Policy Documents

Research & Commentary: 2013 Farm Bill Full of Wasteful Subsidies

June 18, 2013

On June 10 the U.S. Senate approved its version of the Federal Agriculture Reform and Risk Management Act of 2013, also known as the Farm Bill. The bill would fund food stamps, direct payments to farmers, crop insurance, disaster assistance, and various other subsidies. The Congressional Budget Office estimates it will cost $973 billion over the next 10 years.

The largest and most expensive component of the Farm Bill is the Supplemental Nutrition Assistance Program (SNAP), commonly referred to as food stamps. According to Congressional Research Service reports, 80 percent of the Farm Bill money, or $764 billion, will go to SNAP over the next decade. Hunger prevention and farm policy are separate issues, however, and each deserves thoughtful consideration from legislators. Combining them into one enormous 575-page bill decreases chances for meaningful reform.

Another key component of the Farm Bill is the Direct Payments Program. This program gives payments to producers based on past production; farmers collect the payments even when prices are high or their land is uncultivated, provided their average annual farm income does not exceed $750,000. In some cases, however, high-income commercial farms gathered millions of dollars in subsidies without planting a single seed.

Taxpayers also pay 38 percent to 80 percent of crop insurance premiums for more than 100 commodities, and they subsidize insurers for managing the coverage. This allows farmers to take larger risks with their planting and cultivation of crops because they don’t bear the full cost of that risk. In 2011, taxpayers paid 62 percent of the premiums for the crop insurance program, up from 37 percent in 2000. Simply reducing the 62 percent premium subsidy by 10 percentage points to 52 percent in 2011 would have saved $1.2 billion.

Crop insurance also encourages farmers to purchase extra insurance, with the additional cost borne by taxpayers. According to the Congressional Budget Office, crop insurance subsidies are expected to cost taxpayers an average of $8.9 billion a year in 2013–2022. A Government Accountability Office analysis found that if a $40,000 cap on premium subsidies received by farmers had been implemented in 2011, it would have saved taxpayers an estimated $1 billion in that year alone. This type of cap would have affected only 3.9 percent of contributing farmers. Lowering the cap further would achieve even more savings.

Finally, the Disaster Assistance Program invites Congress to declare “emergencies” and release additional funds. This program subsidizes farmers who forgo crop insurance. Current estimates predict the program could grow to cost about $9 billion a year in the coming decade.

Lawmakers should consider the needs of farmers and taxpayers. The most expensive and indefensible subsidies should be eliminated, and lawmakers should take a market-based approach to these programs.

The following documents provide additional information about various provisions of the Farm Bill.

 

Farm Bill “Reform” Is in the Eye of the Beholder
http://heartland.org/policy-documents/farm-bill-reform-eye-beholder
Sallie James of the Cato Institute explains how the recently proposed Farm Bill is a step backward from some of the reforms to farm programs made in the 1996 and 2002 farm bills.

A Farm Bill Primer: 10 Things You Should Know About the Farm Bill
http://www.heritage.org/research/reports/2013/05/a-farm-bill-primer-10-things-you-should-know-about-the-farm-bill

Daren Bakst and Diane Katz of The Heritage Foundation identify 10 important elements of the Farm Bill, including the many subsidies that should be capped or eliminated altogether.

NTU Urges All Senators to Vote “YES” on the Following Amendments Regarding Crop Insurance Reform
http://www.ntu.org/news-and-issues/agriculture/523ntu-urges-all-senators-to.html
Nan Swift, federal government affairs manager at National Taxpayers Union, writes to encourage senators to vote yes on Farm Bill amendments that would prevent the waste of taxpayer dollars on special-interest carve-outs.

Farm Bill Reboot: Crop Insurance Has Got to Go
http://heartland.org/policy-documents/farm-bill-reboot-crop-insurance-has-got-go
The Chicago Tribune editorializes against farm subsidies as creating perverse incentives and unnecessary costs to taxpayers, as well as being bad for the nation’s food production. It calls for an end to this agricultural welfare.

Budget Issues Shaping a Farm Bill in 2013
http://www.fas.org/sgp/crs/misc/R42484.pdf
Agricultural policy specialist Jim Monke discusses difficult choices Congress faces regarding how much support to provide for agriculture and how to allocate it among competing constituencies.

The 2013 Farm Bill: Reducing the Economic and Environmental Costs
http://www.cato.org/multimedia/events/2013-farm-bill-reducing-economic-environmental-costs

Chris Edwards, Scott Faber, Andrew Moylan, and Josh Sewell discuss the impact of the farm programs on taxpayers and the environment and suggest possible reform steps.

 20 Completely Unjustified Programs in the House Farm Bill
http://blog.heritage.org/2013/06/12/20-completely-unjustified-programs-in-the-house-farm-bill/
Diane Katz and Daren Bakst of The Heritage Foundation identify 20 unjustified programs in the 575 pages of the Farm Bill.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website at http://heartland.org, and PolicyBot, Heartland’s free online research database at www.policybot.org.

If you have any questions about this issue or the Heartland website, contact John Nothdurft Heartland Institute’s director of government relations at jnothdurft@heartland.org or 312/377-4000.