Iowa State’s Ag economist, Bruce Babcock, wrote an article for Choices Magazine following the 2014 passage of a new farm bill.
The section titled “Resiliency of Farm Programs” was a delight to read for its well expressed honesty. And, as I emphasized below, the real loss in this year’s bill is the fact that the funds could have been used in far better and more ethical, ways. (all emphasis mine)
Record crop income in recent years and subsequent record-high land prices make it absurd to argue that crop subsidies are needed to maintain agricultural production capabilities in the United States. And the argument that the food security of the United States depends on subsidizing production of crops is easily countered by the fact that 30% to 40% of U.S. corn production is diverted to produce ethanol while about 50% of U.S. wheat production is sold in export markets. Yet these two arguments continue to be the primary justifications put forth for crop subsidies.
The disconnect between a lack of an actual economic rationale for farm subsidies and their continued existence demonstrates that farm programs exist not because of a need to enhance social welfare but rather to meet the political objective of members of Congress to care for a constituency that lends them political support. Thus, it is not surprising that record farm income in the last five years had no real impact on the question of whether farm subsidies would continue. Farm income levels have no impact on the benefit of subsidies to farmers and, hence, they have no impact on the political benefits to members of Congress to provide the subsidies.
The outcome of the recent farm bill, in terms of what programs were adopted, coincides nicely with Becker’s theory of political competition with its focus on deadweight losses. The newly adopted programs will not lead to a significant misallocation of resources because program payments are decoupled from planted acreage. This attribute helped defuse opposition to the programs because, in one sense, they do no economic harm.
Unlike in some previous farm bills, the most important welfare costs of farm subsidies in the Agricultural Act of 2014 are not traditional deadweight losses, but rather the lost opportunity to use the funds for programs that unequivocally have the potential to increase social welfare. Examples include agricultural research, agricultural pollution prevention, invasive species control, transportation infrastructure investments, increased food quality and food safety inspections, and nutrition programs. But transferring funds from farm subsidies to these types of public goods will not happen without a dramatic increase in the political power of groups advocating for the public good, which is a daunting challenge, given the defuse nature of public good benefits and the highly targeted nature of the current subsidy programs to a relatively small number of farm households.
In another Choices Magazine farm bill passage article authored by Barry Goodwin and Vincent Smith, these key suggestions would help politicians vote for a better farm bill:
The Congressional Budget Office (CBO) has scored the 10-year cost of the legislation at nearly $1 trillion. However, those cost estimates are based on long-run price projections. If prices fall, as they have recently done, and remain at low levels, the actual cost of the legislation could be far more than what has been projected by CBO. The political dynamics underlying this rare example of bipartisan legislation are showing signs of changing and rhetorical arguments regarding the necessity of subsidies to “save the family farm” are wearing thin. House Republicans attempted bigger farm program spending cuts and proposed separating nutritional assistance from farm subsidies—a change that would make passage of such an immense bundle of subsidies much more difficult.
Yes, indeed. The farm bill needs to be separated from the food security programs and the politicians need to end the false outdated rhetoric telling us that the taxpayer money goes to saving family farms and stimulating rural development… false rhetorics that Tom Vilsack is frequently guilty of, I might add. Citizen apathy concerning legislation in flyover country helps them get away with it and the Iowa caucus helps motive them. It is time for change.
Finally, I can’t conclude any better than the above-cited article concludes:
In summary, from a short-term and longer term economic welfare perspective, the 2014 Agricultural Act generally appears mainly to be focused on transferring income to relatively wealthy farm families as well as some non-farm entities such as the U.S. mercantile marine and private insurance and reinsurance companies. It does so at the expense of consumers and taxpayers, the long-run productivity of the agricultural sector, and efficiently and effectively meeting humanitarian needs through reasonable reforms to international food aid programs. … And the legislation is likely to have such adverse effects for consumers and taxpayers that, in the aggregate, it will almost certainly reduce the economic welfare of the average U.S. citizen.
Pretty sobering words, I would say. Agree? Is anybody paying attention? Does anybody care?