Eliminating inefficient and outdated agricultural subsidies in the 2012 Farm Bill could save U.S. taxpayers more than $100 billion over the next decade while having little impact on the country’s food supply or its farmers’ viability, according to the American Enterprise Institute.
Federal programs for cotton, dairy and sugar producers are among those the institute recommends be cut, along with subsidies for crop insurance and disaster aid. Subsidies paid to growers of corn and other crops – known as “direct” and “countercyclical” payments – should also be eliminated, according to the institute, a conservative research group based in Washington, D.C.
Farm program subsidies could be eliminated, or at least reduced from current levels by about $8 billion to $10 billion, “without affecting the U.S. food supply or the financial viability of U.S. agriculture,” the institute said in statements released this week.
Soaring grain prices and strong export markets have fueled a farm income boom in recent years, reducing the need for government aid for growers, the institute said, adding that inefficient programs contributed to cost overruns in the 2008 Farm Bill.
“There is little evidence that most programs in the Farm Bill address actual market failures or improve societal welfare,” economists affiliated with the institute said in the statements. “Farms and farm households have no more need for federal programs that subsidize incomes and risk protection strategies than other businesses or households.”
Critics of agricultural subsidy are amplifying their efforts as discussions on the 2012 Farm Bill approach and Congress looks for ways to cut spending and corral a budget deficit that’s expected to reach nearly $1.4 trillion this year.
This week, the American Enterprise Institute, a long-time opponent of farm subsidies, released 12 studies that examined various aspects of U.S. agricultural policy and recommended changes. Institute-affiliated economists discussed the studies, titled “American Boondoggle – Fixing the 2012 Farm Bill,” in a July 11 media conference call.
Discussions during the call, as well as the release of the 12 studies, were embargoed until July 12. Click here for more on the studies.
The current Farm Bill, formally known as the Food, Conservation, and Energy Act of 2008 and passed by Congress in June that year, largely continued subsidy programs from previous Farm Bills, and also included measures increasing support for food aid for the poor and for cellulosic ethanol production.
But the programs required by the bill have cost more than expected, reflecting increased expenditures on food and nutrition programs, higher-than-expected crop insurance subsidies, and an “extremely expensive” disaster program for crops, the institute said.
The institute estimated the 2008 bill’s cost at $307 billion, compared with the Congressional Budget Office projection of $284 billion in 2008.
Farm subsidies, the institute said, “represent unjustified pork-barrel largesse,” transferring taxpayer dollars to relatively wealthy farmers and crowding out programs serving the world’s poor during a time of severe budget constraints.
“The average farm family currently earns substantially more income than the average nonfarm family and is much wealthier,” the institute said. “Most farm subsidies go to substantial and successful operations and provide little support for the farms they were once intended to benefit.”
While farm subsidies have been the target of criticism for years, payments to farmers comprise a relatively small portion of overall agriculture spending. Agriculture represents even a smaller fraction of overall government expenditures, or outlays.
Direct payments to farmers and other commodity programs totaled $8.99 billion in fiscal 2011, or about 6 percent of the U.S. Department of Agriculture’s total spending authority of $149 billion, according to the USDA’s budget summary.
About $107.6 billion, or 72 percent, of USDA spending in 2011 is devoted to food and nutrition programs for children and lower-income people, including the benefits previously known as Food Stamps.
The USDA’s total 2011 spending authority accounts for about 4.2 percent of total federal outlays of $3.54 trillion, according to government reports. Defense outlays, estimated at $561 billion in 2011, account for 16 percent, while Social Security, at $735 billion, accounts for 21 percent.