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Farm Subsidies: A Useful Sacrifice in the Budget Debate

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Amid continuing debates over how to reduce the federal deficit, recent proposals to cut farm subsidies present an important opportunity to bridge partisan divides. By reforming our antiquated farm support system, Congress can exercise some much-needed fiscal discipline and give the country an agricultural policy for the 21st century. Doing so, however, will require putting the national good over the interests of a powerful few, as well as confronting some enduring myths about American farming.

Farm subsidies have long been recognized as ineffective. Since being introduced to help small farmers cope with the Great Depression, the federal farm support program has devolved into a hodgepodge of price supports, direct payments, insurance programs, tax loopholes and low-interest loans that overwhelmingly benefit wealthy farmers and large agricultural businesses. According to data compiled by the Environmental Working Group and the U.S. Department of Agriculture, in recent years the largest 10 percent of American farms have received almost 75 percent of total agricultural subsidies, while a whopping two-thirds of farmers have obtained no government support at all. In addition to rewarding millionaires and agribusinesses rather than small farmers, farm subsidies have encouraged environmentally destructive agricultural practices. By promoting production in areas that would otherwise remain fallow, farm supports have led to habitat destruction and land degradation, as well as increased pesticide and fertilizer use. Subsidies have also had a devastating impact abroad: when shipped to developing nations, cheap American foodstuffs tend to glut local markets and put indigenous producers out of business. Indeed, U.S. agricultural subsidies have been a key factor in derailing the recent Doha round of international trade negotiations.

In other words, farm subsidies are bad foreign and domestic policy. But because the program is relatively cheap (estimated to cost around $16 billion in 2011, according to the Congressional Budget Office) and its impacts felt indirectly, subsidies have been allowed to remain on the books. Five-year re-authorizations of the farm support program have historically been dominated by rural congressmen and the agribusiness lobby, and as a result we have a system that lacks oversight and focus. Although Congress made some important reforms in 1996, farm subsidies continue to be a drain on the nation's coffers, diverting taxpayer dollars away from much-needed investments in education, infrastructure and other productive endeavors.

Fortunately, the current preoccupation with the federal deficit has put farm subsidies on the chopping block. Eager to find savings wherever they can, members of both parties have proposed reexamining the way the nation supports agriculture. Republican Congressman Paul Ryan of Wisconsin has called for cutting direct payments to farmers by $30 billion over ten years, while Democratic Senators Dick Durbin of Illinois and Debbie Stabenow of Michigan have indicated their willingness to reform the nation's farm support system. Importantly, these representatives all hail from agricultural states.

Going forward, it is vital that Congress look to reform the farm support program in the most thoughtful way possible. At present, discussions over altering farm subsidies are focused almost entirely on curtailing direct payments to farmers, in which the government automatically pays farm owners a fixed amount of money per year regardless of whether or not their land is being cultivated. Yet direct payments represent just a fraction of total farm supports, and other subsidies, such as price supports, do more to distort the market. If Congress is truly interested in achieving budget savings and developing a modern agricultural policy, it should put all farm subsidies (including supports for ethanol) on the table. This would mean not only curtailing payments to wealthy farmers and agribusinesses but examining whether the government should be in the business of American farming in the first place. For while agriculture accounted for a significant percentage of the U.S. economy in the 1930s, today farming constitutes less than one percent of GDP, and the notion that government support helps struggling family farmers is little more than a myth.

Of course, reforming the farm support program will not solve the nation's fiscal problems. Even eliminating all agricultural subsidies would barely dent the deficit, where meaningful action will be confined to reforming taxes and entitlement spending. But the current budgetary environment does present a chance to rethink our agricultural policies and, in the process, discard a relic of the past.