Thursday, February 11, 2010

My Farm Subsidies Editorial

Imagine you’re a cotton farmer in West Africa. One day, the man who comes to buy your cotton to be exported does not show up. You go to the marketplace and find there is nobody willing to buy your cotton. In fact, there is cheaper cotton available from abroad.

You now cannot sell your crop, or at least you cannot sell it for very much. You need to buy food and fertilizer, and your children need medicine and money to pay for schooling. You’re in trouble now.

Are these the workings of the free market? No. The reason the foreign cotton was able to price the West African cotton out of the market is because it came from the United States and was heavily subsidized.

Cotton subsidies are one of the most notorious examples of government agricultural supports and it gives American cotton producers an unfair advantage over more efficient producers abroad. For example, in Burkina Faso, it costs one-third as much to produce cotton as it does in the United States. According to the British aid agency Oxfam, the only clear advantage American cotton growers have over competitors in Africa is their ability to get government subsidies.

If American cotton subsidies were eliminated, the income of West African cotton farmers would increase 2.3 to 5.7 percent. This additional income could pay for health care for four to ten individuals for an entire year, schooling for one to ten children, or enough food to feed one or two children for an entire year. American cotton subsidies are more than double the amount of humanitarian aid we send to these countries every year.

Cotton subsidies aren’t the only villain. According to the San Francisco Chronicle, heavily-subsidized American corn has flooded Mexico under the North American Free Trade Agreement, never mind the fact that “dumping” is illegal. According to The Public Citizen, this corn is 30 percent below cost and Mexican farmers cannot compete with this. This has destroyed much of Mexico’s agriculture and caused widespread hunger among the 15 million Mexicans who depend on the corn industry.

According to the World Bank, if First World nations eliminated all agricultural subsidies and tariffs, 144 million people would be pulled out of extreme poverty by 2015. In the case of Africa, if the continent increased its exports by 1 percent, it would generate an additional $70 billion each year, more than five times the amount the continent receives in foreign aid.

Not only are American agricultural subsidies destructive to foreign economies, but they are destructive to our own. American agricultural producers already received enormous sums of money when then-President George W. Bush added an addition $190 billion over 10 years in farm subsidies to the federal budget. In a time of deficits, recession, and war, this kind of spending to essentially secure the votes of Iowans cannot be tolerated.

Furthermore, the practice of subsidizing agriculture puts the U.S. government in the position of both causing and treating major American health problems. Corn subsidies make products containing unhealthy high-fructose corn syrup cheaper and thus more easily purchased and consumed in enormous quantities.

High-fructose corn syrup contributes to many health problems like obesity and diabetes and those cost money. According to the New York Times, three-fourths of health-care spending goes to prevent “preventable chronic diseases,” many of which are caused by a poor diet. For example, U.S. spends $147 billion to treat obesity and $116 billion to treat diabetes, as well as hundreds of billions more to treat cardiovascular diseases and other cancers that result from the typical unhealthy American diet. 30 percent of the increase in health-care spending in the United States in the last 20 years can be attributed to obesity alone. If corn subsidies were cut, the amount spent on health care in this country would decline greatly.

Furthermore, by destroying the Mexican corn industry, farm subsidies have also contributed to illegal immigration. The former farmers in Mexico, not content to starve at home, have come to the United States regardless of whether it is legal for them to do so. According to the Federation for American Immigration Reform, illegal immigration costs state, local, and federal governments $45 billion to $55 billion per year.

Although the farm subsidies were originally intended to preserve small family farms, the primary beneficiaries of federal largesse are not these farmers, but large agribusinesses. Nearly three-fourths of all subsidies went to the top 10 percent of agribusinesses in 2001. For example, Arkansas Tyler Farms received $8.1 million in subsidies, 90,000 times the average payment of $899. Several Fortune 500 companies like Chevron and John Hancock Mutual Life Insurance receive large sums. These subsidies enable agribusinesses to buy out family farms or undercut them using economies of scale. This produces what one government official has called “the plantation effect.”

In short, Americans are being taxed to make the rich richer and the poor poorer, at home and abroad, and to make themselves fatter besides.

President Barack Obama, in one of the few fiscally conservative things he has done, has advocated cutting these subsidies. In his Fiscal Year 2010 budget, subsidy payments to farmers making over $500,000 per year are being phased out, as are subsidies for cotton storage. The elimination of storage payments alone will save $570 million, while eliminating payments to high-income farmers will save $126 million. Eliminating direct payments to farms with sales over $500,000 will save $9.765 billion, while abolishing federal payment of crop insurance premiums and underwriting gains and fees will save $5.184 billion.

The above figures do not include the reduction in health-care costs that the resulting price increases in soft drinks will entail, the reduction in foreign aid that the enrichment of countries whose agriculture we are destroying will make possible, and the reduction in the costs of illegal immigration.

Earlier versions of this column appeared on the blog “Seeking Liberty,” in The Red and Black, and The Griffin Daily News.

“Seeking Liberty”

The Real Cost of Agricultural Subsidies

The Red and Black

Farm Subsidies Create Poverty

The Griffin Daily News

Agricultural Subsidies a Drain on the Budget


  1. dude im lovin your blog, keep it coming.


  2. Good article! I feel strongly about the corn subsidies, in particular, for the health repercussions you mentioned.

  3. This is yet another example of a policy that is clearly economically unjustifiable and yet politically unfeasible to reverse. The inherent public choice problem of diffuse vs. concentrated benefits and costs is exacerbated by an anachronistic Senate that overwhelmingly favors small, rural states that are also overwhelmingly net recipients of federal funds, but also overwhelmingly supporters of the Republican party and of tax cuts.

    Our major political parties have inexplicably chosen to exacerbate this problem EVEN FURTHER by giving Iowa, the Corn Subsidy State, a permanently favored place in our primaries.

    Conclusion: American democracy is a failed experiment. Time for American Derickocracy?

  4. Thanks for the lengthy and substantial comment, Derick.

    Thing is, I think abolishing the Senate is a bit of an overreaction, particularly when there are less radical ways of dealing with the problem.

    For awhile a few years back, it was popular to criticize subsidies for "farmers" like Scottie Pippen or a magazine columnist who wrote a column criticizing farm subsidies (he said he got payments even though he engaged in no agriculture).

    Plus Obama did cut farm subsidies a fair bit in one of his budgets, although I'm not 100% sure if that budget passed in the form I found it in.

    It might be better to push one or both of the major parties to move their opening primary for Iowa to state with a larger population. It'd certainly be easier than convincing Congress to drastically reduce or eliminate farm subsidies.

  5. Abolishing the Senate might be a bit of an overreaction to the specific problem of farm subsidies, which is minor as things go. But let's not pretend that this is the only negative consequence of such an unrepresentative body. Things like the Cornhusker Kickback are only possible because the Senate structure gives so much power to individual Senators, and each state is given equal weight. This was a classic example of how the Senate structure allows the senator from a relatively inconsequential state like Nebraska to capture ridiculously outsize benefits for his constituents while the big states carry the cost. Now the Kickback ultimately was pulled from the bill, but I think we all know it would be much harder for something like that to even be plausible in the House.

  6. What about the inhabitants of Third World cities though - aren't they dependent on cheap subsidized food?

  7. I am not aware of the situation of the Third World populations, although I do know that some countries (like Egypt) subsidize food and fuel to keep them happy.

    Thing is, if there's no more dumping of subsidized American food on them, domestic agriculture might be able to take up the slack.

    (This is in reference to the Mexican corn farmers, primarily.)