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Current Farm Bill Waste Targeted as Congress Moves Toward Next Farm Bill

Two new efforts in Washington seek to rein in the subsidies.

dairy farmCC0 Creative CommonsAs Congress ramps up plans to renew the quinquennial Farm Bill next year, two separate efforts in Washington this month called for cuts to wasteful spending enabled by the stinky current Farm Bill. Both efforts—one a bill introduced last week, the other a report released this week—are making waves.

The Farm Bill, in part, is intended to set federal farm policy for the next five years. While taxpayer-funded payments to farmers—farm subsidies—have under past farm bills always been wasteful, subsidies under the most recent Farm Bill grew by billions of dollars.

Last week, Congress sought to rein in a portion of the out-of-control spending it enabled in 2014 when it passed the latest Farm Bill. A new, bi-partisan bill, dubbed the Harvest Price Subsidy Prohibition Act, was introduced in the Senate by Sen. Jeff Flake (R-Ariz.) and Sen. Jean Shaheen (D-N.H.). The bill—a companion was also introduced in the House—would eliminate the Harvest Price Option (HPO), a subsidy (tied to already subsidized crop insurance) that guarantees a higher price for farmers at harvest if their crop's price rose after planting.

If that sounds needlessly confusing, it is. The short of it is, as Sen. Flake says, is that the HPO acts as "a taxpayer-subsidized profit guarantee."

No business—small or large, farm or industrial, rural or urban—should have its profitability guaranteed by the government. Why not?

"HPO is like insuring your car for $5,000, and getting a check for $10,000 after it's totaled," says Sen. Flake. "It's the kind of program that only makes sense in Washington."

The HPO program has cost taxpayers more than $21 billion.

Along similar lines, a report issued Tuesday by the Environmental Working Group, which monitors and criticizes farm subsidies, exposes how two other Farm Bill-enabled programs waste billions more.

The EWG report, "Double Dipping: How Taxpayers Subsidize Farmers Twice for Crop Losses," focuses on two Farm Bill programs, known as Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC). Farmers who receive taxpayer-subsidized crop insurance may still choose to participate in either ARC or PLC, even though "all three programs essentially pay subsidies for exactly the same reasons."

According to the EWG report, hundreds of thousands of farmers have taken advantage of the loophole by double dipping. That's put American taxpayers on the hook for nearly $24 billion in unnecessary double payments to farmers.

"Farm state politicians sell farm subsidy programs to taxpayers on the premise that they help keep family farmers on the land," said Don Carr, a senior advisor with the Environmental Working Group, in an email to me this week. "But when year after year the same well off mega farms enjoy millions in redundant subsidies while the bruising agriculture economy continues to drive small and mid-sized farmers out of business, it becomes clear that the original intent of these programs has strayed way of course."

These out-of-control giveaways are even more galling because the current Farm Bill was touted as the one that would help rein in spending. (To be clear, though, pretty much every Farm Bill is touted by Congress and lobbyists as a cost-saving measure.)

Farm Bill critics, including me, predicted growing waste under the current Farm Bill.

"During the most recent debates over passage of a Farm Bill, Sen. Thad Cochran (R-Miss.) urged support for crop insurance, which he referred to as a set of 'important risk management tools for farmers and ranchers nationwide' that 'can help reduce costs,'" I detail in my recent book, Biting the Hands that Feed Us: How Fewer, Smarter Laws Would Make Our Food System More Sustainable. "Sen. Debbie Stabenow (D-Mich.), who chaired the Senate Agriculture Committee, of which Sen. Cochran is also a member, lauded the Farm Bill as 'an opportunity to cut spending.' That's not how it's worked out. Rather, costs have skyrocketed under the new Farm Bill thanks to crop insurance subsidies."

Wasting taxpayer dollars is but one negative outcome of subsidizing farmers. Farm subsidies also—and here I'll urge you to buy my book, which provides far more details than a column permits me to share—stifle innovation, harm the environment, needlessly reward not just soy, cotton, corn and other commodity farmers but also everyone from livestock producers to GMO seed companies to crop insurers; and encourage farmers to overproduce quantities of crops we don't particularly want or need.

The Trump administration proposed earlier this year to cut farm subsidies by a couple billion dollars a year, angering many farmers and lobbyists. But $2 billion in cuts is a drop in the bucket for programs that now waste more than $20 billion per year.

American farmers and taxpayers alike can live without HPO, ARC, PLC, and the Farm Bill's confusing array of acronyms of waste. Looking at the bigger picture, we'd also be far better off without any Farm Bill at all.

Photo Credit: CC0 Creative Commons

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  • Fist of Etiquette||

    The Farm Bill, in part, is intended to set federal farm policy for the next five years.

    You know who else had five-year plans?

  • Scarecrow Repair & Chippering||

    Hitler's best bud, Stalin?

  • DJF||

    As always when Reason talks about the "farm bill" I will point out that its actually the Agriculture Department bill and that at least 80% of that bill is Food Stamps and other welfare and that around 10% goes to farmers.

    True they should get rid of the farmer subsidies but can Reason for once talk about the other 80%?

  • Earth Skeptic||

    Can we just go Soylent Green and be done with it?

  • Warren||

    More like 67% but good effort.

  • NotAnotherSkippy||

    More like 80%, but thanks for playing.

  • Paloma||

    How much of that 80% (or roughly 400 billion) goes to bureaucrats who administer the food programs?

  • Domestic Dissident||

    Reason loves the AFDC, food stamps, and all the rest of that type of welfare.

  • Mitsima||

    Can we talk about how either of those subsidies are 100% not in the federal charter? Can we talk about how 100% of that subsidy money is borrowed, putting the burden on our children & grandchildren, whose permission we do not have and to which they cannot consent?

  • Sevo||

    Outlaw to rent-seeker in a New York minute:

    "Big-farm takeover feared under California's new pot rules"
    [...]
    "Small growers were counting on the state to set limits, which they reckoned would give them a chance to get a foothold before the big operators moved in. They had hoped for a cap of 5 acres per farmer for the first five years."
    http://www.sfchronicle.com/new.....367111.php

  • JFree||

    Actually an acres cap on landownership does make sense - given all the subsidies/distortions that landownership has in this country and the reality that land, unlike capital, is zero-sum. And the conflicting arguments about how land should be 'originally' distributed go way back - homestead act (land can only be exchanged for and is financed by actual owner-labor); Jackson's conflict with 2nd bank (land can only be exchanged for hard specie not loans); Jeffersons 'yeoman farmer' (v plantation owner) civic ideal; Northwest Ordinance and how 'states' can come into being; etc.

    Course the solution - both in economics and from our own history - is stop subsidizing ALL land. Stop govt from privatizing rent-advantages. That's the origin of rent-seeking and it's silly to hold one group to some abstention standard while pigs are wallowing in the rent trough elsewhere.

  • Sevo||

    JFree|11.18.17 @ 2:49PM|#
    "Actually an acres cap on landownership does make sense"

    Bullshit.

  • JFree||

    So you're a monarchist. Like that's a surprise

  • Sevo||

    So you're an imbecile. No surprise there.

  • Scarecrow Repair & Chippering||

    It only makes sense if you have the typical statist mind that never removes any regs, only adds new ones, like piling fresh bandaids on stop of rotting corrupt older bandaids.

  • JFree||

    you have the typical statist mind that never removes any regs, only adds new ones, like piling fresh bandaids on stop of rotting corrupt older bandaids.

    Ain't nothing easy about removing ALL of the subsidies and distortions re land in this country - virtually of them paid for via taxes on income/sales/capital (which also then distort things). Would removing all that be the best option? Sure but it ain't gonna happen. And since it won't happen, the only options are to a)directly limit land ownership or b)accept a plantation economy where reverse robin hood applies.

  • Sir Chips Alot||

    No, an acres cap makes zero sense. F off slaver!

  • Leo Kovalensky||

    "Actually an acres cap on landownership does make sense"

    Does that cap include FedGov?

  • JFree||

    Does that cap include FedGov?

    As alloidal owner (ie sovereign)? They still own all land in the US in that form - wherever your birth makes you a US citizen, wherever their original subinfeudation of monopoly (and its terms - ie ability to contract it for sale to others, statehood boundaries, pass it to heirs you designate, etc) gets contested/enforced via their courts/police, wherever an invasion/threat calls on them as sovereign to defend, etc.

    As fee-simple owner in a distorted system where landowners do not pay for the value of a granted land monopoly (ie their Western holdings) but still get all the usus/fructus of that land? They shouldn't own any land like that. Nor would they if they had to pay land taxes on that land like everyone else - which they don't in a distorted system. Nor however should they subinfeudate that land in the current distorted system to further distort it.

    They need to fix the underlying land revenue system so that landowners pay for the value THEY receive from their allod.

    Land is NOT like capital or labor. It is distributed by man - not created by man.

  • Mitsima||

    1) The federal constitution does not grant the feds title to any lands within America's borders, except, " the federal district and cessions of land by the states for forts and arsenals".

    2) land has no value in and of itself; it's only value is what one makes of it, e.g. pre-columbian indians had no knowledge of oil, ergo "oil fields", were "worthless". Imagine the utter bullshit of finding out that your land is suddenly "valuable" because Mineral X is discovered (or developers would really really like it), and now your taxes have grown by an order of magnitude, but you haven't the resources to exploit that resource, so - of course - govt steals seizes liberates that land - let it happen to an old Black grandma and see if it's still, "fair" by proggy standards (ha, "standards").

    Damned if I can wrap my head around how people can think that the feds own us instead of the other way around.

  • JFree||

    The federal constitution does not grant the feds title to any lands within America's borders

    The Treaty of Paris is what gave us recognition of independence. Legally, it is the transfer of alloidal sovereign from the King to the 'United States of America' not the colonies/states individually. 'Title' is different - something the alloidal owner grants to indicate what legal rights it will enforce on behalf of the title owner. The colonies/states retained title granted to them in their original royal charters - but post-treaty - a new allod. We fought a civil war over whether those colonies/states were ever independent sovereigns.

    land has no value in and of itself; it's only value is what one makes of it

    Well - it absolutely has value if one has legal title and that value is ongoing too. Further, any improvements to value come from two sources - those due to communal efforts and those due to individual owner (Hayek - Constitution of Liberty). It is the former that is the proper function of land taxes. Otherwise there is a free rider problem.

    Damned if I can wrap my head around how people can think that the feds own us instead of the other way around.

    Damned if I can wrap my head around the rentier idea that land ownership came from god/nature and that govt has a unpaid obligation to defend it from other men.

  • Warren||

    Well you can thank W for blowing up the farm bill after the Republican congress forced Bill to sign Freedom to Farm which put into place a multi generational effort to reverse the excesses of New Deal agricultural policy.

  • NotAnotherSkippy||

    Well we certainly shouldn't fault the New Deal for it...

  • JFree||

    Wasting taxpayer dollars is but one negative outcome of subsidizing farmers.

    These farm bills are NOT about subsidizing farmers. They are about subsidizing farmLAND. Generating a higher or more stable rent on assets that are inevitably now purchased with bank loans - which means the asset prices get jacked up and the mortgage is more likely to be paid rather than defaulted on. This is a subsidy of landowners and banks.

    Yes - this approach is absolutely stupid and wasteful and perverse. But because modern (neoclassical/marginalist) economics conflates land with capital, it's the only approach that people in the US can understand now. Put that farmLAND into its proper bucket (land) - compare it with all the other land subsidies/distortions in the US (eg mortgage subsidies which are both large and reduce mobility) - and it becomes easier to see that these different land usages can't/shouldn't be micromanaged via subsidies. NO land needs to be subsidized - it should be the main source of taxes. Henry George (to a degree) and Ricardo etc were right. We are wrong.

  • Migrant Log Chipper||

    Sevo's right.

  • Migrant Log Chipper||

    Sevo's right.

  • Scarecrow Repair & Chippering||

    We are wrong

    An idiot not only for babbling unintelligible nonsense, but also for using the royal we to try to pretend anyone else agrees with your faux-humility.

    Fuck off, slaver.

  • NotAnotherSkippy||

    I love the SLT advocates, especially when they claim that a tax which specifically targets a single class of property has zero distortion on the economy.

  • JFree||

    I'm not a single taxer. but the reality is that land IS different. You know the Laffer curve I'm sure. Re land though - if the tax on raw land was 100%, raw land would be priced at zero - but the US would be exactly the same size with exactly the same amount of land. No one would take their land to Singapore. There would be no incentives or disincentives to produce new land or destroy existing land.

    Incentives to DEVELOP that land into something productive are based entirely on the taxes on capital/labor - NOT the taxes on land. And the whole point of a land tax is to reduce the taxes that do distort.

  • HillTown Trader||

    From my front porch I can see seven mid-sized farms; when I talk to my neighbors, they all HATE price supports.

    The programs are complex and expensive to sign up for --- so really only work for the really big farms. The subsidies given the huge farms a price advantage, further cutting small farms out of the supply chains.

    USDA rules similarly given a huge advantage to the BIG companies. Their rules and policies are so expensive that only the really big packing houses can afford to comply. For example, USDA inspectors will not work part time or work at multiple locations. Therefore small packing houses are driven out of business, and unable to serve the retail tor local restaurant trade. The market price to the farmer for an 8month sheep is about $100; a non-inspected (custom/whole animal only) packing house charges about $100 for butchering. A USDA staffed packing house (several hours away) charges $220/animal.

    I can see meat animals from my front porch, but I can't buy any local meat to eat.

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