Revenue (ACRE) program was introduced as part of the 2008 Farm Bill and marketed as a farm revenue safety net program. In reality, ACRE payments are largely driven by decreases in agricultural commodity prices from recent levels and generate subsidy payments for farmers of major crops such as wheat, corn and soybeans. As a result, the ACRE program has the potential to be a federal budget nightmare leading to frequent subsidy payments amounting to as much as $10 billion in some years and averaging as much as $6 billion per year.
US food and nutrition programs: Costs, effectiveness and impact on obesity, by Julian M. Alston
Today, the U.S. government operates a total of 15 food and nutrition programs (FANPs) that serve about 25 percent of Americans at a current annual cost of $100 billion. However, three programs in particular — the Food Stamp Program, the Special Supplemental Nutrition Program for Women, Infants and Children and the National School Lunch Program — absorb 91 percent of FANP spending. While evaluations indicate that FANP programs have been effective in achieving their purposes, the essential question for policymakers is whether they have been economically efficient.
Field of schemes: The taxpayer and economic welfare costs of shallow-loss farming programs, by Vincent H. Smith, Barry K. Goodwin and Bruce A Babcock
The current Direct Payments Program for farmers is becoming politically unviable, and shallow-loss income "safety net" programs are rising to take its place. Depending on structure and crop prices, however, shallow-loss programs could cost the taxpayer as much as or more than the direct payments program they would replace, averaging between $8 billion to $14 billion a year over the next five years.