Why Farm Subsidies Must End

Guest post by Brent

The United States government is currently heavily involved in domestic agriculture. Intervention in domestic agriculture by the United States is not justified. I believe government intervention in the agriculture market is resulting in more harm than benefit and a market-based environment would lead to more favorable outcomes for the agriculture market and the American people.

Federal programs to aid domestic farmers are very costly to the American government. “Farm support programs cost taxpayers nearly $20 billion a year” (Griswold 2007). The costs of farm support programs have been rising every year. From 1995 to 2004 the average cost of farming subsidies was $14.3 billion per year, from 2002 to 2006 subsidies cost the American people an average of $20 billion per year with $25 billion alone in 2005 (Frydenlund 2007). With the rising national debt the American government cannot afford to continue the practice of providing subsidies to agriculture firms.

A government subsidy to farmers creates high levels of income disparity in the agriculture market. In 2003, the wealthiest 10 percent of farmers collected 72 percent of the government subsidies handed out (Frydenlund 2007). Many people believe that farm subsidies have been put in place to protect the “local” farmer but that is simply not true. The large agriculture firms are the ones receiving the majority of the benefit as Frydenlund (2007) points out. The struggling rural farmers are not the ones receiving the benefits of subsidies, “ While farm programs have enriched certain farmers, they have failed to deliver long-promised rural development” (Griswold 2007). Studies have found that areas in the United States where subsidy payouts are high tend to have poor job and population growth. As Frydenlund (2007) discusses the results of a study conducted by the Federal Reserve Bank of Kansas City, “Job gains are weak and population growth is actually negative in most of the counties where farm payments are the biggest share of income”.

Government intervention in the form of subsidies to farmers increases environment degradation. For example, Griswold (2007) writes that farm support programs promote the overuse of fertilizers and pesticides which damage the environment. The price of land conservation also rises due to land owners being able to receive government subsidies from allowing farmers to use their land (Frydenlund 2007). Edwards (2007) of the Cato Institute writes, “Lands that might otherwise be used for parks, forests or wetlands get locked into farm use”. By providing incentive to turn land to usable farm space, the federal government is decreasing the amount of land set aside for environmental conservation efforts. If the free market were allowed to run its course, the amount of land set aside for conservation would increase due to lower opportunity costs and therefore the amount of harmful fertilizers and pesticides would in turn decrease.

Government subsidies in the agriculture market can cause higher food prices for American consumers. The government subsidies of ethanol are a prime example of subsidies driving up the price of food. Farmers responded to ethanol subsidies by devoting more corn to the production of ethanol which lowered the supply of “food” corn. This intervention results in a rise the cost of food, “Rising food prices in response to ethanol mandates also illustrate an important point raised by Ludwig von Mises in his various critiques of interventionism–there is no such thing as an isolated government intervention” (Carden 2010). This is a major point against government intervention, the act of intervention can affect many unintended areas of the economy. A free agriculture market would be able to keep food prices at a desirable level of equilibrium. Government intervention in food markets lead to inefficiencies and higher prices.

Many supporters of government farm support claim that subsidies in agriculture are necessary in order to maintain adequate levels of domestic food production for national security reasons. For example, Young (2007), chief economist for the American Farm Bureau describes farm subsidies as an “insurance policy”.  Guell (2008) also suggests, that without government aid many farmers would have declared bankruptcy and halted growing. This scenario of farmers leaving the industry due to lack of government intervention has not been true across the globe. The farmers of Australia and New Zealand are a prime example of this scenario being false. Farmers of these two nations receive dramatically lower government payouts and yet their populations have experienced no food disruptions or shortages since government spending was cut due to improved efficiently throughout the newly free market of agriculture (Griswold 2007).

Government intervention in farming and agriculture is not justified and it producing an outcome that is suboptimal compared to letting the free market reign. Federal subsidies are contributing to higher food prices, environmental degradation and increased income disparity. Fears of national security risks due to a free agriculture market have been disproved by Australia’s and New Zealand’s agriculture market. In order to achieve an optimal outcome for the people of the United States, the government must cutback or remove current intervention in the farming and agriculture market.

Works Cited

Carden, A. 2010, America’s Food to Fuel Problem, Viewed on 26 February 2010,

http://www.forbes.com/2010/02/10/ethanol-environment-government-initiatives-opinions-contributors-art-carden.html

Edwards, C. 2007, Ten Reasons to Cut Farm Subsidies, Viewed on 27 February 2010,

http://www.cato.org/pub_display.php?pub_id=8459

Fydenlund, J. 2007, Farm Subsidies: Myth and Reality, Viewed on 28 February 2010,

http://www.docstoc.com/docs/896376/Farm-Subsidies

Griswold, D. 2007, Online Debate: Should the United States Cut Its Farm Subsidies?,

Viewed on 27 February 2010, http://www.cfr.org/publication/13147/

Guell, R 2008, Issues in Economies Today, 4th edn, Mcgraw Hill/Irwin, USA.

Young, B 2007, Online Debate: Should the United States Cut Its Farm Subsidies?,

Viewed on 27 February 2010, http://www.cfr.org/publication/13147/

2 Replies to “Why Farm Subsidies Must End”

  1. i notced we had a republican president and a republican majority congress from 2000-2006 and yet farm subsidies did not end. in fact nearly every republican farmer i know and several republican congressman actively get them. its funny how these are the people that seem to complain the most about how people shouldn’t live off the government dont you think?

  2. Why in the world with your economy the way it is are you paying out farm subsidies?????????

    Farming subsidies in NZ ended around 1984 and exporting dairy and agricultural goods is still today one of our biggest export earnners

    the world didn’t fall apart…

    but hey its your dime I guess

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