The U.S. farm sector, now a corporatized and industrialized shadow of its nineteenth-century self, receives far too much aid from the federal government. The farm bill, up for reauthorization in Congress this fall, favors large, wealthy farms in its distribution of subsidies. Legislators should implement sensible payment caps on farm bill programs to limit wasteful spending on industrial farms that do not need assistance.
In the past two centuries, domestic agriculture in the United States suffered from the same forces of industrialization and globalization that created today’s worldwide economic system.
In 1840, nearly seventy percent of Americans worked in agriculture; today, that number hovers between one and two percent. Thomas Jefferson’s agrarian vision for the United States has fallen victim to several decades of technological progress and global economic integration — the “yeoman farmer” simply no longer exists in America.
Take, for example, the global soybean market, which provides feed for cattle and other livestock raised across the world. The United States contributes half of the global total of soybean exports, in addition to feeding domestic livestock. In corn and wheat, too, the U.S. is a global leader, exporting 26% and 18% of total exports, respectively. This level of dominance in global commodity markets is a testament to the extraordinary productivity of American farms, who employ only a tiny fraction of the U.S. workforce and yet lead the world.
Despite this world-leading strength, American farms receive billions of dollars every year in aid from the U.S. government. Beginning with the 1933 Agricultural Adjustment Act — part of Franklin Delano Roosevelt’s New Deal — the United States Department of Agriculture has operated several programs designed to, among other things, support farms by artificially inflating commodity prices and subsidizing crop insurance. Every three to five years since 1933, Congress has returned to the act to renew existing programs and add new ones forming what is colloquially known as the “farm bill.” Today’s farm bill — due for another renewal this fall — operates in 2023 much like the 1933 Agricultural Adjustment Act: As a poverty program for small family farms struggling to make ends meet. The only problem is that most modern American farms bear little resemblance to the farms of the Great Depression.
The typical farm in the U.S. today enjoys above-median household income and household wealth many times the national median. Given this fact, and as it stands to be reauthorized next month, the farm bill is an egregious corporate subsidy and a waste of precious federal dollars. Legislators should take advantage of reauthorization to change the farm bill for the better, by placing limits on the amount of subsidy large farms can receive and by reorienting its programs to serve the needs of small and mid-size farms.
Farm bill programs are an egregious corporate subsidy because, very simply, most payouts are linked to farm size in one way or another. The larger the farm, the more money it receives per acre, because larger farms tend to be more productive per acre. A recent analysis of USDA data shows that the largest 10% of farms receive just over half of all subsidy payments, and the largest 5% of farms receive just more than a third of all payments. Within the crop insurance program, for example, the largest 1% of farms receive almost twice the per acre subsidy on insurance premiums that a farm in the 50-80% size bracket would receive.
From a certain perspective, this kind of policy might make sense. The largest farms are more productive on a per acre basis, which means that each acre on a large farm is more valuable than the same acre on a small or mid-size farm. Therefore, the government should more generously subsidize insurance premiums on those acres, because failure on a highly productive acre of farmland causes a greater loss than failure on a less productive acre.
This kind of concern might be relevant if farm failure were a genuine concern in today’s domestic farm economy, but this is not the case. By any measure, American farms are in a position of robust financial health. Thanks to inflation-driven rises in food prices, farm incomes rose aggressively between 2020 and 2022, with only a slight fall off the high point in 2023 as inflation has cooled. Total farm sector assets and equity have risen comfortably in the past decade, mirrored only by a slight increase in farm sector debt, and farm sector asset-to-debt ratios, though increasing in the past decade, are only 3% above a multi-decade low of 11%. The rate of Chapter 12 bankruptcy filings, the legal route for failing farms, is near its all-time low. Indeed, the data makes it evident that large American farms have absolutely no need for the billions of dollars they receive in subsidies every year.
Despite its largesse, the farm bill is politically difficult to oppose. First and foremost, its single largest program in monetary terms is the Supplemental Nutrition Assistance Program, which provides food stamps to millions of Americans in need. This program provides an invaluable resource for those who need it most, and I certainly do not oppose this part of the farm bill. But its inclusion alongside provisions for corporate welfare to America’s largest farms makes such wasteful spending all the more difficult to rein in.
Furthermore, it receives bipartisan approval in Congress because Democrats support SNAP as a lynchpin of the federal social safety net, and Republicans from rural areas, who normally oppose excessive government spending, support the farm bill when it puts cash in the pockets of their constituents.
To make matters worse, the farm bill is mired in bureaucratic complexity. Thus far, I’ve only mentioned aggregate farm subsidies, the crop insurance subsidy program and food stamps, but the full architecture of the bill is a hopeless tangle of acronyms. The insurance subsidy program actually exists as two Title I provisions that farmers can choose between: Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC). Title I also includes a special provision for cotton growers, the Stacked Income Protection Plan, confusingly abbreviated to STAX. The second title of the Farm Bill is no less complex. This title establishes the Conservation Reserve Program (CRP), the Conservation Stewardship Program (CSP), and the Environmental Quality Incentives Program (EQIP), among others — all administered by the National Resource Conservation Service (NRCS). And all of this just in the first two titles, out of a total twelve.
In the face of these difficulties, there is no easy solution for the farm bill’s waste. As legislators return in session this week, they should work to pass simple, sensible and moderate caps on the subsidy programs in the farm bill. In past sessions of Congress, for example, our own Sen. Jeanne Shaheen, D-N.H., has introduced the Assisting Family Farmers through Insurance Reform Measures Act, which places limits on crop insurance subsidies in gross terms and for farms past a certain income threshold. These kinds of measured reforms will effectively limit the farm bill’s wasteful spending while working within the constraints of the current political landscape.
Opinion articles represent the views of their author(s), which are not necessarily those of The Dartmouth.
