MENU

Reason.com

Free Minds & Free Markets

New Farm Subsidy Programs Were Supposed to Save Money; Instead They've Cost Billions More Than Predicted

Most of the money has gone to a small collection of well-off farms.

Skypixel/DreamstimeSkypixel/DreamstimeThe government tends to be terrible at pruning back spending. For evidence, consider the new form of farm subsidies it adopted in 2014—a reform that was supposed to save taxpayers' money but instead is costing us billions more than projected.

According to new analysis by the Environmental Working Group, the government spent $8.8 billion last year on commodity subsidies, paid to the growers of corn, wheat, soy, and other crops. That's about twice the $4.8 billion the feds had anticipated its commodity programs would cost.

As with past subsidy schemes the bulk of these billions are going not to small family farms but to the largest, most prosperous agribusinesses. In 2016, the top 1 percent of subsidy recipients were getting a minimum $116,501 payout, while the median recipient was recieving only $2,479.

"When you look the current subsidy system," says Colin O'Neil, legislative affairs director for Environmental Working Group, "we are seeing a concentration of wealth with the largest, most successful farm businesses."

The 2014 Farm Bill eliminated the government's system of direct payments to farmers, a change that was supposed to scale back spending and spread the subsidy benefits around more evenly. At the time, those direct payments had become a national embarrassment: A 2012 report by the Government Accountability Office found that a quarter of payments were going to producers who were not even growing the crops the program was supposed to subsidize, while another 2,300 farms were getting subsidies while growing no crops at all.

"Everyone knew that the program that previously existed, the direct payment program, was going to go away," says Josh Sewel of Taxpayers for Common Sense. So the discussion between Congress and farm lobbyists became one of how to scrap the direct payments without losing the money attached to it.

They settled on the new Agricultural Risk Coverage (ARC) program, which would pay farmers a subsidy whenever the revenue for their crops fell below a five-year average revenue set by Congress. They also created a smaller Price Loss Coverage (PLC), which pays out if prices fell below a particular point. This, proponents argued, would save taxpayers money by only funding farmers when their revenue saw a sudden drop.

The Congressional Budget Office (CBO), working with revenue and price projections provided by Congress, estimated that these new subsidy schemes would cost $2.5 billion in 2015 and then only about $4.8 billion in 2016—almost a $1 billion less than what the direct payments would have cost.

Instead, the new programs paid out $5.7 billion in 2015 and a staggering $8.82 billion in 2016, a combined cost overrun of $7.2 billion. "It has cost us a lot more money than if we had just kept paying farmers to be farmers," says Sewel.

When Congress drafted the 2014 Farm Bill, lawmakers predicted that crop prices and revenue would remain at historic highs, necessitating little in the way of payouts. When those predictions proved wildly overoptimistic, the costs of the new programs skyrocketed.

Those overruns are set to continue. According to a budget analysis released by the CBO in June, the new system of commodity subsidies will cost $22.1 billion from 2016 to 2018—$7.5 billion more than predicted.

The new subsidy arrangements have not been more equitable either, with huge cash payments still going to the large agricultural producers. In 2016, the largest recipient of commodity subsidies was Deline Farm Partnership, which operates farms across six states and received a $4 million payout from the federal government.

These programs are set to expire in 2018. When Congress takes up the issue again, Sewel hopes it will recognize that ARC and PLC have been failures.

Not only are they "overgenerous" and "unnecessary," he says, but they also distort the market forces the agricultural industry relies on to spur change and productivity growth.

"People tend to forget that farmers are some of the most innovative, dynamic, technically expert" producers, Sewel tells Reason. "There is a lot of innovation that can happen there if they're given the opportunity."

Photo Credit: Skypixel/Dreamstime

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • BestUsedCarSales||

    Wooooooooooow.

  • jogibew||

    I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

    This is what I do... www.netcash10.com

  • Hugh Akston||

    This might be a dumb question, but why is the government subsidizing farm production in the first place?

  • Crusty Juggler||

    To help manage agricultural supply.

  • sarcasmic||

    The government pays farmers to not produce food. This lowers supply and props up prices. If the government did not do this then the price of food would drop so dramatically that every farm would go out of business, and everyone would starve to death.

  • Hank Stamper||

    Also feds make some destroy their crop cause people will starve otherwise. So we subsidize them to grow and then force them to destroy. Brilliant!

  • Longtobefree||

    As long as the democrats starve first, I say go for it.

  • RafaelGuzman||

    Farmers are a group which historically exercise a disproportionate amount of political power due to popular, idealistic conceptions of who farmers actually are (the vast majority of food is grown by conglomerate style businesses)

  • Crusty Juggler||

    OMG welfare is for wealthy people, too.

    Get it together, Britschgi*

    *In Swiss, Britschgi translates to, "Guy Who Sucks At Links."

  • BYODB||


    ...a reform that was supposed to save taxpayers' money but instead is costing us billions more than projected.

    According to new analysis by the Environmental Working Group, the government spent $8.8 billion last year on commodity subsidies, paid to the growers of corn, wheat, soy, and other crops. That's about twice the $4.8 billion the feds had anticipated its commodity programs would cost.


    So if the government had only spent $4.8 billion of taxpayer money we would be happy about this? I don't think we define 'saving taxpayers money' in the same way, even while technically you're not wrong.

  • BYODB||


    So the discussion between Congress and farm lobbyists became one of how to scrap the direct payments without losing the money attached to it.

    Problem located.

  • BYODB||


    Those overruns are set to continue. According to a budget analysis released by the CBO in June, the new system of commodity subsidies will cost $22.1 billion from 2016 to 2018—$7.5 billion more than predicted.


    Oh my god, could you at least stick to comparing things the same way in your article instead of skewing things to make them look worse than they are? I mean, it's bad. Ok? But purposefully inflating the number to look worse, when it's already outrageously bad, is unnecessary at best.

  • Alan Vanneman||

    If you go back and look at earlier farm bills, I think you'll see the same pattern: A program shows obvious abuse; it's replaced by something "more rational" that will cost less; the new program, to everyone's shock and amazement, proves to be more generous than the wasteful program it replaced; rinse and repeat.

    Small farmers generally don't care that the big guys get so much of the money. They know that without the big guys' lobbying power, there'd be no subsidies at all.

  • Longtobefree||

    Well, gee golly gosh, whoda thunk it?

    If only congress was in session dealing with a tax bill and needed to find somewhere to save a dollar or two -- -- --

  • Enemy of the State||

    Less than 2% of Americans have a cabinet level department charged with plundering the other 98% and funneling that plunder into their coffers...

  • Whorton||

    Why in the world are we subsidizing agriculture in the first place. This is an area where the government needs to get the hell out and let private markets dictate.

  • Rockabilly||

    GOP controls the government and says it's the party of limited government? What BULL SHIT!!!

  • vek||

    In the grand scheme of things these are still pretty small subsidies as a percentage of farm income, I just googled and the farming portion was close to 200 billion a couple years ago, and down to under 150 billion more recently. Overall food related stuff was almost 1 trillion, which includes value added pre packaged food etc.

    So it's not like they're paying for half the production or anything stupid... Which just makes it all the stupider. If a massive industry can't survive without a single digit percentage subsidy to their bottom line, they need to do something different. But of course they would survive and do fine. If the subsidies went away farmers would change crops as made sense, or inefficient producers would go under etc and everything would be fine in short order. The most humane way to end this crap would be to slowly phase out the size of payments over 5 years or something to give everybody time to adjust.

  • ||

    I grow some tomatoes, peppers, lettuce, corn and play around with other veggies from year to year. How do I get in on this $8.8 billion they spent last year? Does it help that I have two apple trees too? What if I got a couple of chickens?

  • Longtobefree||

    Boy, are you asking for 239 federal regulators to drop by and say "Hi, we're from the government, and we are here to help you."
    After dropping off a few thousand pages of regulations, they will casually mention that you are in violation of half of them, and do you want to pay by check or cash?

  • Longtobefree||

    No federal program has ever been improved, modified, or adjusted to address any type of excess.
    Government programs cannot be modified; they have to be completely eliminated, preferably each year for 5 years, or they will come back.
    The only other option is to expand the program year after year, regardless of the outcome or effectiveness.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online