Budget Bullets: Agricultural Subsidies

Billions of Dollars in Agricultural Subsidies Would Be Better Spent on Deficit Reduction

SOURCE: AP/Nati Harnik

In this October 6, 2010 file photo, corn is harvested near Union, Nebraska.

By Gadi Dechter | July 27, 2011

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The federal government each year pays owners of certain croplands $4.9 billion in “direct payment” subsidies, regardless of whether the recipients plant anything on their land. Designed to provide farmers with “income stability,” these payments today go to high-income owners of select croplands who are already enjoying high commodity prices and profits. These ineffective government subsidies should be phased out and used to reduce the U.S. deficit.

Agricultural subsidies are government giveaways that benefit wealthier people and larger farms

• Nearly two-thirds of direct payments go to the largest 12 percent of farms.
• Recipients of this government largesse were “more than twice as likely to have higher incomes as other tax filers,” according to the General Accountability Office.
• Nearly two dozen current members of Congress took home a combined $6 million in these subsidies in recent years, according to an independent analysis.

Direct payments are unfair and make no economic sense

• The payments are made every year whether the recipient farms or not.
• Payments continue to increase the deficit even though they aren’t needed—commodity prices are high and farm profits grew by 27 percent in 2010.
• Most farmers don’t get these special-interest subsidies, which favor cotton and rice growers over fruit and vegetable farmers—even though the latter contribute more than 50 percent of the total farm “gate value” in the United States.

We should phase out these subsidies and use the savings to reduce the deficit

• Direct payments should be gradually phased out, starting with limits that would restrict eligibility to people earning less than $250,000 in farm income.
• Congress should redirect more than $4.2 billion in savings to deficit reduction, and target the remaining $650 million to farm-based clean energy projects, rural home modernizations, biofuel crop cultivation, and agricultural exports.
• These recommendations would allow Congress to simultaneously reduce the deficit and invest in our economic competitiveness, affirming our historical commitment to farmers and rural communities.

Gadi Dechter is Associate Director of Government Reform at the Center for American Progress.