“The Farm Bill Mainly Helps Wealthy Farmers”

Farm-bill-infographic

A postscript to my recent post on Farm Welfare  is a great graphic courtesy of the American Enterprise Institute. This is a nice addition given that my previous post focused on previous iterations of the farm bill as forms of de facto middle class welfare. Politicians like to crow that in the 2014 bill forms of direct payments were ended and in their place farmers could get disaster relief in the form of crop insurance. This shift presumably allows many politicians to make the claim that they implemented more free-market reforms. Alas, as the infographic shows, large farms are getting a lion’s share of the subsidies, farm families are still much more wealthy than their non-farm counterparts (likely as a result of non-wealthy farm families getting crowded out of the market due to welfare going to those that own the land), and insurance is simply a hidden form of more welfare.

The Importance of Ending Farm Welfare – A Middle Class Redistribution Scheme

Corn Farm

It is admittedly with some degree of trepidation that I wade into the arena of agricultural subsidies. My pedigree is one marked with connections to the industry, including part of my early childhood being spent on a corn and cotton farm in the Texas South Plains and then a brief year in Missouri spent on a turkey farm raising contract turkeys for ConAgra. The Texas South Plains in which I was largely raised (and which I recently returned to) is an area that is the largest contiguous cotton growing area in the world. My undergraduate degree is in fact Agribusiness from one of the leading agricultural schools in the country, Texas A&M. Furthermore, although I am not currently employed in agriculture, I have long dreamed of one day returning to the land and occupation into which I was born. That being said, I may be just as guilty personally of falling prey to the overly idealistic aesthetics of living on a farm, which I can’t help but feel are part of our collective problem that leads to resigning ourselves to support of welfare for the farm in order to keep alive what we believe to be an ancient and idyllic profession. The State of Vermont heavily subsidizing dairy farms in an effort to keep the iconic Holstein dairy cow in pastures for tourists to see while driving by and the the recent pickup advertisement during the Super Bowl featuring Paul Harvey voicing a litany of reasons that, “God Made A Farmer” are examples of the tradition of holding agricultural producers in near-mythical status. I will quickly disabuse the notion that living in such occupations is as glamorous as an urban dweller might imagine, as anyone that has ever had to kick baby turkey chicks off of each other to keep them from suffocating the bottom layer  in -10 degree temperatures can attest. Although it still does possess just enough nostalgia for me to one day return, I will admit to desiring to return to a much more free-market system and I will get to my reasons why shortly.

Before I get into specifics, I should state that I firmly believe that getting the intrusive hand of government off of the plow in agriculture would actually benefit the “small” farmer and would stop the lion’s share of government wealth redistribution going to the relatively wealthy, which is what in fact occurs with ag subsidies. Thus, I firmly believe my stance is one that would promote greater fairness and equality and greater distribution of returns to the small and nimble innovative and flexible farmers (rather than the wealthy landowners) within the industry. And much like all of the rest of the industries in America not so coddled, the free market would create viable solutions for insurance and price supports that would be more efficient and useful compared to the cronyist and corrupting influence that is the U.S. Farm Bill.

The largest 10 percent of recipients have received 73 percent of all subsidy payments in recent years.

The U.S. Farm Bill is a monstrosity that has built up thick barnacles over decades, beginning in earnest in FDR’s New Deal Era. Thus, it won’t do to cover all of the tentacles of U.S. Ag Policy in this blog as I am already always at risk of being far too verbose, but I do enjoy and agree with the tenets of this succinct policy document from Cato Institute and appreciate its free market philosophy as much as I enjoy its brevity and important facts. While this document has been superseded by the 2014 Farm Bill, I would argue that very little has changed. The 2014 Farm Bill did finally retire Direct Transfer payments, which those tuned in to Ag policy may recall the infamous reports of wealthy celebrities receiving payments from the government simply for owning land (growing anything was not always a requirement.) While ending these egregious examples of cronyist policy is an important baby step, the rest of the decades long entitlement support for agriculture remains in place, as indicated by this USDA document. American taxpayers will still foot the bill for arcane programs with Orwellian nomenclature such as Price-Loss-Coverage, Agricultural Risk Coverages, and Dairy Margin Protection. A layman’s translation is that taxpayers provide welfare to farmers to subsidize prices, research, marketing, exports, and the purchase of insurance.

As it relates to the Cato document and for convenience of the reader, I have pulled out some quick bulleted highlights:

  • The U.S. Department of Agriculture distributes between $10 billion
    and $30 billion in subsidies to farmers and owners of farmland each year. The particular amount depends on the prices of crops, the level of disaster payments, and other factors
  • More than 90 percent of agricultural subsidies go to farmers of five crops—wheat, corn, soybeans, rice, and cotton
  • More than a million farmers and landowners receive subsidies, but the payments are heavily tilted toward the largest producers
  • Subsidies induce overproduction and inflate land prices in rural America. [My thoughts – The mis-allocated economic rent flows somewhere, and in this case it simply inflates the price of land, to the further benefit of larger landholders and to the detriment of small farmers/landholders.]
  • Farm subsidies transfer the earnings of taxpayers to a small group of fairly well-off farm businesses and landowners. USDA figures show that the average income of farm households has been consistently higher than the average of all U.S. households. The average income of farm households in 2006 was $77,654, or 17 percent higher than the $66,570 average for all households
  • Although policymakers often discuss the plight of the small farmer, the bulk of federal farm subsidies goes to the largest farms. For example, the largest 10 percent of recipients have received 73 percent of all subsidy payments in recent years. Numerous large corporations and even some wealthy celebrities receive farm subsidies because they are the owners of farmland. It is landowners, not tenant farmers or farm workers, who benefit from subsidies

I want to call out especially Cato’s prediction that Agriculture would thrive without subsidies. Sure, there would be winners and there would be losers in such a monumental transition, but the net benefit to producers and even more importantly, to consumers would be positive.

“Interestingly, producers of most U.S. agricultural commodities do not
receive regular subsidies from the federal government. In fact, commodities that are eligible for federal subsidies account for about 36 percent of U.S. farm production, whereas commodities that generally survive without subsidies, such as meats and poultry, account for about 64 percent of production. And, of course, most other U.S. industries prosper without the extensive government coddling that many farm businesses receive. An interesting example of farmers’ prospering without subsidies is New Zealand. In 1984, New Zealand ended its farm subsidies, which was a bold stroke because the country is four times more dependent on farming than is the United States. The changes were initially met with fierce resistance, but New Zealand farm productivity, profitability, and output have soared since the reforms. New Zealand farmers have cut costs, diversified land use, sought nonfarm income, and developed niche markets, such as kiwifruit. The Federated Farmers of New Zealand argues that that nation’s experience ‘‘thoroughly debunked the myth that the farming sector cannot prosper without government subsidies.’’ That myth needs to be debunked in the United States as well.”

Ending such support will be a political challenge, as those that espouse free-market views in our legislature are often the first to make policy exceptions for agriculture, usually under various guises that agriculture is somehow a different industry that can’t face the variations of the market or that food needs protection for national defense reasons. To these I am reminded of a quote I saved from F. A. Hayek’s The Constitution of Liberty that, “Most countries in the process of taking agriculture out of the market mechanism and subjecting it to increasing government direction began before the same was done in industry and that it was usually carried out with the support, or even the initiative, of the conservatives, who have shown themselves little averse to socialistic measures if they serve ends of which they approve.”

My point is this – if we as conservatives and libertarians are serious about limiting the scope and size of government and we want to be consistent, then sometimes we have to take a look and consider reducing the size and direction of government even when it favors us or our region.

Foodborne Illness Scorecard: Chipotle- 200+ illnesses; GMOs – 0

Chipotle

A closed Chipotle restaurant in Boston, MA on December 7. PHOTO: STEVEN SENNE/ASSOCIATED PRESS

For anyone that may obtain access to my bank records over the past five years, they would see about as much occurrence of Chipotle popping up on my ledger about as Target popping up under my wife’s ledger. I went for one reason – it tasted good and it defined a relatively novel concept in the rapidly produced and customizable burrito. I always held my nose, and my breath, when being subjected to their trite and cynical marketing ploys to convince the world that they were somehow better and more morally righteous than their competitor down the street because they used more local ingredients (although not entirely local, which begs the question of: how much local is enough to make one virtuous?) and because they eschewed genetically modified foods.

Now arrives the comeuppance and the limits of that approach, as Chipotle finds out the hard way the challenges of managing quality and risk management of leveraging local suppliers in a large chain and mass production world. As much as Chipotle leadership has pilloried more industrial and centralized forms of food production, they now find themselves going back and applying some of its most profound economic lessons and virtues as they hurriedly scale back on their usage of local suppliers. Namely, these lessons are the benefits of productivity and innovation, which leads to lower cost foods, produced in a more safe and trackable manner and often times a more environmentally friendly manner than their small-scale counterparts.

Thus, I find it important to keep up with the scorecard since Chipotle used GMOs as a whipping boy for all that is wrong with food in America and to fear monger us all about “frankenfoods” in order to boost its own prices. I present the updated scorecard that helps us keep up with the ill effects of GMOs and how Chipotle is saving us from its malevolent forces:

Chipotle – 200+ illnesses due to E. Coli

Deaths due to Malnourishment in Children Under the age of 5 during 2013 – 3 Million

Deaths or illnesses due to GMOs – 0