Farm subsidies are perhaps the ultimate, but secret, third rail of American politics. While entitlements are discussed out in the open, farm subsidies are rarely talked about – even though they are the most expensive subsidy Washington doles out.
All told, the U.S. government spends $20 billion annually on farm subsidies, with approximately 39 percent of all farms receiving some sort of subsidy. For comparison, the oil industry gets about $4.6 billion annually and annual housing subsidies total another $15 billion. A significant portion of this $20 billion goes not to your local family farm, but to Big Aggie.
(Note that this $20 billion annual farm subsidy figure doesn’t take into account the 30+ years of ethanol subsidies to the corn industry nor export subsidies to U.S. farmers issued by the USDA.)
The government never properly explains why this is. Certainly small farmers are growing their crops at enormous risk. However, it’s not clear that agriculture is any different than other high-risk industries – especially because the United States is blessed with some of the most fertile farmland in the world, and a highly skilled labor force.
Subsidies don’t just cost taxpayers, an expense that might properly be justified by showing a return on investment. Subsidies also provide powerful disincentives against innovation, as well as cost effectiveness and diversification of land use.
There is also a strong case to be made that farm subsidies are a major driver of the obesity and cancer epidemic in the United States. Every time Washington interferes in the private sector, they are picking winners and losers. The winners chosen are companies producing food that’s high in calories and low in nutritional density – and that helps make Americans sick and fat, because it distorts what food is available at what price.
While President Trump has sometimes discussed reducing farm subsidies, the solution to the problem is much more radical – the total elimination of all farm subsidies from the federal budget.
Food Subsidies in the United States
There have long been federal programs in the United States propping up the agricultural sector. For example, the Morrill Act of 1862 established land-grant universities with a focus on agricultural education. The Smith-Lever Act of 1914 similarly provided funding for agricultural education.
The first program similar to the farm subsidies of today was the Federal Farm Loan Act of 1916. This still exists in the form of the Farm Credit System, which currently holds $280 billion in assets. This Act came out of a study done by progressive Republican President Theodore Roosevelt. At this time, rural Americans made up the bulk of the United States’ population.
The Act allowed farmers to borrow 50 percent of the value of their land and 20 percent of the value of their improvements. Loans were available between $100 and $10,000 and amortized between five and 40 years. It was intended to provide poor farmers with an alternative source of credit from large banks. The successor of this Act, the Farm Credit System, currently provides approximately a third of the credit in rural America.
The Great Depression, the New Deal and Farm Subsidies
As with many other aspects of American economic life, farming changed with the advent of the Great Depression and the New Deal, which, at least it was argued, sought to minimize the impact of the worst parts of the Depression.
The Agricultural Marketing Act of 1929 was passed on the watch of Republican President Herbert Hoover, widely blamed for the Depression and maligned as having “done nothing” to protect Americans from it. This Act created the Federal Farm Board, which was itself a modification of the Federal Farm Loan Board.
Hoover believed that he could halt the collapse of agricultural prices by buying, selling and storing surplus grains. Another method to prevent the collapse was to lend to farmers on generous terms. Farmers used the loans to purchase seed and feed. This was particularly important in the South, where farmers were just getting over a drought.
This had a very predictable effect: Farmers began raising more crops than they knew they could sell. They knew the government would buy whatever they produced, and the bill contained no production limit. Deflation was not countered and the Depression worsened for American farmers. The federal government spent $500 million before the program was abolished in 1933.
The real expansion of federal subsidies for the American farmer began under President Franklin Delano Roosevelt. Programs enacted under FDR’s New Deal included price supports for commodities, regulations on the supply of farm commodities, barriers to prevent importation of farm commodities, and crop insurance programs. These programs, while modified and greatly expanded, form the basis of current federal farm policy. There is no other way to describe this than central planning.
The first major program passed by FDR as part of the New Deal was the Agricultural Adjustment Act of 1933. This was the somewhat infamous program that had the government paying farmers to not plant crops, to dump out milk and the like when people were going hungry in the streets. Not only did it look bad, it was also declared unconstitutional in 1936, in the United States v. Butler case, on the grounds that the Constitution made agricultural regulations a state matter. This was in the ancient days, when the Supreme Court declared acts unconstitutional when the Constitution did not authorize them to do so.
The first replacement was the Soil Conservation and Domestic Allotment Act of 1936. This paid farmers to plant fewer crops on the basis that it was preventing topsoil erosion. A more straightforward replacement, the Agricultural Adjustment Act of 1938, preserved many of the earlier provisions of its 1933 cousin, and was passed at a time when the Supreme Court was more amenable to the wishes of President Roosevelt following his proposed threat to pack the court with up to 15 judges. This new version of the Agricultural Adjustment Act mandated price supports for broad sections of American agriculture. When challenged in court, the Supreme Court ultimately upheld it under (what else) the commerce clause.
Commodity price and income supports are now a staple in the federal budget. But what does the money go toward?
Where Do Farm Subsidies Go?
Farm subsidies are often painted as the last refuge of the American small farmer. But even a close examination of where farm subsidies go reveals that nothing could be further from the truth. The 10 largest recipients of aid receive between $14 million and $23.7 million, averaging $18.2 million, or approximately $1.8 million per year for what are giant agricultural combines. Part of this is a deliberate result of United States agricultural policy – after the Second World War, farmers were told to “get big or get out.”
Let’s look at some startling facts about U.S. farm subsidies:
- Over 6,000 farming companies and combines received more than $1 million federal aid in the years between 2008 and 2018.
- This constituted a total of over $11 billion in this 10-year period.
- 18 different farming entities received over $10 million.
- Over $626 million went to urban areas – i.e., places with over 250,000 residents and precisely zero farms.
- The five most populated cities in America (New York, Los Angeles, Chicago, Houston and Philadelphia) received a collective $18 million in farm subsidies. 25 percent of all subsidies went to someone receiving over $250,000 in subsidies.
- The 150 most affluent zip codes in America received $5 million in subsidies in 2017 alone.
- What’s more, the government is still paying farmers to not farm.
- 12 members of Congress received as much as $637,059 in farm subsidies in 2017.
All of this adds up to underscore the true nature of America’s food subsidy system: It’s a massive welfare program directed at the rich and affluent, which artificially distorts food prices for everyone.
Perhaps worst of all, the massive farm subsidies aren’t keeping people out of debt. American farmer debt currently stands at $409 billion. Wheat is receiving $45.9 billion in subsidies while corn is getting $112 billion. Farmers received $12 billion in aid from the Trump Administration to help hedge against potential losses from the trade war with China. While it’s difficult to say to what extent any of this is vote-buying, it is worth noting that Iowa is the second-largest recipient of USDA subsidies, only slightly behind Texas.
But if the story here were simply one of government largesse, this would be a very short article, indeed. The story is much deeper, and goes to the heart of health and wellness in the United States.
Earl Butz: Father of the Modern Food Subsidy System
The subsidy system might have had its problems, but the system really went off the rails with the advent of Earl Butz as Secretary of Agriculture under both President Richard Nixon and President Gerald Ford. He was the one who pioneered the fundamental change in farm subsidies. No longer would farmers be paid to take fields out of production. Instead they would be paid for producing absolutely insane amounts of corn.
He was the man who coined the term “get big or get out.” He also urged farmers to use every available square inch of land – to plant “from fencepost to fencepost.” This change in policy had a dramatic impact on the world of American agriculture. Small family farms were crushed and big agribusiness became the norm rather than the exception.
Part of the change was due to the high cost of food during the early 1970s. The Nixon Administration (and thus, Butz) were taking heat over soaring food prices. Thus, Butz decided to switch from paying people not to grow food to paying them to grow it. He brokered the sale of 30 million tons of grain to the Soviet Union to keep prices afloat. This was not simply to help farmers, but also to keep them in the Nixon fold – there was a strong fear that they would vote for 1972 Democratic Party candidate George McGovern.
Butz argues in the documentary King Corn that he provided a valuable service to both the American consumer and the American farmer: both the dramatic reduction of the cost per calorie of food and also the dramatic increase in the efficiency of farming techniques. Indeed, this generation spends less feeding itself than any other in human history.
Still, as we will discuss in greater detail below, one of the unintended side effects of the newly crowned “King Corn” was the development of high fructose corn syrup – the consequences of which have been a disaster for the American diet.
The Emblem of USDA: The Food Pyramid
Everyone is familiar with the food pyramid, the alleged template for a healthy diet produced by the United States Department of Agriculture in 1992. The original Food Pyramid urged Americans to eat as many as 11 servings of carbs per day, in addition to another four servings of fruit (i.e., more carbs). Meat, poultry, eggs, fish, beans and nuts were to total only two to three servings per day between all of them.
Fats – even healthy ones like avocados and olive oil – were to be “used sparingly.” They were lumped into the same group as sugars and sugary snacks. Healthy plant-based oils like olive or avocado oil were not separated from less healthy processed plant-based oils like canola or corn oil.
The USDA’s latest version of the Food Pyramid is known as MyPlate, and some insight into how it was created and what purpose it serves can be found with the previous pyramid (the Eating Right Pyramid) and why it was discontinued. The Eating Right Pyramid, the original Food Pyramid, was replaced due to industry concerns from beef and poultry farmers that their product was not being presented properly.
An alternative to MyPlate is the Healthy Eating Plate from the Harvard School of Public Health. This stresses whole grains, healthy proteins and fats, drinking water and other sugar-free drinks, and adequate amounts of vegetables.
Harvard School of Public Health Department of Nutrition Chair Walter Willett claimed that, “like the earlier U.S. Department of Agriculture pyramids, MyPlate mixes science with the influence of powerful agricultural interests, which is not the recipe for healthy eating”.
Dr. Marion Nestle, former chair of the Department of Nutrition, Food Studies, and Public Health at New York University stated that, “There’s a great deal of money at stake in what these guidelines say.”
A lot of money is in the subsidies themselves, but there is also a trickle-down effect. Cheap corn, for example, has totally changed the world of agriculture and food. Cows never ate corn until farmers started getting money to grow it everywhere. This is what makes the 99-cent hamburger possible. Fish, likewise, are another animal that would never eat corn if left to its own devices, but humans have trained them to eat corn because it is arguably the world’s cheapest and most plentiful food source – not due to naturally occuring market forces, but because of corn subsidies.
If you’re horrified by factory farming – the penning in of tons of cows, pigs and other animals in tiny spaces – you can lay the blame right at the feet of farm subsidies. Such practices are simply not economically viable or sustainable without massive subsidies or corn. Ethanol is another creation of the agriculture-industrial complex.
The bottom line is that the USDA Food Pyramid and its antecedents and successors have more to do with feeding money into the agricultural system – where the subsidies are – than it does with teaching Americans proper nutrition.
Corn Subsidies Are a Killer
Corn subsidies are big business in the United States, and this can be seen in the explosion of a simple ingredient now found in everything from sodapop to hot dogs – high fructose corn syrup, also known as HFCS.
Between the development of HFCS in 1970 and 1990, the consumption of HFCS skyrocketed by 1,000 percent. It’s not just that HFCS is in just about everything. It’s also that HFCS makes a number of things possible that otherwise wouldn’t be – think the now ubiquitous 99-cent three-liter bottle of sodapop available at every big-box supermarket around the country.
The New York Times reported that junk food is the largest source of calories in the United States. The top 10 calorie sources in the United States are, according to Harvard Medical School:
- Grain desserts (everything from cake to granola bars)
- Sodapop, energy drinks and sports drinks
- Mexican food
- Dairy-based desserts
This means that at least four out of the 10 top calorie sources in the American diet are junk food. Most of them are based on ingredients from highly subsidized food groups like corn, soybeans, wheat, and rice. Barely any subsidies exist for fruit and vegetables, the foods that Americans are ostensibly supposed to fill half of their plates with.
A study by the Centers for Disease Control and Prevention, published in JAMA Internal Medicine in August 2016, was able to document a connection between heavily subsidized food sources and obesity. The study found that those subsisting on a diet of heavily subsidized foods were 37 percent more likely to be obese than those who did not. Belly fat, abnormal cholesterol, and high blood sugar levels were likewise linked to a diet heavy in foods subsidized by the federal government.
Fruits and vegetables are called, in a typical act of government doublespeak, “specialty crops.” They claim approximately 75 percent of all farmland in the United States, but net a scant 14 percent of all subsidies. These are primarily grown by small family farmers. Some subsidy bills stipulate that farms receiving subsidies for commodity crops like corn and wheat cannot grow “specialty crops.”
The Coming Tax on Meat
Meat, in particular red meat, has long been maligned as a source of unhealthy calories. However, the paleo movement, the low-carb movement, and the extreme carnivore diet movement have all championed meat, in particular red meat, as the healthiest thing you can possibly eat. Most health conscious people these days are, at the very least, avoiding simple sugars and opting for healthy complex carbohydrates in their diet, if not drastically reducing the number of calories they get from carbs.
Whether or not carbs are good for you or not is a source of continued debate, and largely centers around which carbs and how much of them. Likewise, dairy is enjoying a renaissance among people who tout the health benefits of whole milk and raw milk.
Taxing meat in the manner of cigarettes and sugar, however, is becoming an increasingly mainstream idea. The proposal is linked not just to a desire to exert even more control over what Americans eat, but also with (of course) carbon emissions and saving the environment.
Beyond the simple fact that a tax on meat would be yet another example of government overreach, there are other problems with a meat tax. It is also based on a subjective and dubious interpretation of the effects of meat on both the environment and on personal health. Such a tax would, like existing taxes on sugar and tobacco products, disproportionately impact the poorest Americans.
Given the poor job that the United States Department of Agriculture has done with attempting to dictate what people eat with the Food Pyramid, it’s unlikely that they’re going to hit paydirt with a meat tax.
Subsidies Cause Cancer
The consequences of subsidies are far reaching when one considers the correlation with obesity. While tobacco use is responsible for one-third of all cancer cases, obesity is considered responsible for another third. Put more directly, there is a health epidemic in the United States similar to tobacco, but rather than a public campaign against it, it’s subsidized by the federal government.
This is what led a presidential report commission on cancer to attack food subsidies in much the same way that it did tobacco.
There is another aspect to subsidizing unhealthy food, which will become increasingly expensive: healthcare. As the federal government creeps more into healthcare, the more you and other taxpayers will be subsidizing (again) by paying for treatments for those who are clinically obese, diabetic, or otherwise unhealthy from the nutrient-poor foods promoted by the United States government through its subsidies. This creates a maniac cycle, whereby the federal government subsidizes foods that make people sick and fat, then subsidizes the healthcare of sick and fat people. In all likelihood, this will all be paid for disproportionately by people who are neither sick nor fat.
It’s important to point out that more government intervention, in the form of taxation or subsidizing “healthy” (according to some) foods, is not the answer – it’s the problem. Subsidies and other government handouts are invariably shaped by those with the most political influence. The ultimate programs always bear little resemblance to how they are touting through what are effectively PR campaigns in the nominally independent media.
In the age of digital media, it has never been easier for the average person to learn what they need to know about feeding themselves and their family in the most healthy way possible. Government subsidies are not required for this and, as we have shown, have very much the opposite impact on public health. It is time for a revolution in the world of food subsidies – one of drastic reduction and ultimately the elimination of these wasteful and counterproductive programs.