March 22, 2011
National Journal: Ag Committee Supports Cuts to Food Assistance, Not Farm Subsidies
The House Agriculture Committee endorsed a letter this week to Budget Chairman Paul Ryan arguing that the Supplemental Nutrition Assistance Program, which helps low-income Americans purchase food, would make a better target for cuts than automatic subsidies to farms.
The move comes as food prices are rising -- the Department of Agriculture expects overall food prices to rise 3 percent to 4 percent this year -- making it harder for the beneficiaries of SNAP to stretch their existing benefits, even as farmers profit from the tightening market. Critics across the political spectrum have called agricultural subsidies wasteful and unnecessary, and they question the logic of maintaining them as lawmakers hunt for budget cuts.
"Conspicuously missing from the list of mandatory spending cuts the Agriculture Committee has made or is proposing to make are commodity subsidies, and specifically the $4.9 billion in direct payments that are automatically paid out each year regardless of whether a person farms,” said Jake Caldwell, the director of agricultural policy at the left-leaning Center for American Progress. “It is shortsighted of the Committee to suggest cuts to SNAP, particularly as food prices are on the rise, Americans are spending more than 10 percent of their household budget on food, and more people are enrolled in the food stamp program than ever before."
President Obama has endorsed cuts in agricultural subsidies as a way to lower the deficit without targeting essential programs, and lawmakers from both parties, like Ryan, R-Wis., have expressed similar opinions.
But the Agriculture Committee is dominated by members of Congress from farm states; Chairman Frank Lucas, R-Okla., has reported $445,714 in political contributions from the agricultural industry during the course of his career, and ranking Democrat Collin Peterson of Minnesota reports $809,097 in career donations.
From CBO (January 2011):
Mandatory spending for agricultural support totaled $15 billion in 2010 and is projected to average about that amount in each year between 2011 and 2021. That spending will dip in 2012, to about $13 billion, largely because of changes in the timing of payments for crop insurance and commodity programs that were mandated in the 2008 farm bill. ...
Some discussion of the distribution of support from ag subsidies (including the number of millionaire recipients) in this GAO study entitled "USDA Needs to Strengthen Controls to Prevent Payments to Individuals Who Exceed Income Eligibility Limits".
My first published paper, on Capture and Ideology in American farm policy (with Peter Navarro).
Posted by Menzie Chinn at March 22, 2011 02:50 PMdigg this | reddit
IF you look at the recipients of subsidies, you see they are skewed toward wealthy farmers - and companies formed to own land. The all GOP congressmen from the subsidy receiving states abhor subsidies that aren't productive and since their states receive subsidies those must be productive, except when the subsidies go to poorer people.
Posted by: jonathan at March 22, 2011 05:31 PM
This Wisconsinite is hardly surprised. How lame and predictable that the larger economic "bang for the buck" is passed over in favor of unnecessary subisidies to the group that has the funds to contribute.
Don't let the nice face fool you, this Wisconsinite can tell you that Paul Ryan is pay-for-play all the way. Good catch on this article, Menzie.
Posted by: Jake at March 22, 2011 05:58 PM
Rent control and ag subsidies: These two topics were well-covered in economics texts thirty years ago. Both tend to be poor policy.
Posted by: Steven Kopits at March 22, 2011 07:01 PM
Domestic food and nutrition assistance is provided through a decentralized system of primarily 18 different federal programs that shows signs of overlap and inefficient use of resources.
Posted by: Babinich at March 23, 2011 02:35 AM
But the Agriculture Committee is dominated by members of Congress from farm states
They are voting as the majority of their constituents want them to vote. Farm subsidies drive higher crop and land prices, which in turn, drives mainstreet in rural America.
I don't like democrats pushing the union cause, but I understand it. They are simply voting as their constituents and special interests want them to vote.
Some of you have lost sight of the fact that congress/legislators are elected to REPRESENT their consituents in their districts. They are not elected to defend/support policies that are pushed by special intersts outside their districts.
Posted by: tj at March 23, 2011 06:00 AM
Thanks for this post. The Republicans are huge hypocrits on this issue (as are the Democrats I might add). Ag subsidies and other federal government interventions in Ag have been one of the primary causes of economic decline, conflict and violent unrest in our nation since the founding. It was primarily federal intervention in Ag policy that brought on the Civil War. It was Ag tariff policy that brought us the Fordney-McCumber and Smoot-Hawley tariffs resulting in the Great Depression. Much of the hunger during the Great Depression was caused by the federal government intervention in the Ag markets, destroying food and paying farmers not to produce. Federal Ag policy has been a disaster in the US. We produce food for the world in spite of our idiocy.
Posted by: Ricardo at March 23, 2011 06:26 AM
One could also argue that our agricultural subsidies for corn are contributing to higher food costs in the rest of the world because such a large percentage of our production is driven by incentives into ethanol.
Posted by: jonathan at March 23, 2011 09:24 AM
"But the Agriculture Committee is dominated by members of Congress from farm states; Chairman Frank Lucas, R-Okla., has reported $445,714 in political contributions from the agricultural industry during the course of his career, and ranking Democrat Collin Peterson of Minnesota reports $809,097 in career donations."
The article goes on to say that Ryan favors cuts in agricultural subsidies. Just because the Ag Committee favors protecting the subsidies, doesn't mean that it's a done deal. I do not recall that Nancy Pelosi cut them during her just-ended tenure, but maybe I just missed it.
I favor accross the board cuts, like Christie has done in NJ, to neutralize the special interests like agriculture and the public employees' unions. Tell them everyone is in the same boat and deal with it.
Politicians will be always be susceptible to being bought, be they Dems or Repubs. The best way to counteract this is to reduce the power and scope of government and reduce the potential for favor buying. Big government = big corruption.
Posted by: Anonymous at March 23, 2011 09:41 AM
Todays corn farmer is the biggest welfare who're on the planet. Look no farther than Vicky Hartzler (MO-4).
Posted by: dickeylee at March 23, 2011 10:43 AM
To further my point above, the U.S. ethanol industry is government-created and a huge misallocation of resources. But, you can't expect legislators in major ag states to vote against ethanol subsidies. (Unless they ran on an anti-ethanol platform to get elected, as might be the case in some urban districts).
Posted by: tj at March 23, 2011 11:17 AM
Wrong tj, it is not government created, it is agribusiness created. It goes through the government.
Republicans moved toward agribusiness subsidies in the post-911 timeframe to buy votes in "Red States" and boost the economy along with defense(the main one) and energy. Thus special interest and farming capitalists got what they wanted for years.
It also with defense and energy created the basis for the Bush era economy and recovery from the previous recession even though we were offshoring capital at alarming rates. Without it, the housing boom never happens and the economy just would have gotten slowly worse over the decade rather than all at once.
It is the shadow beneath the vines.
If we made deep cuts in defense and "reformed" ag subsidies back to 1930's standards, the Republicans would lose votes up the ying yang.
Posted by: The Rage at March 23, 2011 01:29 PM
Ricardo Ag subsidies and other federal government interventions in Ag have been one of the primary causes of economic decline, conflict and violent unrest in our nation since the founding. It was primarily federal intervention in Ag policy that brought on the Civil War. It was Ag tariff policy that brought us the Fordney-McCumber and Smoot-Hawley tariffs resulting in the Great Depression.
Honestly, sometimes your ignorance of history just leaves me dumbfounded. Ag policy brought on the Civil War??? Really? I grew up in the Land of Lincoln and when I was in school we were always taught that the Civil War had something to do with slavery. As to Smoot-Hawley, according to NBER the Depression started in Aug 1929, which was 10 months sooner than when Smoot-Hawley was passed and long before Smoot-Hawley had effect. Foreign reaction to Smoot-Hawley may have made a bad situation worse, but Smoot-Hawley did not bring on the Depression. Anyone familiar with Stolper-Samuelson knows that this argument about Smoot-Hawley is just a canard and a good example of ersatz economics.
I'm not a fan of ag subsidies and for the most part we'd be a lot better off without them, but the earliest rationale for ag subsidies does make economic sense. Just remember the old "cobweb" model married with adaptive expectations and you can make a pretty good case for some government intervention to stabilize output. The "cobweb" model is inherently unstable in the sense of a differential equation that doesn't converge towards equilibrium. And the "cobweb" model was probably a pretty good way to describe ag markets during the New Deal era.
Posted by: 2slugbaits at March 23, 2011 03:10 PM
"But the Agriculture Committee is dominated by members of Congress from farm states"
Nice try... Party independent... Same as it ever was...
Posted by: Babinich at March 24, 2011 02:40 AM
I am sorry that you were a victim of public mis-education.
Are you aware that Lincoln from the beginning promised to keep slavery if the Southern States would simply maintain the union? As an example consider the Emancipation Proclamation. Public schools teach that Lincoln freed the slaves with the Emancipation Proclamation but they never bother to actually read it.
Wikipedia states it correctly.
The proclamation did not cover the 800,000 slaves in the slave-holding border states of Missouri, Kentucky, West Virginia, Maryland or Delaware, which were Union states; slaves there were freed by separate state and federal actions. The state of Tennessee had already mostly returned to Union control, so it also was not named and was exempted. Virginia was named, but exemptions were specified for the 48 counties that were in the process of forming West Virginia, as well as seven other named counties and two cities. Also specifically exempted were New Orleans and 13 named parishes of Louisiana, all of which were also already mostly under Federal control at the time of the Proclamation.
Here is the specific wording of the Proclamation.
...all persons held as slaves within any State or designated part of a State, the people whereof shall then be in rebellion against the United States, shall be then, thenceforward, and forever free;
To correct your mis-education on Fordney-McCumber and Smoot-Hawley I suggest you read Dr. Thomas Rustici's book Lessons from the Great Depression. His book can be ordered from his web site here.
Posted by: Ricardo at March 24, 2011 06:11 AM
All major policy is created by special interests! That's the problem! Left or right doesn't matter. Special interests push their policy through whenever they have the votes.
I read this morning that Romney is going on a tour to raise funds from 'major campaign contributors'. In other words, whose boots does he need to lick if he gets elected? Special interests on both sides are ruining America.
Posted by: tj at March 24, 2011 07:51 AM
It's hard to see the fiscal favoritism toward rural states changing anytime soon and the main reason is the Senate. The disproportionate representation of rural voters makes it a done deal and the odds of changing the constitution, in a process that also gives rural voters a disproportionate voice, are nil.
Posted by: Bob_in_MA at March 24, 2011 07:56 AM
Funny, the actual document South Carolina produced (in December 1860) to explain their reasons for secession only mentions ONE THING:
You'd think that if "ag policy" was at all relevant, they'd have brought it up...
Posted by: Matt at March 24, 2011 12:46 PM
Ricardo Thanks for the history lesson, but believe it or not I was aware of what the Emancipation did and did not say. But how is that relevant to your claim that the Civil War was brought about by the agricultural policies of the federal government?
Posted by: 2slugbaits at March 24, 2011 03:38 PM
Why are people complaining? Heck, farmers face increasingly variable climate, and so obviously they need lots of support. As for those poor people getting food stamps, well, we know that the poor are poor due to their own fault, and we need to provide incentives for them to get out of being pooer, so, taking away their food stamps should provide a heightened incentive. And as for those families of strikers, well!!!
Posted by: Barkley Rosser at March 25, 2011 12:58 PM
I think the point about ag policy and the Civil War is that the South was a cash crop ag economy which required slavery in order to survive, at least in the minds of the slave owners. It's a bit of a stretch to call it ag policy in the contemporary sense, but at the very least, slavery was a policy with huge ag implications.
Posted by: Jczecznye at March 25, 2011 05:22 PM
You wrote: I grew up in the Land of Lincoln and when I was in school we were always taught that the Civil War had something to do with slavery.
I guess I made the mistake of reading what you wrote then responding.
One of the primary causes of the Civil War was tariff policy.
The quote below is from a government site for children so it is easy to read.
There were many reasons for a Civil War to happen in America, and political issues and disagreements began soon after the American Revolution ended in 1782. Between the years 1800 and 1860, arguments between the North and South grew more intense. One of the main quarrels was about taxes paid on goods brought into this country from foreign countries. This tax was called a tariff. Southerners felt these tariffs were unfair and aimed specifically at them because they imported a wider variety of goods than most Northern people. Southern exporters sometimes had to pay higher amounts for shipping their goods overseas because of the distance from southern ports and sometimes pay unequal tariffs imposed by a foreign country on some of their goods. An awkward economic structure allowed states and private transportation companies to do this, which also affected Southern banks that found themselves paying higher interest rates on loans made with banks in the North. The situation grew worse after several "panics", including one in 1857 that affected more Northern banks than Southern. Southern financiers found themselves burdened with high payments just to save Northern banks that had suffered financial losses through poor investment.
In the years before the Civil War the political power in the Federal government, centered in Washington, D.C., was changing. Northern and mid-western states were becoming more and more powerful as the populations increased. Southern states lost political power because the population did not increase as rapidly. As one portion of the nation grew larger than another, people began to talk of the nation as sections. This was called sectionalism. Just as the original thirteen colonies fought for their independence almost 100 years earlier, the Southern states felt a growing need for freedom from the central Federal authority in Washington. Southerners believed that state laws carried more weight than Federal laws, and they should abide by the state regulations first. This issue was called State's Rights and became a very warm topic in congress.
Posted by: Anonymous at March 28, 2011 10:20 AM
Farm subsidies contribute to the social good of a stable government. I don't know that they are a neccassary condition, but a steady state of non-famine seems advantageous toward a stable government. As for farm sub's vs feed the poor, I would believe, as capitalists, we have a bias toward transfers to capital holders.
How in blue blazes did this become a "what caused the civil war" thread? If you really want to debate that I would suggest www.fark.com.
ps it was "states' rights" the slave states were angry that the non-slave states kept exercising their rights by not enforcing the federal Run-away slave act.
Posted by: Frank in midtown at April 1, 2011 01:51 PM