Agricultural Policy in Disarray
Vincent H. Smith, Joseph W. Glauber, and Barry K. Goodwin, Editors
American Enterprise Institute
Imagine being an investigative journalist tasked with digging into the latest political scandal. You know your subject is dirty, but the more you mine, the more disturbing and sleazier it gets, until you ultimately discover the full scope of the corruption and depravity of your subject.
This is a little bit like studying American agricultural policy. It’s incredibly depressing. The more you learn, the more you realize just how nonsensical it all is, from every standpoint: economically, environmentally and societally. Well, except from the perspective of a few special interest groups—it makes a lot of sense for them. Dr. Vincent H. Smith, one of the editors of a new two-volume set of essays on farm policy, Agricultural Policy in Disarray (APD), seems upbeat in his YouTube videos and sometimes cracks corny jokes. He’s made the decision to laugh rather than to cry. We shouldn’t blame him—one has to cope somehow.
APD is a collection of nineteen essays about different aspects of current federal agricultural policy. Although it is published by the American Enterprise Institute, a conservative think tank, this book largely addresses concerns that everyone who is committed to regenerative agriculture should share. From the libertarians to Trump voters to Green New Deal supporters among us, if we’re for ecological farming, we should support the two central premises of these volumes: current federal agricultural programs “poorly serve both farmers and the American public”; and “by and large, U.S. agricultural policies now merely transfer dollars from taxpayers to owners of financially sound farm businesses.” This is a near-textbook definition of crony capitalism—the funneling of government aid to the already rich and powerful.
APD presents four major findings. First, current policies predominantly benefit special interest groups. Second, although the policies advocated by environmental groups receive some traction in current laws, these laws mostly seek to pay farmers to not do things. Third, farm policy pays little attention to consumers, even though they are paying for these programs through their taxes. Finally, subsidies are primarily directed to relatively well-off farms and farm businesses—those who would generally be fine without the help of U.S. taxpayers.
The book’s essays cover the gamut of agricultural concerns, beginning with crop insurance and subsidy payments. Several essays delve into the details of the specific subsidy programs for sugar, dairy, cotton and peanuts. Volume II gets into the other half of the farm bill—SNAP and other food-aid programs for the poor—as well as agricultural research programs, conservation issues and the regulation of commodity markets and international trade.
Crop insurance serves as a microcosm of the overall problems with farm policy. APD reveals the following:
- In 1980, crop insurance covered about 15 percent of insurable lands. Over the years, the amount of the premium that the federal government pays has risen. Today, about 90 percent of insurable lands participate.
- Private companies administer the actual insurance policies, but the government pays 70 percent of the premiums.
- The program is a money-maker for farmers, not a risk-reduction tool. On average, farmers receive two dollars for every one dollar they “invest” in insurance payments. Crop insurance actually encourages high-risk practices, particularly by incentivizing growers to utilize marginal lands. There are more effective ways to manage farm risk, including—most importantly—employing regenerative and ecological methods.
- Farm businesses receive, on average, 5.6 billion dollars of taxpayer money in subsidies per year. About 80 percent of these subsidies go to the largest 20 percent of farm businesses and 65 percent to the largest 10 percent. Additionally, the larger the farm, the more crop insurance subsidies it receives per acre. The largest farms receive almost thirty dollars per acre, while those in the fiftieth percentile in terms of crop sales receive just over ten dollars per acre.
- The USDA spends about eighty million dollars a year administrating the crop insurance program and educating farmers on how to use the overly complex system.
- Private insurance companies are, unsurprisingly, huge advocates of continuing the program. They have made money every year except two since 1980. In bad years, the government bears most of the losses; in good years, the private companies receive most of the gains.
The bottom line is that crop insurance wastes money and benefits the relatively well-off. It’s bad policy.
APD suggests getting rid of federal subsidies for crop insurance completely, but this is politically unlikely. The farm bill is popular on both sides of the aisle because it combines farm subsidies with food programs for the poor—axing something on one end would require a cut on the other. The authors therefore recommend at least reducing subsidies to pre-2000 levels, when taxpayers paid a mere 40 percent of the premiums, a move that would save several billion dollars annually. They also advise removing the “prevent plant” option, which is ripe for fraud. Under this option, farmers buy subsidized prevent-plant insurance, and if bad weather prevents them from planting before a government-established date, they can receive about 60 percent of what they’re covered for. Because they didn’t ever plant anything, their costs on that field are low—usually much lower than the 60 percent payout. The authors also advocate capping per-farm premium subsidies at a reasonable level, say, forty thousand dollars per farm.
Crony capitalism—not true capitalism—is what happens when special interests influence government policy for their own gain. Some refer to this as “corporatism,” but this term can be unhelpful because it insinuates that corporations (particularly large ones) are somehow inherently evil. In and of themselves, corporations are not bad. They’re actually incredibly important and beneficial to society as a whole and are only bad when they ask for and receive special favors from government. Such private-public partnerships are what distorts markets toward the already powerful.
In truth, the large corporations that run American agriculture hate competition as much as the most ardent socialist. Their partnership with government is what keeps them in power. They are devoted supporters of regulations, because regulation makes it harder for smaller businesses and individuals to compete with them. They love rules that pile up barriers to entry in their own industry. Both sides of the spectrum—pro-big-business on the right and pro-socialism on the left—are inherently devoted to cronyism. A system truly designed to benefit the poor and the average consumer would be one in which government does not pick the winners and losers.
As Arthur C. Brooks says in the introduction to APD, “[The] deepest flaw in agricultural policy today is not merely that it creates economic inefficiencies, whether involving the country’s resource base, market mechanisms, long-run productivity growth, or U.S. international trade relations; it is that the cronyism still present in our system reduces our ability to direct resources and opportunities to those who need them the most.”
Some will argue that we’ve had the wrong people making policies; if we just elected the right lawmakers and executives, they would give us an agricultural policy that makes sense. The problem is that no person or group is ever going to be wise enough, unselfish enough or knowledgeable enough to properly guide something as complex as a national (or even state or county) economy. Everyone has interests.
Government does have a role to play. It exists to make and enforce laws that establish a framework for free trade, such as preventing fraud, outlawing child labor, prohibiting unjust discrimination and providing a court system where contract disputes can be adjudicated. It is the referee that ensures that individuals and corporations abide by these minimal laws—but the referee should not be a player in the game.
There’s much more to say (and to argue!) about these issues. Again, though, we should all be able to agree on most of what APD discusses. There’s a lot that we have in common. It’s impossible to ignore our preferred solutions completely, but we can all get behind the effort to at least try to curb the crony capitalism inherent in our current agricultural policies.
The American Enterprise Institute published APD before the latest farm bill was signed, but all that has changed are a few particulars. It’s well-written, very well-documented and heavy on statistics. I will say that some of it makes for dry reading, and the price tag is a bit steep.
One other disappointment is that the authors are regrettably conventional in terms of their opinions on GMOs, herbicides, synthetic fertilizers and so on. They adhere to the common belief that organic or regenerative methods require much more land to produce the same amount of food, that switching to regenerative farming would thus require pasture and forest to be converted into fields for broadacre crops and that the environmental costs of row cropping are higher than for pastures or forests. Unfortunately, there aren’t enough hard data—yet—to parry this line of argumentation effectively.
Studies by the Rodale Institute demonstrate equal yields on a field-trial scale. There are also good results from individual farms—some of which are even demonstrating carbon-negative row cropping, particularly when incorporating livestock—but we still need collection and communication of large-scale data. Part of the problem is that we’re in the middle of developing regenerative techniques; we’re still in the innovator and early-adopter phases. The prudent take-away is that advocates of regenerative agriculture need to devote more energy toward doing this research and communicating its results.
The authors’ failure to embrace organic farming in no way negates the overall truths they illuminate about the problems with modern American agricultural policy. So cry “Foul!” Laugh at the insanity of the current system. And patiently work with your elected representatives to try to reduce the power of special interests in agriculture.
This article appeared in Wise Traditions in Food, Farming and the Healing Arts, the quarterly journal of the Weston A. Price Foundation, Spring 2020