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Thanksgiving Feast: One Big Meal, Two Big Bills

Millions of Americans have plenty to be grateful for this Thanksgiving, including family nearby, a roof over their heads and a tableful of food. But that doesn’t mean Americans should have to purchase their holiday meal twice. Save for the turkey (and it’s too late for the turkey), the traditional Thanksgiving dinner is paid for once by consumers at the grocery store and a second time by taxpayers through Washington’s farm bill policies. The U.S. government spends billions of dollars every year to subsidize 130 crops and livestock and to pick up the costs of insurance for farmers, among other expenses. Hover over the picture and click on the icons to get a breakdown of the taxpayers’ contributions for your Thanksgiving favorites.

 


Family at table by Pressmaster / Shutterstock.com
Brad Wassink contributed to this report.

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No new farm bill: Is it really a national catastrophe?

Published on October 4, 2012, by

The expiration of the provisions of the 2008 farm bill on September 30 would seem to be a national catastrophe, at least according to a broad coalition of U.S. farm groups, Senator Debbie Stabenow (the chair of the Senate Agricultural Committee) and Department of Agriculture Secretary Tom Vilsack. So what cold, hard threats to the farm sector’s future do we face over the next three months?

According to Secretary Vilsack, first on the list are the dairy subsidies provided under the Milk Income Loss Contract Program, but no subsidy payments were made under that program in September and they would be less likely to be available over the next three months even if the program were continued because feed prices typically decline when corn is harvested in October and November.

Next up: a suspension of the provision of public monies for research on organic and other specialty crops that “expand economic opportunities for producers of fruits, vegetables, and nuts.” Would the foundations of U.S. agriculture be shaken by a delay of two or three months in implementing those programs? Well, perhaps not: some graduate students and researchers at land grant universities may experience an interruption in their stipends and ability to obtain supplies — no fun at all for them, but truly not Armageddon for U.S. agriculture.

Batting third? Funding for the Market Access Program and other programs designed to boost U.S. agricultural exports. These programs partially or completely underwrite efforts to sell crops in other countries through technical assistance or direct marketing efforts. Will Egypt or Taiwan stop buying U.S. wheat or China abandon U.S. soybeans just because efforts under those programs will slow down for a few weeks? Probably not, although some farm lobbies claim that any lost export sales will spell long-run ruin.

And in the clean-up spot: food aid provided under the Food for Progress Program. But the program doesn’t expire until December 31, although acquiring funds to pay for shipping costs may be more difficult. And funding for most other food aid programs is not tied to the 2008 farm bill.

How important are total annual expenditures on all of these “under threat” programs? Less than one percent of total farm bill spending.

It really is very hard to believe that short-term interruptions to these programs provide a compelling reason for Congress to be steam-rolled into a new farm bill during the lame-duck session in November and December, especially one as potentially expensive as either the Senate or House Agricultural Committee draft proposals. And in fact Congress can always follow the path it pursued in late 2007 and early 2008 by simply extending the provisions of the current farm bill for a few weeks at a time.

Of course, that is exactly what the U.S. farm lobby does not want. Their view seems to be, “Let’s do anything we can to get a new five-year farm bill now, before Congress gets serious about a deficit reduction plan. Otherwise, our American Boondoggle farm subsidies, mainly targeted to large and rich farm operations, may actually have to take a real hit.”

Finally, perhaps it is worth remembering why the various 2008 farm bill provisions have not already been extended. When the House leadership offered an extension of the 2008 farm bill in late July, coupled with the provision of funding for three livestock disaster aid programs, the farm, nutrition program, and environmental lobbies all combined to unanimously reject that option. So the moderately irritating hair-shirt interruptions in a very small number of programs about which farm groups are now complaining is a shirt they have made for themselves.

Vincent H. Smith is a visiting scholar at the American Enterprise Institute and an agricultural economist at Montana State University.

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Rich farmers don’t need farm bill’s welfare

Published on September 17, 2012, by

By most standards, farmers are rich. For a long time, the average family farm has enjoyed a higher income and has been six or seven times wealthier than the average American family. And the average farmer does not receive most of the farm subsidies that flow from the federal government. Eighty percent of those funds go to the largest 20 percent of farms that have much higher household incomes and are many times wealthier than the average taxpayer. That trend will continue this year when U.S. Department of Agriculture predicts that farm incomes will be higher than ever before.

The House farm bill has two new welfare programs for well-off farmers: a price support program called Price Loss Coverage and a new “Supplementary Coverage Option” crop insurance program in which taxpayers would pick up 70 percent of the premiums. These programs will shovel most of the subsidies to wealthy farmers because they are tied to the amount of land a household farms. Families in real poverty will get very few benefits because they don’t farm much land. However, crop insurance companies are likely to scalp about half a billion taxpayer dollars to manage the new insurance program.

Fundamentally, the House Agricultural Committee’s farm policy proposals do not pass any reasonable fairness test. Worse, because payments under the new programs could balloon to as much as $20 billion a year when crop prices fall, they have the potential to be federal budget busters. And, because both programs encourage expanded crop production, they could cause the United States to violate its World Trade Organization commitments on domestic agricultural subsidies, with subsequent penalties that hurt U.S. exports.

Congress should require the House and Senate Agricultural Committees to do better, especially given the urgent need for major federal budget reform. Let’s not pass a new farm bill right now which the main purpose of is to give substantial subsidies to wealthy farmers just because some lobbyists claim that food stamp payments and programs that benefit the environment will stop on October 1 if no legislation is passed. That is simply not the case, as a recent Congressional Research Service Report clearly explains. Instead, the House and Senate Agricultural Committees need to be more fiscally responsible, do a better job for their country, and cut off farm subsidies that flow from less well-off taxpayers to very well-off farmers and landowners.

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Will the sky fall? What happens if there is no new farm bill by Oct. 1, 2012

Published on September 14, 2012, by

The short answer: the sky won’t fall. The longer and more nuanced answer: Heck no, the sky won’t fall. To put pressure on the House Republican leadership, some farm lobby groups are arguing that the agricultural sector will face severe problems if a new farm bill is not in place by Sept. 30, two weeks from now. The truth is that very little would happen, either in agricultural commodity markets or on the farm, at least over the next eight months.

The reason: many important farm subsidy programs are authorized by other legislation, have their own appropriated funds or involve long term contracts that would be unaffected by the fact that the authorizing legislation, the 2008 farm bill, expires at the end of this month.

Such programs include the federal crop insurance program, through which the largest amount of federal subsidies (estimated by the Congressional Budget Office to be about $9 billion annually) are currently channeled to farmers, and most of the annual outlays under the Conservation Reserve Program (currently about $1.6 billion) which are typically dispersed through 10- or 15-year contracts with individual farmers. In addition, in October, farmers will still receive their 2012 crop-year welfare checks worth $5 billion through the Direct Payments program. This program will expire in 2013 if there is no new farm bill, but funds this year have already been appropriated to make those payments.

An extremely useful report by Congressional Research Service staff, published on July 25 of this year, lays out what would happen to each of the major farm subsidy programs if Congress took no action to extend the provisions of the 2008 farm bill for either a few weeks, a few months or up to a year. While programs that authorize for mandatory funding under the 2008 farm bill could be subject to suspension, the CRS report points out that many of those programs, including nutrition programs, have their own appropriated funds. The General Accounting Office has determined that programs with appropriated funds, which include many farm programs, do not have to be authorized by current legislation.

In fact, the problems created by an expiring farm bill have been easily addressed by Congress in the past. The 2008 farm bill should have been the 2007 farm bill (as its predecessor, the 2002 farm bill, expired on Sept. 30, 2007). However, while the House passed a farm bill in July 2007, the Senate did not get its “act” together until May 2008.

The solution to the potential “hiatus” problem was simple; to get from Oct. 1, 2007, to late May 2008, Congress passed six very short-term extensions of the 2002 farm bill provisions. Congress can, and as recently suggested by the ranking member on the Senate Agricultural Committee, Senator Pat Roberts, R-Kan., almost surely in the end will adopt a similar strategy now.

So the sky won’t fall, Chicken Little will mend the bump on his head from the acorn, and U.S. agricultural, which the USDA predicts will earn record revenues and profits from its 2012 crops, livestock sales and government subsidies, will continue to enjoy a banner year.

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The 2012 farm bill: A wolf in sheep’s clothing

Published on September 10, 2012, by

The American Boondoggle website exists for one reason — to let Americans know how their tax dollars are being used to prop up the well-off rather than support the needy.

You wouldn’t know that by listening to the agriculture-industrial complex lobbying for the farm bills. They’ll tell you that most farms are family-owned, that farming is “different” from other businesses and that government support keeps cheap food flowing to the world.

This might have been true in the 1930s, when farmers were poorer than most Americans and 20 percent of our grandfathers worked on farms. But it is not true today.

Consider these facts:

  • The median farm household earns 10 percent more than the median U.S. household-and in 2010 averaged over seven times the median U.S. household net worth;
  • As of 2006, only 3.5 percent of farms went out of business each year, and since then, crop prices have increased substantially. In fact, there are 45,640 more farms today than 10 years ago.
  • Crops prices and farm incomes are at record highs, yet taxpayers still send billions of dollars each year to farmers.

This might be OK if our payments were sent to the poorest farmers to keep their families afloat. But they’re not. Eighty percent of farm subsidies are paid to the largest 15 to 20 percent of farms — farms with household incomes averaging $135,000 per year and very little debt.

How can this be?

This happens because farm subsidies have changed a lot in the past 20 years. They used to be mainly price supports, sending our taxes to farmers when prices were too low to keep them in business. Now, they take the form of payments that flow regardless of prices.

Crop insurance subsidies are now the largest subsidy in the farm bill. You’d think that farms with hundreds of thousands of dollars in revenue each year would buy their own insurance to protect them in case of bad weather. Instead, taxpayers pay an average of 60 percent of crop insurance premiums for farmers — and we also subsidize the insurance companies that sell the policies.

This boondoggle alone costs us over $6 billion a year — and the cost is going up.

The government doesn’t pay us to buy insurance to protect our home, so why does it pay wealthy farmers to buy insurance to protect their crops?

The list of boondoggles go on:

  • Taxpayers pay almost $5 billion a year  in “direct payments” to farms whether or not they grow crops;
    So-called conservation programs pay farmers billions of dollars a year to undertake practices they would have done anyway, or to remove farmland from cultivation they probably wouldn’t have farmed to begin with;
  • Dairy and sugar programs manipulate markets to drive up the cost of milk and sweeteners, making much food more expensive for all of us;
  • The Renewable Fuel Standard forces gasoline companies to buy corn ethanol to mix into our gasoline, driving up the price of corn and making food more expensive all around the world. Most environmentalists say this does nothing to help the environment, but it sends billions of dollars a year from your pockets to farm communities (as our interactive map shows).

These programs just aren’t fair. Government interference in markets is justified when it helps people on the margins of life or in difficult straits. It’s not when it helps the already successful. That’s true whether the well-off are bankers on Wall Street or farmers on Main Street.

Today’s farm bill is the proverbial wolf in sheep’s clothing. Under the cloak of compassion, it gives farmers a suit of subsidy, paid for with your money.

Regardless of whether the farm bill programs continue or not, all Americans deserve to know what their money is really being used for and who benefits from it. I hope you find this website educational and informative.

Henry Olsen is vice president and director of National Research Initiative at AEI.

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Getting serious about reducing farm subsidies

Published on September 6, 2012, by

If there were ever a time when the government should and could get out of the business of subsidizing relatively wealthy tax farmers at the expense of less wealthy taxpayers, that time is now. The need for serious action to reduce the federal deficit makes the need to reduce farm subsidies urgent.

One way or another, taxpayers are spending about $20 billion a year, and about $100 billion over the five-year lifespan of a new farm bill, on programs that channel 80 percent of that money to less than 200,000 large and generally very wealthy farms, at a rate of roughly $400,000 per large farm over the five-year period.

Currently, 80 percent of all farm program subsidies are paid to the owners and operators of the largest 15 to 20 percent of farms. These larger farm households are much wealthier than the average taxpayer, typically with a net worth in the millions; have much larger incomes, averaging around $135,000 a year; and have very little debt, with the average farm’s debt-to-asset ratio less than 9 percent.

Essentially, most farm subsidies flow to rich farmers, almost all of whom run family farms and don’t need help from taxpayers to do well in their agricultural businesses.

In addition, for the past seven years, almost all U.S. farmers have enjoyed record or near record prices for their crops and livestock and record profits. Even in 2012, a year when drought-devastated corn and soybean production in the Midwest, USDA’s Economic Research Service is reporting that farmers will again have record or near-record net farm incomes because prices have soared for corn, wheat, other food and feed grains, soybeans and other oilseeds.

A fiscally prudent House and Senate would recommend substantial cuts in farm program spending of at least $10 billion a year and $100 billion over 10 years. There are plenty of wasteful programs that can be cut without damaging the agricultural sector.

Four fixes to the 2012 farm bill

First, the Direct Payments program could simply be ended. (more…)

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The grim reapers of crop insurance

Published on August 28, 2012, by

The U.S. Department of Agriculture’s Farm Service Agency (FSA) is often described as overstaffed and inefficiently structured for its mission, which is to deliver and monitor a variety of federal subsidy and conservation programs. Currently, FSA operates offices in over 2,100 counties — almost all counties with any measure of agricultural production. Many of the offices are located within 20 miles of one another, and some don’t even have staff.

The county-based structure for FSA offices might have been reasonable in the early 1930s, when FSA (with a different name) was developing its infrastructure. At that time, farms were much smaller and far more numerous, 30 percent of the national workforce was directly involved in farming, transportation was much more costly, forms had to be processed by hand and by typewriter, and, to a large degree, program administration required face-to-face meetings between farmers and FSA employees.

Things, of course, are vastly different today. So much so that even Secretary of Agriculture Tom Vilsack and most members of the congressional agricultural committees have acknowledged that there is an efficiency problem. In January, Vilsack announced that 131 FSA offices would be closed. The secretary’s action represents a de minimis response: many more FSA county offices could almost surely be shut down and the FSA workforce correspondingly reduced, with no loss in effective administration of farm programs. And if a new Farm Bill actually rationalized and reduced the complexity and scope of farm subsidy programs, further workforce reductions would be more than justified. (more…)

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The farm bill: Where are we now?

Published on August 2, 2012, by

The House and Senate Agricultural Committee Leadership–Frank Lucas (R-OK), Colin Petersen (D-MN), Debbie Stabenow (D-MI), and Pat Roberts (R-KS)–must be feeling a little like Oliver Hardy when he and Stan Laurel found themselves in yet another catastrophic situation, about to be run down by a fast-moving train. (more…)

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New farm bill likely to be a budget and trade disaster

Published on July 10, 2012, by

Parents know how often children confuse their wants with their needs. A child may hunger for a glitzy new bike, but if she already has one in perfect working order there is no need for a new bike to get her to school: She just wants one. In the same vein, the chair and ranking member of the House Committee on Agriculture have confused farmers’ wants with their needs. Farmers just don’t need large taxpayer subsidies. They are enjoying record market prices and record profits, have almost no debt (the average debt to asset ratio in farming is less than nine percent), and are ideally placed to manage price and production risks by themselves. Moreover, the farm households who receive about 80 percent of the subsidies are typically multimillionaires with annual taxable incomes in the hundreds of thousands of dollars. (more…)