This post is the first in a series that will examine big picture issues that frame U.S. farm safety net policy. Impetus for the series is the recent rejection by the U.S. House of Representatives of the proposed 2013 Farm Bill. While spending on food nutrition programs was a key issue, both the proposed spending and structure of the farm safety net impacted at least some, maybe many, votes. Thus, the decision by the House of Representatives suggests the U.S. is now fully engaged in a major debate about the future of its farm safety net. These types of debates are more about the big policy picture than about specific policy parameters, such as the level of target prices. This post specifically examines the issue of farm income relative to the income for the rest of the U.S.
Average income of U.S. farm households has exceeded average income of all U.S. households every year since 1996, a full decade before the start of the recent farm prosperity (see Figure 1). Moreover, since 1972, income of farm households has exceeded income of all households in 67% of the years. The major exception is 1979 through 1984, a period that overlaps with the farm financial crisis. Note that farm household income is calculated using net farm income. For a more detailed discussion comparing U.S. farm household and all U.S. household income see the U.S. Department of Agriculture (USDA), Economic Research Service (ERS) website (available here).
Average household incomes can be compared back to 1960. In 1960, average farm household income was 65% of average U.S. household income. Thus, over the last half century, farm household income has increased substantially relative to income of U.S. households.
To obtain a longer historical perspective, two data series need to be spliced. Specifically, USDA, ERS published a comparison of per capita (per person) personal income from 1934 through 1983. This data also is presented in Figure 1. It is from the Economic Indicators of the Farm Sector: Income and Balance Sheet Statistics, 1983 (available here). Specifically, Figure 1 contains per person disposal personal income. Disposable income is total personal income minus personal current taxes. In 1934, per person disposable income of farms was 39% of U.S. per person disposable income. By 1983, the ratio was 69%. The ratio of farm household income to all U.S. household income usually exceeds the ratio of per person disposable income because farm households are larger on average than nonfarm households. Again, per capita farm income is calculated using net farm income.