US farm policy: We know where we have been, but do we know where we are going?

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Article Highlights

  • Subsidies to the US agricultural sector have become increasingly difficult to justify.

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  • In America, average farm household incomes are now substantially higher than average non-farm household incomes.

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  • About 80% of farm subsidies are received by the largest 20% of farmers who are much wealthier and have higher incomes.

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Introduction

In the United States, the federal government has been involved with, and provided subsidies for, farmers and the agriculture sector since at least 1862, when the Morrell Act established the Land Grant University system to encourage both agricultural research and education. Beginning in 1933, with the Agricultural Adjustment Act, farm policy became increasingly focused on providing direct subsidies for farmers to increase farm household incomes, especially when commodity prices were low. After eight decades of federal support, most farm organizations in the United States have come to view farm subsidies as tax payer funds to which they are entitled and are mortified when policy makers or other commentators suggest that those subsidies should be reduced.

In fact, subsidies to the US agricultural sector have become increasingly difficult to justify as, in stark contrast to the 1930s, in America average farm household incomes are now substantially higher than average non-farm household incomes. Moreover, the average farm household is six or seven times wealthier than the average non-farm household. In addition, about 80 percent of farm subsidies are received by the largest 20 percent of farmers who are much wealthier and have much higher incomes. Nevertheless, farm organizations in the United States continue to be powerful lobbies that have a great deal of influence with key House and Senate Congressional Agricultural Committees, whose members largely come from rural states and constituencies. In addition, especially since the early 1980s, those farm lobbies have also formed effective alliances with other interest groups, including environmental, agricultural business, and insurance organizations. As a result, they have been able to sustain those transfers to farmers from taxpayers, albeit in shifting forms.

 

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About the Author

 

Vincent H.
Smith
  • Vincent H. Smith is Professor of Economics in the Department of Agricultural Economics and Economics at Montana State University and co-director of MSU’s Agricultural Marketing Policy Center. He received his Ph.D. from North Carolina State University in 1987 and his bachelor’s and master’s degrees from the University of Manchester in 1970 and 1971. Dr. Smith’s current research program examines agricultural trade and domestic policy issues, with a particular focus on agricultural insurance, agricultural science policy, domestic and world commodity markets, risk management, and agricultural trade policy. He has authored nine books and monographs and published over 100 articles on agricultural and other policy and economic issues. His work has been recognized nationally through multiple national awards for outstanding research programs. In 2008, he became a Distinguished Scholar of the Western Agricultural Economics Association. Currently he is a Visiting AEI Scholar and co-director of AEI’s agricultural policy initiative. Dr. Smith is married and he and his wife, Laura, have two children, Karen and Meredith.
  • Email: uaevs@montana.edu
  • Assistant Info

    Name: Neil McCray
    Phone: 2028625826
    Email: neil.mccray@aei.org

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