Government subsidies of one form or another have become as American as apple pie.
Everyone goes to Washington with their hand out and politicians looking for votes
are more than happy to oblige with other people’s money.
Too often, this practice becomes so entrenched that Americans can hardly be blamed
for thinking this is the only way to do things. Can you imagine life without Social
Security or the mortgage interest tax deduction? Probably not.
It should come as no surprise, then, that farmers throughout the U.S. can’t
get their mind around operating without federal farm subsidies. As the U.S. Congress
debates a new “farm bill” – an all-encompassing legislative package
they pass every five years dealing with agriculture and food policy – the
debate will be less about whether rural America can exist without federal subsidies
and more about how much Washington can throw at favored programs. In fact, the term
“farm bill” is probably misleading because 80% of the funding cover
in the bill went to things not ag related last year. The lion’s share of the
bill is spent on food stamps and other non-ag programs.
FYI, the farm bill passed the U.S. Senate today by a vote of 64-35; committee action
in the House is scheduled to begin on 11 July.
With federal spending and deficits driving the discussion in D.C., the Senate version
is being hailed for "saving" $23 billion, compared to current policy. That may sound
like a lot at first glance, but it pales in comparison to the projected federal
deficit of $1.3 trillion
or the total cost of the bill itself, $969 billion over ten years.
Pending any last minute amendments, it spends $193 million for farmers to grow crops for
biofuels, extending a program that was previously cited by the USDA’s inspector
general for extending unequal and improper benefits to farmers, and over $200 million
to retro-fit refineries to produce biofuels. Biofuels are but one of numerous examples.
As currently written, this bill does little to help America tackle our budget deficits
and does less in freeing Kansas farmers to capture the entrepreneurial and risk-taking
heritage that saw our state turn into the “World’s Breadbasket.”
Fortunately, a modern example exists which shows what a subsidy-free agricultural
sector can look like.
From the Cato Institute during the 2002 farm bill debate:
In 1984 New Zealand's Labor government took the dramatic step of ending all
farm subsidies, which then consisted of 30 separate production payments and export
incentives. This was a truly striking policy action, because New Zealand's economy
is roughly five times more dependent on farming than is the U.S. economy, measured
by either output or employment. Subsidies in New Zealand accounted for more than
30 percent of the value of production before reform, somewhat higher than U.S. subsidies
today. And New Zealand farming was marred by the same problems caused by U.S. subsidies,
including overproduction, environmental degradation and inflated land prices. New
Zealand's plan was initially met with protest marches on parliament and organized
resistance by farmers. Bolstering opposition was the government's own prediction
that 10 percent of all the country's farms would go out of business. But the subsidies
were ended, and New Zealand farming has never been healthier.
So, what does New Zealand’s agriculture sector look like nearly 20 years after
they stopped subsidizing it? In a word, bountiful. According to the World Bank, in 1980 New Zealand’s ag
sector produced $2.3 billion in value-added product. By 2009, that same number was
$4.9 billion – a 111% increase (all numbers in 2000 dollars and are most recent
available). Over the same time frame, the World Bank’s production indexes
for both livestock and food have also showed tremendous gains in New Zealand. Maurice McTigue, a farmer by
trade and member of the New Zealand Parliament when subsidies were kiboshed, has
this to say about things in NZ...McTigue is also the vice president of the Mercatus
Center at George Mason University in Virginia...
"In 1985 the [NZ] government removed all subsidies form agriculture whether
they were price support, subsidized insurance, input subsidies or production controls.
This was a tough love approach with all the subsidies disappearing over the succeeding
9 months...[we] can look back on the last 25 years as probably the best in the history
of New Zealand farming.
"Why would this be so? The major effect of subsidies is that they kill off or water
down innovation...An example of this unfettered innovation is that the dairy industry
in New Zealand in 1985 produced 35 products from milk by 2005 the dairy industry
was producing 2200 products from milk and the dairy industry is the boom industry
of New Zealand farming. The conclusion, subsidies keep farmers poor."
While the Kiwi’s were busy
not subsidizing farmers their rural population grew by 11.6% (1980-2011),
here at home our rural population decreased by 8.4%, once again from the World Bank.
Certainly, more was at play than subsidies, but you get the point – the rural
populations can thrive without government handouts.
The Federated Farmers of New Zealand (picture our National Farmers Union) might
have said it best in that New Zealand has "thoroughly debunked the myth that the
farming sector cannot prosper without government subsidies."
The 2012 farm bill, as currently written, is only the most recent example of someone
in Washington saying one thing and doing something completely different. You’ll
hear talk about helping family farms and supporting rural America, but the key thing
to remember is that the farm bill is little more than a bunch handouts to politically
connected industries (hello biofuels!) and an extension of federal food stamps.
It isn’t about an individual farmer in Finney County and certainly isn’t
about less government spending or intrusion in the market.
Listen to a good George Strait song as he extolls the virtues of the Heartland and
hard work. The people he is singing too aren’t asking for a government
handout, but Washington has distorted the market for so long that it is hard to
imagine farm life without subsidies and mandates. Farm profits continue to grow
in spite of government manipulation - not because of it.
Pull off I-70 on your way to your next trip to Breckenridge or Estes Park and ask a farmer or
rancher if they want more government involvement in their operation. The answer
will almost certainly be no. Hopefully, someone in Washington is listening, but
if the bipartisan comments following today’s Senate vote are any indication,
I’m not holding my breath.