Why (Sigh!) Farm Subsidies Survive

Why (Sigh!) Farm Subsidies Survive

By Robert Samuelson - June 13, 2013

WASHINGTON -- The farm bills now before Congress -- one from the Senate, the other from the House -- attest, if nothing else, to the inertia of politics. There is no "public interest" (a phrase often meaningless in Washington) in having government subsidize farmers. Food would be produced without subsidies. The uncertainties and insecurities faced by farmers from unpredictable weather and global markets, though often compelling, are paralleled by the uncertainties and insecurities faced by many industries from disruptive technologies, erratic business cycles and shifting public tastes. Yet, unlike most industries, agriculture is lavishly subsidized and protected by government.

The explanation is force of habit. Since the Great Depression of the 1930s, when there were plausible reasons to aid farmers, government has consistently accorded agriculture special treatment. The politics of doing so long ago became self-perpetuating. Without the massive subsidies, the Agriculture Department would be far less important. So would the congressional agriculture committees and the crowd of farm groups (sometimes, it seems, one for almost every crop) that lobby for benefits. And certainly the farmers who receive payments and protections feel entitled to them.

All this creates a powerful and shared vested interest in safeguarding the status quo, even as different interest groups and their congressional champions fight ferociously over the structure and distribution of benefits. The cost has been considerable. From 1995 to 2012, the various subsidies totaled $293 billion -- more than $16 billion annually -- according to the Environmental Working Group (EWG), a critic of present programs. This understates the true costs, because it includes only the on-budget costs of explicit subsidies. Excluded are higher consumer prices paid on some products (sugar, for instance) that are partially shielded from market competition.

The congressional agriculture committees faced a special challenge this year because huge federal deficits have put pressure on spending. The committees straddled this difficulty by claiming to make substantial savings while actually extending expensive programs. In press releases, the Senate Agriculture Committee says its bill will cut deficits by $24 billion from 2014 to 2023. This sounds like a lot but isn't. Even if the savings occur, the Congressional Budget Office (CBO) estimates that farm subsidies will total almost $190 billion over the decade.

And the savings may not materialize. The projections depend on assumptions about market prices and crop yields that, in the past, have often proved optimistic, says the EWG's Scott Faber. According to Faber, the projected spending for the 2002 and 2008 farm bills significantly underestimated actual costs. (In fairness, errors in the other direction could reduce costs.)

Consider the farm bills as a public relations exercise. To make subsidies more acceptable, Congress is repackaging them. "Direct payments" to farmers are ending, because they seem (and are) a straightforward giveaway. Instead, "crop insurance" -- which seems prudent protection against droughts and other misfortunes -- is being expanded. In reality, crop insurance resembles "a farm income support program" more than standard insurance, writes economist Bruce Babcock of Iowa State University in a report for the EWG. Farmers' premiums cover only 40 percent of costs; taxpayers pick up 60 percent. With premiums subsidized, farmers buy generous coverage that produces payouts even in many good years. The CBO puts the 10-year cost at $89 billion.

The survival of farm subsidies is emblematic of a larger problem: Government is biased toward the past. Old programs, tax breaks and regulatory practices develop strong constituencies and mindsets that frustrate change, even when earlier justifications for their existence have been overtaken by events. It's no longer possible to argue that ag subsidies will prevent the loss of small family farms, because millions have already disappeared.

It's no longer possible to argue that subsidies are needed for food production, because one major agricultural sector -- meat production -- lacks subsidies and meat is still produced.

The larger lesson must be discouraging. Among other qualities, good government requires the capacity to adapt to change. It needs to discard what doesn't work or is no longer necessary. It needs to devote its limited resources -- in time, skill and money -- to the problems where it might do some good. In the best of circumstances, this is difficult. But routine politics compounds the difficulty, as the immortal farm subsidies and endless debates over budget deficits attest. 

(c) 2013, The Washington Post Writers Group 

Robert Samuelson

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