The Bush administration is set to take on one of the great scandals of American governance: a system of farm subsidies so perverse that it should get whatever the equivalent of an NC-17 rating is for a federal program. Decent people everywhere should want to avert their eyes. In seeking to cut and reform the subsidies, President Bush will provoke a fight every bit as fierce, in its own way, as that over Social Security, prompting opposition from the forces of greed and political cowardice.
Farm subsidies as we know them grew up around the Great Depression, when they didn't work particularly well, and they have maintained their tradition of not working for more than seven decades now. As The New York Times recently reported, farm income doubled during the past two years, and -- holy soybean! -- farm subsidies still went up 40 percent. Farmers game the commodity markets to get both high prices for their products and high federal subsidies. It goes to show that few things are as addictive and distorting as a government handout.
The system is supposed to help family farms -- but if this is a family-farm-friendly government program, what would a hostile one look like? Family farms aren't big enough to garner the largest subsidies and are squeezed by the way the federal payments increase land values and stimulate overproduction. "The subsidies reward the guy who gets higher yields with higher subsidies, and he's able to buy out his neighbor and get even bigger," says Dennis Avery, an agriculture expert at the Hudson Institute.
Ten percent of farms -- i.e., the biggest ones -- receive 60 percent of the subsidies. According to Brian Riedl of the Heritage Foundation, giant Riceland Foods got $110 million in federal largess alone last year. By his calculation, the feds could guarantee every full-time farmer an income of $35,000 a year at a cost of "merely" $4 billion. Subsidies now run roughly $15.7 billion annually.
American agriculture has its share not just of welfare queens, but welfare cheats. Federal subsidies are technically designated only for those who actually work in farming. But that restriction is evaded, sometimes by people occasionally participating in farm-related telephone conference calls. Dubious partnerships are a way to get around restrictions on how much any one operation is supposed to get in federal payments. As a result, some agriculture businesses are little better than Enrons with tractors.
Environmentalists hate the subsidies because they maximize the land under cultivation, therefore increasing the use of pesticides and fertilizer. And they unfairly disadvantage Third World farmers. So how's this for an efficient government program? It doesn't succeed in its express purpose of helping small farmers, but at least it potentially harms the environment and helps further impoverish poor people around the world.
It's an enduring mystery why one of the country's more marvelously efficient industries is so attached to the federal teat. Agricultural production has doubled in the United States the past half-century. At the same time, the number of farms has dropped by two-thirds. That is a textbook case of a productivity revolution, and it has been driven by agribusiness. Turning around and subsidizing it is a little like putting the giants of the Internet revolution on the federal dole. How big a check would you like, Messrs. Gates and Bezos?
Indeed, roughly half of American agriculture -- fruits, vegetables, nuts -- is not subsidized and does fine, thank you very much.
What exactly are the subsidies good for? "You don't accomplish anything but buy votes," says Avery. At that, the program is quite efficient. A 1996 overhaul was slowly unraveled by ravenous farm-state politicos. The administration now wants to save nearly $6 billion in payments in the next decade, cap annual payments to individual farms at $250,000, and generally rationalize the system. Congressional representatives from Bush's rural base are already screaming. At issue is whether they think welfare dependence is as bad in red states as it is in the blue.