Stop Farm Subsidies

In a few days the Congress is going to vote on the $300 billion Farm Bill. Its passage is pretty much assured, however, there is still hope that president Bush would veto it, as he should.

The bill contains a significant number of provisions, all of them either wasteful, harmful or downright scandalous. Yes, scandalous! How else can you call a provision, added by the Senate Minority Leader Mitch McConnell, that gives tax breaks to the owners of the race horses? How do they dare to create taxpayer funded welfare for race horse owners?! Well, McConnell is from Kentucky after all, I guess he or his friends/relatives own some race horses...

However, this, and other provisions like this, are just a drop in the bucket (or trough, as some would have it). The real problem lies in the commodity subsidies.

The federal government is giving out some $30 billion a year to farmers, for producing certain commodities: corn, rice, soybeans, etc. These subsidies create a lot of troubles, and solve nothing.

First problem, the redistribution of income. It is always bad when the government takes money form one group and gives it to another, but in this case it borders on ridiculous. In 2005, the average of farm household income was about $80,000 while average of all household income was close to $65,000. So, in effect, the subsidies move money from the poorer general population to the wealthier few. Very few. The list of recipients of the federal farm subsidies include such names and companies as David Rockefeller, Chevron, Eli Lily, Ted Turner, Kenneth Lay (of Enron fame). In fact, about 75% of the subsidies go to the wealthiest 10% of recipients. The other 90% of recipients receive in average some $500, that is, less than one percent of what Mr. Turner gets. And with current (and most likely, future) commodity prices at record high, why should we subsidize them at all?

Well, the federal government argues that we get lower food prices in return for our subsidies. Maybe, but since the price cuts are paid for with our taxes, where's the gain? Considering that the money go through the federal redistribution, it is a safe bet that half of it is wasted and/or stolen on the way from taxpayer through the federal government through the farmers back to the taxpayers (in the form of lower food prices). I would much rather keep the tax money and pay 3 cents more for an apple.

Another problem created by the subsidies is the distortion in the commodity market. The farmers, having even small incentive, will produce more what the farm bill tells them to produce, instead of what is needed. Rather than paying attention to the demand and supply (which is the only way to have real competition that brings prices down), the farmers pay attention what the central government want them to grow. Currently, our lawmakers want mostly corn. That leads to overproduction of corn, which is then wasted (actually, it is distilled into ethanol, but since creating a gallon of ethanol from corn uses about a gallon of oil, it is pretty much wasted effort), and underproduction of everything else. Have you been grocery shopping recently? These prices are results of such underproduction, coupled with the oil price and the weakness of the dollar, of course.

Then there is the current budget deficit. Farm subsidies are paid by either borrowed money, or "printed" money. The first method is rather costly, and results in ever-increasing taxes; the second one raises inflation and increases prices, defeating the very purpose of the subsidies. If there ever was something to cut from the federal budget, it is farm subsidies.

There is still time, write your representative!