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Frank Bernheisel: The View From Here
Frank Bernheisel
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Frank Bernheisel
Posted 06.24.11
Just Outside Washington

FRANK BERNHEISEL

"Farm" Subsidies

Recently, the US House of Representatives passed the agriculture appropriations bill. This bill includes a bunch of subsidies for farmers and agribusiness. These subsidies, partially listed below (thanks to the Cato Institute for those) add up to between $14 and $23 billion every year. These are in addition to the $6 billion a year ethanol subsidy, which has pushed the price of corn to over $7 per bushel, increasing the cost of food.

From the subsidies below, there is $20 to $30 billion that the House could cut from the budget and make a substantial impact on reducing the debt. So what did the House do to save money?

They cut the FDA food safety program -- $87 million; the USDA food safety and inspection program -- $35 million; and the emergency feeding program for poor mothers, infants and children -- $832 million.

We could debate the merits of these cuts but there is no point to that. The real point is that the House of Representatives is not serious about the budget and reducing the US debt. If this were a group of individuals serious about reducing the debt they would go after the big-ticket items and not the small change.

Wake up Democrats, there are plenty of programs to cut and reduce the debt.

Wake up Republicans, not everything is a socialist program that is President Obama's fault.

The Direct Payment program provides cash subsidies for producers of 10 crops: wheat, corn, sorghum, barley, oats, cotton, rice, soybeans, minor oilseeds, and peanuts. The last three were added in the 2002 farm law. Direct payments are based on a historical measure of a farm's acres used for production and are not related to current production or prices.

In most years, direct payments are the largest source of subsidies to farmers at more than $5 billion annually. Some of these payments go to people who don't even farm. One example, thousands of acres of land previously used for rice growing in Texas, which are now used for suburban housing and other purposes.

The Marketing Loan program is a price-support program that has been part of the farm subsidy system since the New Deal. The marketing loan program covers the same crops as the direct subsidy program-wheat, corn, sorghum, barley, oats, cotton, rice, soybeans, minor oilseeds, and peanuts.

You might call it double dipping. Because the loans do not get paid back, in recent years, payments under this program have ranged between $1 billion to $7 billion annually.

The Countercyclical Payments program covers the same 10 commodities as the direct payments program-wheat, corn, sorghum, barley, oats, cotton, rice, soybeans, minor oilseeds, and peanuts -- and the 2008 farm bill added dry peas, lentils, and chickpeas. In recent years, countercyclical payments have ranged from about $1 billion to $4 billion annually.

The Conservation Subsidy programs dispense about $3 billion annually to the nation's farmers. The largest conservation subsidy program is the Conservation Reserve Program, which was created in 1985 to idle millions of acres of farmland. Under CRP, farmers are paid not to grow crops, but to cultivate ground cover such as grass or trees on retired acres. A large share of land idled under the CRP is owned by retired farmers, thus one does not even have farm.

The Farm Insurance programs, include both "yield" and "revenue" insurance to protect against adverse weather, pests, and low market prices. The USDA describes its mission as helping farmers "manage their business risks through effective, market-based risk management solutions." This part of USDA has annual outlays of about $4 billion, employs about 550 people, and its activities are far from "market-based."

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