Freedom to Farm Without Subsidies
Uncovering the Hidden Costs of Federal Farm Programs
As Congress debates the next Farm Bill, some farmers are sounding the alarm on the unintended consequences and hidden costs of subsidy programs that are meant to aid the agriculture industry.
As Congress prepares to reauthorize the Farm Bill, crop insurance subsidies and other aid programs are coming under criticism from farmers across the United States.
They say that the subsidies mostly benefit the largest and wealthiest farmers, drive up land prices, discourage innovation, and distort planting decisions in ways that seriously impact our food system.
One of the farmers who is sounding the alarm, Gabe Brown, purchased over 600 acres outside Bismarck, North Dakota, in 1991.
He started farming the way he had been taught—using tillage, fertilizers, and herbicides to grow traditional cash crops— while taking full advantage of the various government programs that provide aid to the agricultural industry.
But after years of crop failures due to capricious weather and counterproductive farming practices, Brown started to rethink the way he ran his family’s operation.
He shifted his focus from sustaining degraded soil to regenerating his land.
Brown implemented several practices to vastly improve his farm’s soil health and ecosystem, including phasing out all chemical inputs, cycling through diverse cover crops, restructuring his livestock’s grazing habits, and no longer tilling the ground.
He also started to reconsider his attachment to the government programs that many American farmers depend on.
Brown realized that running a farm to maximize subsidy revenue creates a pernicious cycle of monoculture cropping, harmful synthetic inputs, and time wasted in listless offices instead of experimenting through trial and error on his own land.
“I don’t miss walking into those offices and doing the paperwork and they know every single thing about my operation. And they say, ‘Oh, but it takes away your safety net.’
“My safety net is the resiliency built into my soil.
“My safety net is the health of the operation. My safety net is the fact that I don’t rely on only one or two commodities to make my income.… That’s very liberating. It’s a good feeling.”
The Federal Crop Insurance Corporation was originally created in 1938 to help farmers weather the Great Depression.
Congress expanded the program in the 1990s in an effort to create a more stable and cost‐efficient alternative to ad hoc disaster payments…
…but because there are few limits to the subsidies, they have increased dramatically in recent years, disproportionately flowing to the wealthiest farmers and largest agribusiness corporations.
US crop insurance subsidies have also caused other problems.
As subsidies flow to larger farms, the agriculture industry has consolidated, hollowing out small towns around the United States.
“It certainly wreaks havoc on the rural community because instead of having 10 separate entities, you now have three.
“It’s depopulated rural America.”
—BILL FURLONG, IOWA FARMER
The subsidization of crop insurance also crowds out other risk management practices, making farms less dynamic and more susceptible to volatile weather.
North Dakota, for instance, just experienced three of the driest years on record, but Gabe Brown was able to adapt to the weather because he wasn’t handcuffed to any government programs.
Then there’s the waste, fraud, and abuse.
Despite a record $11.6 billion in crop insurance premium subsidies last year and $8.5 billion in 2021, the USDA handed out $31 billion during those same years to about 950,000 farmers as compensation for losses related to the coronavirus pandemic.
And before the pandemic, the USDA gave another $23 billion to more than 600,000 farmers for export losses caused by then President Donald Trump’s trade war with China.
Both handouts were marred by dysfunction.
The GAO found almost $800 million in improper trade war payments during 2018 and 2019.
The Farm Service Agency conducted spot checks on 90 farmers who received assistance related to the pandemic and found that over half of them, 48, may not have actually qualified for the support, such as one cattle producer who received over $6 million for animals that they may not have even owned.
Brown estimates that 95 percent of all planting decisions that American farmers make are based on how much money is guaranteed through subsidized crop insurance, leading to a highly centralized production system.
Agricultural economist Jeff Schahczenski notes that insurance for specialty crops like fruits and vegetables “are often available only in a few locations, have confusing eligibility requirements, and do not have easily assessable benefits,” trapping farmers into “growing the same few crops or livestock because they are the only options for which good insurance is available.”
As a result, about 80 percent of all premium subsidies now go to just four staple crops: corn, soybeans, wheat, and cotton.
Researchers with Emory University and the Centers for Disease Control and Prevention examined the diets of 10,308 people in 2016 and found that about 56 percent of all calories consumed belonged to major subsidized foods, such as sodas sweetened by high‐fructose corn syrup and meals cooked with vegetable oil derived from soybeans.
The federal subsidization of these staple crops at the expense of specialty crops like fruits and vegetables has larger implications for the US food system and Americans’ obesity.
The United States could learn from New Zealand.
New Zealand abruptly ended all government aid for its highly subsidized agricultural sector in 1984 as the country flirted with bankruptcy.
“We were going broke. The subsidies were costing the economy so much.”
LIFELONG FARMER WHO SPENT THREE DECADES AS A MEMBER OF NEW ZEALAND’S PARLIAMENT
New Zealand’s farmers protested.
But once it became clear that no government assistance was coming, farmers went back to work, and the industry thrived.
The primary aim of lessening the burden on taxpayers was achieved, but agricultural productivity also shot up fourfold, and the sector’s share of economic output grew.
Biodiversity improved as fertilizer use dwindled, decreasing pollution in the country’s rivers and streams, and farmers innovated and allocated resources more efficiently in response to market forces.
US lawmakers on both sides of the aisle and various government agencies have suggested piecemeal changes to crop insurance subsidies over the years.
These proposed changes have included:
- implementing a means test for premium subsidies
- reducing the amount of the subsidy that taxpayers cover
- adding more transparency to who receives the aid
- lowering payments to private crop insurance companies
But as New Zealand’s experience shows, as well as US farmers like Gabe Brown who have sworn off government support altogether,
American agriculture can thrive without taxpayer support.
“I did take advantage of those government programs for many years. But once I realized, man, why should my city cousins, as we like to call it, why should they have to pay for my business? Why should they be subsidizing it?
“If it’s a true business, I should be able to make it on my own.”
EXPANDED HIS FAMILY’S FARM TO OVER 5,000 ACRES
Learn more about the CATO Institute’s stand on this important issue at this article:
Banner Image: Farming. Image Credit – Zoe Schaeffer