It's Time To End Farm Subsidies

On more than one occasion I have opined that farm subsidies are something that should end because they have outlived their usefulness. These days farm subsidies have nothing to do with helping the family farm survive but are more about unneededcorporate welfare for the agri-businesses, i.e. crony capitalism.

However, the farm lobby is powerful and doing away with something that benefits the agri-businesses will be difficult even though it would save the American taxpayers $22 billion directly, and untold millions or billions indirectly when consumers no longer have to pay artificially high prices for some foodstuffs.

Cronyism is the practice by which government officials provide preferential treatment (such as loans, subsidies or regulatory preferences) to handpicked firms or industries. It is a bipartisan practice, as we may once again find out if lawmakers reauthorize most of the farm bill currently moving through Congress. There is no justification for extending our current regime of agricultural subsidies -- a clear example of cronyism.

In 2012, the Department of Agriculture is projected to spend $22 billion on subsidy programs for farmers. Introduced in the 1930s to help struggling small family farms, the subsidies have become the poster child for government welfare for the affluent. Farm households have higher incomes, on average, than do nonfarm U.S. households.

Second, farm subsidies tend to flow toward the largest and wealthiest farm businesses. According to the Environmental Working Group database, in 2010, 10 percent of farms received 74 percent of all subsidies. These recipients are large commercial farms with more than $250,000 in sales and mostly produced crops tied to political interests. The Cato Institute's Tad DeHaven and Chris Edwards calculate that more than 90 percent of all farm subsidies go to farmers of just five crops -- corn, wheat, soybeans, rice and cotton. For every federal dollar spent on farm subsidies, 19 cents goes to small farms, 19 cents to intermediate (middle-income) farms and 62 cents to the largest commercial farms.

Other countries have ended farm subsidies and in the end everyone was better off without them, including the farms. The excuse “But we've always done it this way!” is lame. All subsidies do is distort the market by short-circuiting the free market feedback systems and give political power to both major parties because they can use them to reward their “friends” and punish their “enemies” by granting or denying them taxpayer dollars.

It's time to do away with that kind of foolishness and end yet another failed FDR-era policy.