2006 July 02 Sunday
Farm Subsidies Go To Non-Farmers

The Washington Post has done an excellent investigation into how the federal farm subsidies work in the United States. The US government pays non-farmers subsidies for land that has not been farmed for many years.

Nationwide, the federal government has paid at least $1.3 billion in subsidies for rice and other crops since 2000 to individuals who do no farming at all, according to an analysis of government records by The Washington Post.

Some of them collect hundreds of thousands of dollars without planting a seed. Mary Anna Hudson, 87, from the River Oaks neighborhood in Houston, has received $191,000 over the past decade. For Houston surgeon Jimmy Frank Howell, the total was $490,709.

"I don't agree with the government's policy," said Matthews, who wanted to give the money back but was told it would just go to other landowners. "They give all of this money to landowners who don't even farm, while real farmers can't afford to get started. It's wrong."

The checks to Matthews and other landowners were intended 10 years ago as a first step toward eventually eliminating costly, decades-old farm subsidies. Instead, the payments have grown into an even larger subsidy that benefits millionaire landowners, foreign speculators and absentee landlords, as well as farmers.

Farms have been split up into 10 acre plots for upscale housing. For each 10 acres 9 can be classified as still available for farming and so owners who just use their land for luxury housing get checks each year for 9 acres of their 10 acre plots.

Farmers and non-farm landowners get more subsidies than welfare recipients but they get far less criticism than do welfare recipients.

What began in the 1930s as a limited safety net for working farmers has swollen into a far-flung infrastructure of entitlements that has cost $172 billion over the past decade. In 2005 alone, when pretax farm profits were at a near-record $72 billion, the federal government handed out more than $25 billion in aid, almost 50 percent more than the amount it pays to families receiving welfare.

It is time to end farm subsidies entirely. Americans should stop seeing farmers as virtuous just because they work the land.

The subsidies serve as an incentive to convert rice fields into cattle grazing land.

In 1998, Zapalac was leasing 2,500 acres, most of it for rice farming. One landlord canceled a lease for 1,400 acres in 1998, he said, and a second cancellation followed for the rest in 2004.

"As soon as they figured they could take the payments, they said, 'I don't need you anymore,' " he said. "They were renting me land for $40 an acre, but they could get $125 an acre from the government."

Some of the rice land he lost has been turned into pasture for cattle, while the landlord continues to receive the rice money.

"You can sell the calves and still stick the rice payment in your pocket," Zapalac said. "It's a hell of a deal."

In the 2010s and 2020s when the huge rise in the retired population causes an explosion in federal spending farm subsidies are one place where spending could get cut without any harm to the economy. But why not cut the subsidies sooner?

Update: Farmers get price subsidies not based on what they sell for but rather for what low prices happen during the year.

The farmers do not have to sell at distressed prices to collect the money. They can bank the government payments and sell when prices are higher.

Since September, the program has cost taxpayers $4.8 billion. Most of that money -- $3.8 billion -- went to farmers such as Richardson who sold at higher prices, according to a Washington Post analysis of USDA payment data.

The subsidy is called the loan deficiency payment. Although it has cost taxpayers $29 billion since 1998, it is virtually unknown outside farm country. But in rural America, the LDP is a topic at backyard barbecues and local diners along with the high school football team and the weather. Despite its name, it is neither a loan nor, in many cases, payment for a deficiency. It is just cash paid to farmers when market prices dip below the government-set minimum, or floor, if only for a single day.

The LDP has become so ingrained in farmland finances that farmers sometimes wish for market prices to drop so they can capture a larger subsidy.

...

For last year's crop, farmers sold their corn for an average of $1.90 per bushel, only 5 cents below the national floor price. But they received an LDP averaging 44 cents, government payment records show. The difference amounted to $3.8 billion.

These subsidies will have to go on the chopping block when the baby boomers retire. The federal government's financial crisis will bring massive pressure to cut all pork barrel spending including farm subsidies.

Share |      By Randall Parker at 2006 July 02 05:14 PM  Politics Money


Comments
Mark said at July 2, 2006 8:48 PM:

Hmm... That election. No clear winner yet.

Adam said at July 5, 2006 3:45 PM:

The reasons these farmers recieve subsidies without paying anything is because by not farming their land, it reduces the available supply of the various crops (rice, corn, etc.), therefore keeping the price of crops high for the farmers who are farming crops, so that they can afford to continue producing crops.

This practice arouse under FDR during the great depression, because farmers were not getting enough money to live farming crops, so they we're actually better off saving their time and effort for something more profitable rather than creating food for our great nation.

That's why we have the subsidies.

Bob Badour said at July 5, 2006 7:36 PM:

Adam,

That doesn't explain why some dentist or lawyer with a mini-mansion on a 10 acre lot deserves welfare.

Adam said at July 14, 2006 5:08 PM:

First of all, it's not welfare, the difference between welfare and a subsidy is very different. Welfare is there to support those who are unable to support themselves (although, its use has been perverted a bit in recent times).

Subsidies are there mostly for economic reasons. You have to realize, if the guy owning the house wasn't getting paid to not farm his land, while it is unlikely that he would farm his own land, it is likely that he may divide and sell some of it, or lease the land he feels he doesn't really need, to farmers in the area. This would cause an increase in supply lowering the prices for the good that's being produced on that land.

I do think however that the land owners should not receive the subsidies if they are using the land, as pasture for cattle, or anything else, I also agree that these subsidies will have to be cut in order to pay for the baby boomer's retirement costs.


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