The House Agriculture Committee endorsed a letter this week to Budget Chairman Paul Ryan arguing that the Supplemental Nutrition Assistance Program, which helps low-income Americans purchase food, would make a better target for cuts than automatic subsidies to farms.The move comes as food prices are rising -- the Department of Agriculture expects overall food prices to rise 3 percent to 4 percent this year -- making it harder for the beneficiaries of SNAP to stretch their existing benefits, even as farmers profit from the tightening market. Critics across the political spectrum have called agricultural subsidies wasteful and unnecessary, and they question the logic of maintaining them as lawmakers hunt for budget cuts.
The direct payments program itself is rooted in the early years of the so-called Republican Revolution of the mid-’90s and the famous Freedom to Farm Act, which promised to wean producers off federal support. The payments were billed as a temporary measure but have stubbornly endured, paid out under a formula driven by past production levels and not what prices or costs are for farmers today.
We are told the farm economy cannot function without subsidies. However, nearly all subsidies go to growers of just five crops: wheat, cotton, corn, soybeans and rice. By contrast, fruit, vegetable, livestock and poultry operations receive nearly nothing, yet still produce two-thirds of the farm economy, with stable prices and healthy incomes. Why can’t the Big Five crops function in the same free market?More than merely ineffective, farm policies impose substantial harm. They cost Americans $25 billion in taxes and another $12 billion in higher food prices annually. Environmental damage results from farmers overplanting crops in order to maximize subsidies. By undermining America’s trade negotiations, subsidies raise consumer prices and restrict U.S. exports. Cotton subsidies undercut African farmers, keeping them in desperate poverty. And as Michael Pollan, author of “The Omnivore’s Dilemma,” has written, by promoting corn and soy (from which sugars and fats are derived) rather than healthier fruits and vegetables, farm subsidies contribute to obesity, rising health care costs, and early death.
With the passage of the 2007 energy bill and 2008 farm bill, Congress has managed to devise an interlocking maze of subsidies that, taken together, force taxpayers to spend billions of dollars no matter what the condition of the farm economy. First off are the so-called "direct payments" that go out to farmers and landowners even if crop prices and farm profits are setting record highs–and most such records have been set in the past few years–or even if the recipient plants no crop at all. Direct payments have averaged around $5 billion per year since 2005.Next are the "counter-cyclical payments" that go out when crop prices fall below a level set in law by Congress. These payments have declined from about $4 billion in 2005 to $1.2 billion in 2009, because crop prices have been higher than average over those years. That is a savings of about $2.8 billion."Market-loss" payments comprise another type of crop subsidy that slows to a trickle when prices are robust but can gush by the billions from the Treasury when prices dip. The last time that happened, farm subsidy costs topped $20 billion in one year.The cost to taxpayers of yet another subsidy subsystem, the federal crop insurance program, mushroomed from $2.7 billion in 2005 to $7.3 billion in 2009, precisely because prices were high. The cost of crop insurance goes up as crop prices increase because the government's premium subsidies, and its subsidies to crop insurance companies for administrative and operation costs, are tied to the cost of policies–and policy expenses rise with crop prices. And since it is taxpayers who pay a good portion of crop insurance claims, the costs we incur for any crop losses climb along with crop prices.