If you were to review the Enumerated Powers of the three branches of government, you would be hard pressed to find authorization for farm subsidies. Of course, you would be hard pressed to find authorization for most of what government does. However, I am not going to look at this issue from the standpoint of constitutional or not. No, let’s look at what subsidies and programs have done to farmers, and by extension, to us.
I live in Kansas. I have many friends and family members who are farmers or who otherwise engage in farming and its support. I have a small farm and ranch, and I refuse to participate in any farm subsidy programs.
Government intervention did not start overnight. A friend recently posted the picture and comments. Part of this is simple supply and demand. In the early 50’s average yield was under 20 bushels per acre, in 2016, it was over 60. $9,000 in 1951 is the same as nearly $90,000 today, but the machine then was a basic cutter and thrasher. Now it is a technological marvel, similar in differences as a 1951 car compared to a new model. They are apples and oranges in comparison. However, much of the problem is induced by government subsidies and programs.
My grandfather said when the farm programs and subsidies began, that it set the stage for the end of the family farm. He only had a sixth-grade education, but he was no dummy. Like most of the additions to the powers of government, farm subsidies and programs were a product of progressives.
American farmers were the best in the world. Under a free market system, American farmers developed better and better strains of crops, producing more than anyone else in the world. Early attempts to give preferential treatment to sugar beet growers were met with this comment from Agriculture Secretary Morton, “Those who raise corn should not be taxed to encourage those who desire to raise beets. The power to tax was never vested in a Government for the purpose of building up one class at the expense of other classes.”
Farmers weathered depressions, recessions, and WWI largely without any government involvement. During the 1920s Congress passed legislation, the McNary-Haugen Bill. This would have fixed prices of some crops by a complicated bureaucratic system and passed the costs on to American consumers. Thankfully, it was vetoed by President Coolidge who did not believe the government should give preferential treatment to any industry. Hoover and Roosevelt broke the precedent set by Morton and Coolidge, along with the previous 140 years of farming history. During the Great Depression, both presidents decided it was best for the American citizens to be taxed, so that farms could be subsidized.
First was price setting on wheat, cotton, and surprise, surprise, many farmers switched to wheat and cotton for the guaranteed income- from price guarantees to payment to not grow certain crops, to today’s monstrous farm budget of an estimated $23.9 billion.
My grandfather was right. The family farm has been long gone. The combination of our tax code and government intervention has made it a big corporate business for the most part.
What is the alternative?
Several years ago, I learned of New Zealand’s decision to drop all farm subsidies and programs. From time to time, I revisit how that is working for them, and I believe it is past time for us to look at this for the American Farmer. A move to make this change would not be something done to them, but rather for them.
There were those who predicted doom and gloom for New Zealand’s farmers, however, due to a severe budget crisis, the decision was made to cut nearly all the country’s subsidies. The nation’s economy is much more dependent on farming which is like the US economy. In 1984, about 30 production subsidies and export incentives were ended. The predicted mass exodus from farming did not happen. Although some had a tough adjustment period, only about 1% left their farms. Interestingly enough, that was the same as left before the change.
New Zealand’s farmers proved up to the challenge. Today the farming sector is more dynamic than ever, and is proudly operating without government support. Farmers did what any business does, they diversified, sought new crops, improved efficiency, and productivity has steadily grown in the absence of government involvement.
The free market allows farmers to meet consumer needs, not a government-set quota.
New Zealand is a country of 4.6 million people, yet it produces enough to feed 40 million, so it exports about 90% of production. Low-income farmers are eligible for social welfare support, so they don’t starve, but nothing for the farm.
Farmers were heavy into sheep and wool because of the supports and programs. Since the end of the programs, more are into cattle for beef and milk. For instance, before the cut, milk producers made 35 products from milk. Since the reforms, they now produce 2,200 milk products!
Of course, all farmers are subject to swings in prices, normal for supply and demand in a free market. Any business is subject to swings in prices and demand. While farmers are also subject to the influences of weather, the availability of crop insurance can protect from losses just as any prudent business or homeowner should do.
According to NZ Federated Farmers (New Zealand’s leading farmer organization), told the BBC News that the average New Zealand farmer’s advice to his or her colleagues in other countries would be to “get off the subsidy gravy train as soon as possible.”
According to the Kiwi outlook, the ill effects of subsidies include:
Resentment among farmers, some of who will inevitably feel that subsidies are applied unfairly. Resentment among non-farmers, who pay for the system once in the form of taxes and a second time in the form of higher food prices. The encouragement of overproduction, which then drives down prices and requires more subsidization of farmers’ incomes, and the related encouragement to farm marginal lands, with resulting environmental degradation.
Most subsidy money passed quickly from farmers to farm suppliers, processors, and other related sectors, again negating the intended effect of supporting farmers. Additional market distortions, such as the inflation of land values based on production incentives or cheap loans.
Various bureaucratic insanities, such as paying farmers to install conservation measures like hedgerows and wetlands—after having paid them to rip them out a generation ago, caused resentment with those farmers who have maintained such landscape and wildlife features all along, and who got nothing.
Removing subsidies, on the other hand, forces farmers and farm-related industries to become more efficient, to diversify, and to follow and anticipate the market. It gives farmers more independence, and gives them more respect. It leaves more government money to pay for other types of social services, like education and health care.
Historically in the US, if you want higher prices and fewer choices, just get the government involved. This is clearly seen in the health care sector and Obamacare. With nearly a trillion dollar deficit every year added to the current $20 trillion debt, how can we possibly justify programs that only depress the free market and add to the debt?
Photo Credit: "farm", © 2009 Josh Friedman, Flickr | CC-BY-ND