It's Time To End Agricultural Subsidies

If we want to save billions of taxpayer dollars, stop the negative effects of government interfering with market forces, and let food prices seek their own level, then maybe it's time to get farmers off the federal dole.

While some may decry such an action as being against the interests of small family farms, those same folks speaking out against such cuts don't understand that it isn't the small family farms receiving the benefits of the government subsidies and tax breaks, but the large agribusiness corporations. They don't need those subsidies and shouldn't be receiving them because in the long run all they do is raise food prices (and the taxes keeping them there) to the detriment of everyone else, including the small farmers.

Government subsidies obviously aren’t necessary for food production: people have fed themselves and traded their surpluses for thousands of years. The system doesn’t help consumers. Reducing supplies and imposing price floors obviously are bad deals for the hungry. Paying off farmers might lower some prices, but steals back through taxes any benefits received by consumers. Agricultural subsidies are designed by farmers for farmers.

But which farmers? Not the idyllic family farmer. The majority of payments go to farms with average annual revenue exceeding $200,000 and net worth around $2 million.

Many of the subsidies date back to the Depression and the reasons for them no longer exist, but here we are seventy years later and we're still paying for them.

Before anyone gets on their high horse about saving the American farm, we should look at what happened when another country eliminated farm subsidies, in this case, New Zealand.

In 1984, New Zealand's Labor government ended all farm subsidies, which then consisted of 30 separate production payments and export incentives -- a striking action given that New Zealand was five times more dependent on farming than the U.S. economy.

A report from [2001] from the country's main farmers' group, the Federated Farmers of New Zealand, documents what happened:

While land prices initially fell after reform, by 1994 they had rebounded and remain high today.

The predicted farm bankruptcies never materialized -- with just 1 percent of farmers going out of business.

The value of farm output soared 40 percent in constant dollar terms since the mid-1980s and agriculture's share of national output rose from 14 percent to 17 percent today.

Since subsidies were removed, productivity in the sector has risen 6 percent annually -- compared with just 1 percent before reform.

New Zealand's farmers have competed successfully in world markets against subsidized producers in much of the rest of the world.

Can anyone successfully argue that we shouldn't do the same thing, and quite likely, see exactly the same results? Oh, I'm sure someone will try, particularly the folks from the “corporate farm” lobby. But maybe it's time we wean these folks off the government teat and let them succeed or fail on their own rather than allowing them to continue dipping into the taxpayer's wallets.