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The House is scheduled to debate the 2018 Farm Bill over the next two days. The bill is controversial and, completely breaking with tradition, reported out of the House Committee on Agriculture with only Republican votes. The core problem for Democrats is a suite of proposed changes to the Supplemental Nutrition Assistance Program that would expand the scope of work requirements for many recipients. However, the farm-oriented programs in the legislation are fraught with problems for both parties, as federal funds in many of these programs are being funneled to households with above average incomes.
Most of the farm subsidies included in the bill flow to large-scale agribusiness farms. For example, in 2015 the largest 15% of all farms receive about 74% of all subsidies paid out under the two largest subsidy programs. Those programs are the federal crop insurance program (estimated by CBO to cost taxpayers close to $8 billion annually) and the so-called “shallow loss” Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs introduced in the 2014 farm bill (estimated by CBO to cost between $5 and $7 billion annually).
These agribusinesses enjoy extraordinarily strong financial positions and are by all economic accounts invulnerable to financial shocks. The agricultural industry debt-to-asset ratio average for 2018 (as reported by USDA) is 12.6%, and while slightly higher for larger farms — it’s about 16% for farms with annual sales in excess of $750,000 with substantial assets — is still very low for those operations. Almost all of the farms receiving substantial federal subsidies are at zero or close to zero risk of failing. Not surprisingly, less than 0.3% of all farm businesses file for bankruptcy annually, a statistic which is the envy of every the sector of the economy.
Further, subsidy payments are targeted to a very small number of crops. Agribusiness farms raising corn, soybeans, and wheat received 73% of the crop insurance subsidies paid out to all farms in 2017 and 85% of all PLC and ARC subsidies in 2016. Given that the bulk of those payments were for corn and soybeans, it is transparently clear that the farm subsidy programs are really intended to benefit a small number of largely relatively wealthy farmers.
Understandably, many legislators are concerned that so much money is flowing to a small number of very wealthy agribusinesses raising a small number of crops. They also recognize that many farm businesses raising other kinds of crops and livestock receive no or very few subsidies — for example, hogs, beef cattle, poultry, fruits and vegetables — and are flourishing in the market place. Why then, many legislators are asking, is the Committee so strongly opposed to any reform proposals that would reduce crop insurance or any other subsidy payments, especially when the country is facing a record peace time federal budget deficit?
A farm bill that reduces the scope of nutrition programs for the poor but sustains and if anything increases subsidy programs that overwhelmingly benefit wealthy agribusiness farms seems anything but a sensible legislative initiative. Many amendments have been put forward that would reduce crop insurance and other subsidies and terminate or modify other wasteful initiatives such as the US sugar program. Many of those amendments, most of which are supported by legislators from all sides of the house and some of which incorporate the Trump administration’s reform proposals, would reduce farm subsidies and rationalize farm programs. They deserve serious attention. As they stand, the “business as usual” farm subsidy proposals in the House Committee on Agriculture bill do not.
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