How Many US Farmers Should Get Subsidies?
If The US Must Have Farm Subsidies, Then Why Shouldn't All Farmers Get Them?
August 20, 1999
by Dennis T. Avery
CHURCHVILLE, Va.--Every U.S. farmer should stake out a place in line for the additional farm subsidies that could be heading their way.
The Democrats in Congress are urgently trying to give some of America's "budget surplus" to farmers to help their party win back a majority in 2000. Meanwhile, Republicans are reluctant to seem less generous to farmers than the fellows across the aisle.
This means that this year's federal handout to farmers may be in the neighborhood of $7 billion. (President Clinton wants to give most of the surplus to senior citizens, presumably because they cost less per vote.)
This leaves one major question: How many farmers will divvy up the money?
Instead of the free trade and export markets envisioned when Congress passed the Freedom to Farm reform legislation in 1996, farmers will be offered additional subsidies.
The Democrats are doing it because they don't want to cross swords with the labor leaders of the AFL-CIO, who officially hate free trade.
The Republicans are going along out of embarrassment over the well- known Asian collapse of 1997, which lots of farmers erroneously blame for the low prices their products receive on the global market. (The Asian recovery, which has already started, is not yet a political reality in Washington.)
In the past, U.S. farm subsidies were paid to a select group of farmers of corn, wheat, cotton, rice, sorghum and milk, as well as minor crops like sugar, peanuts and tobacco. But most of America's farmers were left out.
The United States has about 200,000 farmers specializing in wheat, corn and cotton and some 86,000 dairymen, according to the U.S. Census of Agriculture. These farms produce commodities that have been on the dole for over 60 years.
Yet there are 90,000 soybean farms that have not gotten subsidies for oil seeds. There are 110,000 fruit and vegetable farms out there that get no government support for their product.
The poultry industry gets no subsidies, even though about 40,000 American families raise chickens and turkeys, plus another 270,000 people with jobs in related areas.
Hog producers (114,000 of them) have gotten no subsidies, yet they have suffered some of the lowest recent prices. They also have thousands of support workers in feed mills, trucking and processing plants.
And we can't forget the 785,000 farms, ranches and feedlots involved in beef production.
The people who work on and for these enterprises all have a stake in the new farm subsidies, since the subsidies are being offered in lieu of farm trade liberalization.
The world will demand three times as much food in the next few decades. America is primed to take advantage of that demand. It has the world's largest chunk of prime farmland, its lowest-cost transport system and its most sustainable farming.
But under proposed farm policy, U.S. farmers will not earn an extra $50 to $60 billion per year from expanded exports. Instead, they will jockey for position in line to get $5 to $8 billion per year in federal payments.
Farmers must understand that Congress cannot politically afford to hand out enough subsidies to make commercial farmers prosperous.
There will be payment limits because city folk and the Sierra Club like small farms, but don't like the ones that succeed and grow.
In good years for farm prices, there will be no federal dollars. In years when Congress is forced to admit it has overspent, there may be no federal dollars forthcoming.
To be fair, federal dollars should be spread over the entire spectrum of farmers losing export growth opportunity, not just a select group of farmers.
Imagine $7 billion divided by a million or so farmers, several hundreds of thousand farm workers and perhaps another million rural support workers. That adds up to less than $2,000 per capita in subsidy, even in the years when the government was feeling generous.
Still, even if the individual payments are small, each farmer should demand a share.
It would send a message that Congress owes the payments as a penalty for not leading the world to liberalize farm trade. Small farmers should demand payments every year until free farm trade is a reality, and not think they owe Congress for diminishing their economic future.
If export markets open up, the congressional handouts will look tiny in comparison and farmers can walk away.
In the meantime, presenting the farm payments as compensation for failure to open markets would set Congress a worthy goal, something beyond buying the votes of "poor but grateful" farmers.
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Dennis T. Avery is based in Churchville, VA, and is director of the Hudson Institute's Center for Global Food Issues.