Are Winds of Change Blowing for Farm Subsidies?
The
2002 farm bill, the legislation that is responsible for establishing the type
and amount of subsidies that are provided to farmers, expires in September.
While farm bills set farm
subsidies, they are also responsible for a multitude of other programs from
nutrition to conservation to energy.
As Congress is in the process of writing the legislation to replace the
2002 farm bill, many questions arise regarding the future of subsidies and
other farm bill programs.
Historically, farm subsidies have
received broad support. That support has been driven by both social and
economic factors. Harkening back to Thomas JeffersonÕs vision of the United States
as a nation of landowning farmers, the family farm has enjoyed a special status
in American culture.
From an economic standpoint, it is
easy to understand why subsidies were instituted in 1933. At that time, average
farm household income was about half of that of non-farm households. Also, in
1930, over 20 percent of the nationÕs workforce was employed in production
agriculture.
Today,
the situation in agriculture is much different. Farm household income and
wealth is consistently higher than that of non-farm households, and less than 2
percent of the U.S. workforce is employed in production agriculture.
At the same time, as many critics
of farm subsidies point out, large farms are receiving an increasingly greater
share of subsidies. Although these subsidies are not primarily going to huge
corporate operations as some assert, a greater share of subsidies are going to
a smaller number of farms.
An
average of $17 billion in agricultural subsidies has been paid out annually
since 1997, contributing over 30 percent of national net farm income.
Considering that many agricultural commodities (fruits and vegetables, for
example) are not subsidized, it appears that those farmers who receive
subsidies are dependent on them for their economic well-being.
In fact, according to data from the
Kansas Farm Management Association, in the four years from 1998-2001,
government payments contributed over 100 percent of net farm income. However,
the problem with the assertion that farmers are dependent on subsidies is that
those subsidies get capitalized into land values – meaning that the
biggest beneficiaries of farm subsidies are landowners, not farmers.
Thus, from an economic standpoint,
the importance of subsidies for the well-being of U.S. agriculture is
debatable. This debate has been ongoing for those who steadfastly support
subsidies, and those who want to see them end.
Since the 2002 farm bill was signed
into law, many others have been weighing in on this debate as well. Rarely does
a week go by when a major U.S. newspaper does not publish a story or editorial
critical of some aspect of farm subsidies.
Many of these stories are fueled by
interest groups advocating reform. Many of these interest groups are new to the
farm bill debate and have widely divergent agendas and ideologies. Conservation
and wildlife, nutrition and food assistance, anti-poverty, and free-trade
groups are all pointing out some of the problems associated with farm subsidies
and questioning whether those resources could not be better used in other ways
– whether that is in the public or private sector.
The looming question for those with
an interest in agricultural policy is: How much influence will these
Ònon-traditionalÓ groups have on the 2007 farm bill? Odds are that the powerful
agricultural lobby will maintain its support, but one wonders whether the winds
of change will become stronger in the near future.
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Farm bill column by Troy Dumler, agricultural economist, KSU
Troy Dumler is an Extension agricultural economist at the Kansas State
University research station in Garden City.
