Farm Subsidies

The Panderer in Chief and the 'War on the American Farmer'

Farmers are such a protected class that it's hard to take the notion of a war against them seriously.

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Farmer
Gburshtein / Dreamstime

Auditioning for the title of panderer in chief during this election cycle are two potential masters. On one side, you have Hillary Clinton constantly offering "free" stuff, such as college tuition. On the other side, you have Donald Trump promising to protect Michigan's cars, Idaho's potatoes, Harley-Davidson in Wisconsin, Caterpillar in Illinois, and corn-based ethanol in Iowa. But nothing beats Trump's contention that there is a "war on the American farmer" requiring his help to end. The truth is that if there's a war on anyone, it's on taxpayers and individual freedom.

To be fair, there is no doubt that Trump's promises to implement regulatory reform and to eliminate the estate tax would be an improvement for farmers and everyone else. However, farmers are such a protected class that it's hard to take the notion of a war against them seriously.

By the end of 2016, the U.S. Department of Agriculture will have spent approximately $25 billion subsidizing farmers this year and another $10 billion to subsidize other agricultural interests, including rural businesses. Introduced in the 1930s to help struggling small family farms, the subsidies now routinely draw condemnation from both the left and the right as wasteful corporate welfare. Though the number of farms is down 70 percent since the 1930s—only 2 percent of Americans are directly engaged in farming—farmers aren't struggling anymore. In 2014, the average farm household earned $134,164—which is up over 50 percent from 2010 and is 159 percent higher than the income of the average American household.

Also, for all the talk about small family farms, the data show that the market is dominated by massive farm businesses. According to the USDA, 88 percent of U.S. farms are small family farms, but 64 percent of vegetable sales and 66 percent of dairy sales come from just the largest 3 percent of farms.

What's more, only a handful of farmers reap most of the benefits from the subsidies. Traditionally, wheat, corn, soybeans, rice and cotton have taken the lion's share of the feds' largesse. The nonprofit Environmental Working Group reports that "the top 1 percent of farm subsidy recipients received 26 percent of subsidy payments between 1995 and 2014."

The EWG adds: "Under 30,000 farmers received over $46 billion in subsidy payments in that time period. The top 20 percent of subsidy recipients received 91 percent of all subsidy payments, while the bottom 80 percent received just 9 percent of subsidy payments at an average of $7,100." So don't be surprised if you hear that Saudi Prince Khalid bin Abdullah, a billionaire, could be collecting "hundreds of thousands of dollars in U.S. taxpayer-funded crop insurance subsidies through farms he owns in Kentucky."

As with other crony programs, it might not even be in the farmers' interest to be reliant on handouts from taxpayers, given that economists have repeatedly shown that privileged sectors of the economy often do not receive any actual benefit in the long run.

In farming, for example, the value of the subsidy is capitalized into the price of farmland. So farmers have to pay exorbitant prices for the land entitling them to subsidies. Factoring in these prices, they are no better off as a group. However, while some subgroups of farmers capture the benefits of the subsidies (the ones who own the land), others are worse off a result (e.g., young farmers with less capital looking to purchase land).

In other words, if there is a war on farmers, it is being waged by a federal government that hands out subsidies to a few rich farmers while placing lower-income and younger farmers at a disadvantage along the way.

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  1. I’ve heard a lot of political comparisons between the US and Rome in recent times (after having made a few of my own a while back), but the progression from smallholders to latifundia is another parallel to add to the political

    1. parallels only meet at the “vanishing point”, so it all depends on your perspective. except if it doesn’t.

  2. This article is all over the place. Farmers don’t need anymore protection and everything’s great for them – and oh, by the way, they are selling out to corporations who get all the subsidies and aren’t taxed out of business through the estate tax.

    Might there be a cause and effect relationship between taxes, subsidies, and the loss of small farms? We have an agriculture policy that is driving this trend – is that good?

    1. I kind of agree with you here. The final sentence is a great thesis for this piece. It just takes de Rugy too much meandering to get there.

  3. “In 2014, the average farm household earned $134,164?which is up over 50 percent from 2010 and is 159 percent higher than the income of the average American household.”

    I am in no way defending farm welfare. But, using 2014 numbers is deceiving because that was the last year of a run of “boom” years. And if memory serves, 2010 was at the end of a run of “bust” years. Crop prices were very high and most farmers (at least in my area) were doing very, very well. The last two years have been very different. You can’t get a full picture by using numbers from any single year because farming success/failure can be very different from year to year.

    1. And is that gross or net? After tax or before? It’s a meaningless number in a vacuum.

      1. Very good point. All the input costs go up in boom years. So even if they were grossing more, they were also spending more to produce a crop. Especially the guys who were buying new land or renting land. Land prices around here skyrocketed in the “good years”

        1. there you go trying to be all mathy and such…just go with the feelz

  4. In other words, if there is a war on farmers, it is being waged by a federal government that hands out subsidies to a few rich farmers while placing lower-income and younger farmers at a disadvantage along the way.

    At the same time it uses the EPA to push farmers out of marginal land use.

    1. and BLM, USFS, Energy, etc.

  5. Meanwhile the same bill that provides the farm subsidies spent 3 times as much on food stamps which were undoubtedly completely deserved with no waste or fraud. Perspective.

  6. Isn’t America the worlds #1 food exporter? Gee, I wonder where that comes from?

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