Why Don't We Eliminate Farm Subsidies?

The 2014 White House budget includes some real cuts in farm subsidies, including to the absolutely absurd Direct and Counter-cyclical Payment Program. As Justin Green points out, this is a good thing. But it’s also long overdue.

Direct payments came into being in 1996, originally as an effort to wean farmers off of direct government subsides altogether. The Class of ’94 Republicans that engineered the shift promised the program would end in 2002. But interest group politics being what they are, the program continues sending out checks 11 years after its originally scheduled end.In part because it was intended to be a transitional program, the program sends farmers regular payments that are tied to the market prices of crops that were historically grown on a particular piece of land, regardless of how that land is currently being used, or even whether it is being used at all. Under the “counter-cyclical” portion of the program, farmers receive checks when, say, the price of corn declines, even if the land in question is now growing cotton or is left fallow.

Unfortunately, as absurd as the program is, and as broad as the support is for abolishing it (even most farm groups are now on board with scrapping direct payments), getting rid of it also would carry some unintended negative consequences.

Under existing and long-standing policy, farmers who receive direct payments are barred from using federal money to drain wetlands and are required to develop plans to avoid soil erosion. These restrictions aren’t just environmental red tape. They prevent farmers from using taxpayer dollars to cultivate land that is most marginal and most prone to catastrophes. (Those that want to turn down federal payments altogether are free to do what they want.)

To replace direct payments, Congress and the farm lobby are proposing extending the already enormous federal subsidies for crop insurance, and the crop insurance program doesn’t currently have these same conservation compliance regulations.

The shift thus portends ecological disaster. Protected by their subsidized insurance from both crop loss and price drops, farmers would have every incentive to engage in all sorts of land-ruining activities they would never even consider in a free market.

Yet another reason—as if any were needed—why we shouldn’t be providing farm subsidies at all.

Eli Lehrer is president and co-founder of R Street. Follow him on Twitter.