Full Version: Farm Subsidies
Each year Congress is pressed by the agriculture lobby to keep farm subsidies alive. Often the argument is that farmers need help because prices are low and farming is risky business. However, by paying subsidies, the government distorts the market signals the farmers receive thereby increasing agricultural output. This increased output leads to low prices.
Do we still need these programs? Should they be altered or abolished? What do you think?
Do we still need these programs? Should they be altered or abolished? What do you think?
This is just another form of corporate welfare. These subsidies are available whether you're a single-family farm with 1,000 acres, or ADM with control of 5 million acres.
End the subsidies. Let the market determine what the price should be, instead of artificially propping up the price. That is what America is all about, isn't it?
End the subsidies. Let the market determine what the price should be, instead of artificially propping up the price. That is what America is all about, isn't it?
The worst thing about farm subsidies is that the government pays some farmers not to harvest their crops in order to keep the market stable. That makes no sense to me. We let fields sit and rot so that prices stay high.
Also, the government only pays subsidies on a particular few crops, and not others. This encourages farms to specialize in a single crop, and use the same soil year after year for that crop. But many crops deplete certain nutrients while accumulating others in the soil, so the soil becomes unbalanced and less fertile. Crop rotation has been used since ancient times to keep the soil nutrients stable year after year, but now it is more profitable not to rotate crops. Subsidies need to at least be modified to encourage more sustainable farming practices.
Also, the government only pays subsidies on a particular few crops, and not others. This encourages farms to specialize in a single crop, and use the same soil year after year for that crop. But many crops deplete certain nutrients while accumulating others in the soil, so the soil becomes unbalanced and less fertile. Crop rotation has been used since ancient times to keep the soil nutrients stable year after year, but now it is more profitable not to rotate crops. Subsidies need to at least be modified to encourage more sustainable farming practices.
There needed to be another choice, this isn't a YES or NO question. Should the government pay farmers NOT to grow? Absolutely not. Should the government step in and aid farmers through lean years? Certainly. The point of any business, be it a farm or the corner grocery store, should be self-sufficiency and profit. If they cannot make a profit, they don't deserve to be in business, but farms do have a difficult time of it at some times, their livelihood is dependent on a lot of factors that they have no control over.
America can no more afford to lose it's farmers and go global than it can allow it's defense industry to be totally dependent on other countries. Food is a strategic resource, same as oil, probably a more hidden one that is just as important. Funny, in every military science class I ever took, (ROTC etc) this statistic was always one that was talked about during the cold war: Our country, if it were forced to stop producing any food of any kind tomorow, would be able to feed it's population for 2 years. During that time, the USSR could sustain 2 weeks. Being able to feed troops and populations are as important to a nation as building tanks.
I think that is the reason that it has never been seriuosly talked about cutting out of the budgets, because I think that anybody that takes into account national security and our food supply, you see they are one and the same.
It is one industry that the US can not have dependent on foriegn sources, so subsidies will remain, though I would like to see a cut off of corporate size, so ADM and conglomerate farms don't have such an upper hand, though some of these conglomerates are even neccesary.
The funny thing is, the dust bowl is really what created the system we have today, like Soc Sec. in order to stabilize and secure our country. The dust bowl is the direct reason of paying farmers not to grow crops, in order to allow the field to lie fallow.
I think that is the reason that it has never been seriuosly talked about cutting out of the budgets, because I think that anybody that takes into account national security and our food supply, you see they are one and the same.
It is one industry that the US can not have dependent on foriegn sources, so subsidies will remain, though I would like to see a cut off of corporate size, so ADM and conglomerate farms don't have such an upper hand, though some of these conglomerates are even neccesary.
The funny thing is, the dust bowl is really what created the system we have today, like Soc Sec. in order to stabilize and secure our country. The dust bowl is the direct reason of paying farmers not to grow crops, in order to allow the field to lie fallow.
Personally I would remove all subsidies as they distort the market and we are all paying for them in our taxes and through higher food prices. I can understand CruisingRam's argument that food is a strategic resource, but if that's the justification for farm subsidies why do we also subsidise cotton farmers and tobacco farmers?
Cotton too is a strategic resource. Tobacco is to regulate the drug market itself. NOt just anyone is allowed to grow a crop of tobacco. IT is not like growing weed, but to get the money you have to adhere to some rules.
Yeah, I always get a kick out of the fact that we subsidize tobacco farmers while suing tobacco companies. 
There are existing free-market solutions to the year-to-year variance in farming returns. I live in an agricultural area and I constantly hear ads for crop insurance and the like. It would be all well and good for the government to "step in" and aid farmers from time to time were it not for the pesky little fact that they have to get the money from someone else, someone with no moral obligation whatsoever to the farmer. I can't legally take your money and give it to a farmer, no matter how tough of a time he's having. Why should the government have the legal right to do so?
Ever heard of the "Freedom to Farm Act"? When passed in 1996, it was touted as the first step in ending farm subsidies completely once and for all. There has, indeed been serious talk about ending subsidies, there just hasn't been the political will to stay on course...
Those who make the national security argument are again putting too little faith in the market. If the US really began to become too dependent on a small number of countries for its breadbasket, then there will be those that invest in alternatives, or stand ready to do so, in order to profit from the emergency that would result if these sources were suddenly cut off.
In truth though, ending farm subsidies will not likely result in dependence on foreign countries, but rather in large increases in productivity here at home.
Read this Cato Institute article on what happened to New Zealand when they eliminated farm subsidies. Here's an editted excerpt:
Okay, that's almost the whole article...
But it's good stuff!!!!
QUOTE(Cephus(edited down))
Should the government step in and aid farmers through lean years? Certainly. ...farms do have a difficult time of it at some times, their livelihood is dependent on a lot of factors that they have no control over.
There are existing free-market solutions to the year-to-year variance in farming returns. I live in an agricultural area and I constantly hear ads for crop insurance and the like. It would be all well and good for the government to "step in" and aid farmers from time to time were it not for the pesky little fact that they have to get the money from someone else, someone with no moral obligation whatsoever to the farmer. I can't legally take your money and give it to a farmer, no matter how tough of a time he's having. Why should the government have the legal right to do so?
QUOTE(CruisingRam)
I think that is the reason that it has never been seriuosly talked about cutting out of the budgets, because I think that anybody that takes into account national security and our food supply, you see they are one and the same.
Ever heard of the "Freedom to Farm Act"? When passed in 1996, it was touted as the first step in ending farm subsidies completely once and for all. There has, indeed been serious talk about ending subsidies, there just hasn't been the political will to stay on course...
Those who make the national security argument are again putting too little faith in the market. If the US really began to become too dependent on a small number of countries for its breadbasket, then there will be those that invest in alternatives, or stand ready to do so, in order to profit from the emergency that would result if these sources were suddenly cut off.
In truth though, ending farm subsidies will not likely result in dependence on foreign countries, but rather in large increases in productivity here at home.
Read this Cato Institute article on what happened to New Zealand when they eliminated farm subsidies. Here's an editted excerpt:
QUOTE
In 1984 New Zealand's Labor government took the dramatic step of ending all farm subsidies, which then consisted of 30 separate production payments and export incentives. This was a truly striking policy action, because New Zealand's economy is roughly five times more dependent on farming than is the U.S. economy, measured by either output or employment. Subsidies in New Zealand accounted for more than 30 percent of the value of production before reform, somewhat higher than U.S. subsidies today...
Subsidy elimination in New Zealand was swift and sure. There was no extended phaseout of farm payments, as was promised but not delivered under U.S. farm reforms in 1996. Instead, New Zealand's government simply offered one-time "exit grants" to those who wanted to leave farming when subsidies ended.
New Zealand's plan was initially met with protest marches on parliament and organized resistance by farmers. Bolstering opposition was the government's own prediction that 10 percent of all the country's farms would go out of business. But the subsidies were ended, and New Zealand farming has never been healthier.
A report last year from the country's main farmers' group, the Federated Farmers of New Zealand, documents the positive change and growth in that country's agriculture industry since subsidies ended. While land prices initially fell after reform, by 1994 they had rebounded, and they remain high today. The mass of farm bankruptcies some had expected never occurred; just 1 percent of farms have gone out of business.
Meanwhile, the value of farm output in New Zealand has soared 40 percent in constant dollar terms since the mid-1980s. Agriculture's share of New Zealand's economic output has risen slightly, from a pre-reform 14 percent to 17 percent today. Since subsidies were removed, productivity in the industry has averaged 6 percent growth annually, compared with just 1 percent before reform. Farming in New Zealand scores well on the export "report card," with producers competing successfully in world markets against subsidized farm production in much of the rest of the world.
The Organization for Economic Cooperation and Development (OECD) confirms that New Zealand has the least subsidized farm sector among the industrial nations, concluding that its reforms "resulted in a dramatic reduction in market distortions." The OECD's data show that agriculture subsidies account for just 1 percent of the value of agriculture production in New Zealand and consist mainly of scientific research funding. By contrast, subsidies represent 22 percent of the value of U.S. farm production.
Subsidy elimination in New Zealand was swift and sure. There was no extended phaseout of farm payments, as was promised but not delivered under U.S. farm reforms in 1996. Instead, New Zealand's government simply offered one-time "exit grants" to those who wanted to leave farming when subsidies ended.
New Zealand's plan was initially met with protest marches on parliament and organized resistance by farmers. Bolstering opposition was the government's own prediction that 10 percent of all the country's farms would go out of business. But the subsidies were ended, and New Zealand farming has never been healthier.
A report last year from the country's main farmers' group, the Federated Farmers of New Zealand, documents the positive change and growth in that country's agriculture industry since subsidies ended. While land prices initially fell after reform, by 1994 they had rebounded, and they remain high today. The mass of farm bankruptcies some had expected never occurred; just 1 percent of farms have gone out of business.
Meanwhile, the value of farm output in New Zealand has soared 40 percent in constant dollar terms since the mid-1980s. Agriculture's share of New Zealand's economic output has risen slightly, from a pre-reform 14 percent to 17 percent today. Since subsidies were removed, productivity in the industry has averaged 6 percent growth annually, compared with just 1 percent before reform. Farming in New Zealand scores well on the export "report card," with producers competing successfully in world markets against subsidized farm production in much of the rest of the world.
The Organization for Economic Cooperation and Development (OECD) confirms that New Zealand has the least subsidized farm sector among the industrial nations, concluding that its reforms "resulted in a dramatic reduction in market distortions." The OECD's data show that agriculture subsidies account for just 1 percent of the value of agriculture production in New Zealand and consist mainly of scientific research funding. By contrast, subsidies represent 22 percent of the value of U.S. farm production.
Okay, that's almost the whole article...
But it's good stuff!!!!
QUOTE(CruisingRam @ Oct 20 2003, 10:59 PM)
NOt just anyone is allowed to grow a crop of tobacco.
That's not true. I am allowed to grow tobacco here in my backyard. I just can't sell it without being part of the Agricultural Commodity Commission for Tobacco for the State of Georgia. Georgia Code: Rules for the ACCT
Perhaps, just a technicality, but one I felt needed to be distinguished.
Edited for clarity
QUOTE(Cephus @ Oct 7 2003, 11:28 PM)
There needed to be another choice, this isn't a YES or NO question. Should the government pay farmers NOT to grow? Absolutely not. Should the government step in and aid farmers through lean years? Certainly. The point of any business, be it a farm or the corner grocery store, should be self-sufficiency and profit. If they cannot make a profit, they don't deserve to be in business, but farms do have a difficult time of it at some times, their livelihood is dependent on a lot of factors that they have no control over.
This is a common argument for maintaining subsidies. Many people say: "We need subsidies to keep prices up in down years." However, farming is not the only risky business. Should technology companies have received subsidies over the past few years because business was bad?
Secondly, you say: "If they cannot make a profit, they don't deserve to be in business, but farms do have a difficult time of it at some times, their livelihood is dependent on a lot of factors that they have no control over."
This is half right. If they cannot make a profit they should go out of business, however artificially stilting prices prevents this from happening. Also, everyone’s livelihood depends on ‘a lot of factors that they have no control over.’ Just look at the recent layoffs in the U.S.
Yes subsidies to farmers should end. Not only in the USA, but everywhere else, too.
I think the "strategic resource" argument is something of a chimera - there is no reasonable suggestion that, if subsidies were all axed tomorrow, America would suddenly become dependant on foreign food sources without some kind of environmental or climatic disaster (in which case the US would need to import food whether or not farmers were paid subsidies).
What would happen, though, is that the huge food surpluses being dumped on the less developed world at rock-bottom prices that put local economies into tailspins of aid dependancy would disappear. Not only would this save taxpayers in the USA and EU the money they spend on domestic farm subsidies, but it might ultimately reduce demands on foreign aid budgets.
Small-scale farmers might go to the wall at the expense of big conglomerates, but if that's something that requires protection through subsidy, why do we limit it to food production? Surely smaller food retailers (the part of the supply chain that actually gets the food to the population, through their logisitics departments - production is nothing without distribution for any resource, strategic or otherwise) should be subsidised as well to protect them from competition from the likes of WalMart?
I think the "strategic resource" argument is something of a chimera - there is no reasonable suggestion that, if subsidies were all axed tomorrow, America would suddenly become dependant on foreign food sources without some kind of environmental or climatic disaster (in which case the US would need to import food whether or not farmers were paid subsidies).
What would happen, though, is that the huge food surpluses being dumped on the less developed world at rock-bottom prices that put local economies into tailspins of aid dependancy would disappear. Not only would this save taxpayers in the USA and EU the money they spend on domestic farm subsidies, but it might ultimately reduce demands on foreign aid budgets.
Small-scale farmers might go to the wall at the expense of big conglomerates, but if that's something that requires protection through subsidy, why do we limit it to food production? Surely smaller food retailers (the part of the supply chain that actually gets the food to the population, through their logisitics departments - production is nothing without distribution for any resource, strategic or otherwise) should be subsidised as well to protect them from competition from the likes of WalMart?
QUOTE(Julian @ Oct 21 2003, 01:26 PM)
What would happen, though, is that the huge food surpluses being dumped on the less developed world at rock-bottom prices that put local economies into tailspins of aid dependancy would disappear. Not only would this save taxpayers in the USA and EU the money they spend on domestic farm subsidies, but it might ultimately reduce demands on foreign aid budgets.
This is a great point. There was an article in the Wall Street Journal recently that talked about this. One of the ways America subsidizes its farmers is by buying surplus domestic crop to use as food aid. The result is the artificial inflation of domestic prices, while prices in the countries who receive the aid are depressed. Essentially this removes incentive for farmers in those poor, starving countries to farm. The article made a strong case that food aid actually makes the problem worse in the long run.
Argh the Wall Street Journal's subscription policy is enough to drive you nuts sometimes. They had a perfect article on this just last week. To recap it, from the depression (the last time a dramatically sudden nose dive of grain prices occurred) until the early 1970's the US government had a kind of grain reserve lending service. The government set a minimum price for grain, when grain fell below that price the government LOANED farmers the price of the grain, taking it as collateral and holding it until prices rose again. The effect of stockpiling all this grain outside the marketplace what to produce a relative scarcity and thus raise the price once more. Once prices rose above the minimum price farmers "sold" the grain in government reserve and "repayed" the loan they had been given. This allowed farmers to receive a steady reliable income and kept the price of grain from falling too high or too low. Farmers almost always repayed the loans and even when the government was left holding the grain they usually made their money back eventually. However the farmer never actually received a grant from the government, just a loan. So if he massively over planted in regard to expected demand he could still go out of business. This kept the kind of massive over production we see today from happening.
This system worked almost all the time, but in years of bad harvest it really had no mechanism for keeping prices down, it was designed to protect farmers not consumers. So during the Nixon administration there was a relative grain shortage and the price of bread and meat and alot of other foods rose. This led to actual protests over the price of food. Nixon had enough protestors to deal with without having to face middle class mothers who couldn't afford their kids PB&J's so he told his Agriculture secretary to fix the problem no matter what it took. As a result the grain deposit/loan system scrapped in favor of a blanket subsidy that rewarded farmers for planting as much as their land could produce. I believe the famous line was for farmers to plant their grain "fence row to fence row."
That led to the current massive over production system we have now. The WSJ author notes that the last time there was this much surplus grain Americans made and consumed more alcohol than at any other time in our history, creating a societal scourge. Drinking is no longer PC, so now we turn it into corn syrup. This has led to an explosion in the number of "sugary" (really corn syrupy) junk foods available. We're becoming an overweight nation, and our grain exports are flooding third world markets making it impossible for local farmers to sell their surplus at market.
Farm subsidies have turned the grain belt into a massive welfare state. If our Republican leaders want small government why don't they begin at home?
This system worked almost all the time, but in years of bad harvest it really had no mechanism for keeping prices down, it was designed to protect farmers not consumers. So during the Nixon administration there was a relative grain shortage and the price of bread and meat and alot of other foods rose. This led to actual protests over the price of food. Nixon had enough protestors to deal with without having to face middle class mothers who couldn't afford their kids PB&J's so he told his Agriculture secretary to fix the problem no matter what it took. As a result the grain deposit/loan system scrapped in favor of a blanket subsidy that rewarded farmers for planting as much as their land could produce. I believe the famous line was for farmers to plant their grain "fence row to fence row."
That led to the current massive over production system we have now. The WSJ author notes that the last time there was this much surplus grain Americans made and consumed more alcohol than at any other time in our history, creating a societal scourge. Drinking is no longer PC, so now we turn it into corn syrup. This has led to an explosion in the number of "sugary" (really corn syrupy) junk foods available. We're becoming an overweight nation, and our grain exports are flooding third world markets making it impossible for local farmers to sell their surplus at market.
Farm subsidies have turned the grain belt into a massive welfare state. If our Republican leaders want small government why don't they begin at home?
QUOTE(Jaime @ Oct 21 2003, 03:32 AM)
QUOTE(CruisingRam @ Oct 20 2003, 10:59 PM)
NOt just anyone is allowed to grow a crop of tobacco.
That's not true. I am allowed to grow tobacco here in my backyard. I just can't sell it without being part of the Agricultural Commodity Commission for Tobacco for the State of Georgia. Georgia Code: Rules for the ACCT
Perhaps, just a technicality, but one I felt needed to be distinguished.
Edited for clarity
Conceded, but I think the end result is the same....
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