$20 billion in farm subsidies doesn’t reach the poor, leaves them hungry
New research suggests that agricultural subsidies have done little to help those below the poverty line become more food secure. Despite $20 billion spent every year on wasteful subsidies, hunger and inadequate nutrition are endemic in the United States. More than 43 million Americans, including 13 million children, live below the poverty line and lack reliable access to nutritious food.
One long-standing rationale for subsidizing farmers is that as they raise more crops and rear more livestock, food prices paid by consumers will fall, and the poor will become food secure through that trickle-down process. However, as a new American Enterprise Institute report by Joseph Glauber, Dan Sumner and Parke Wilde shows, there is no evidence that the $20 billion in direct subsidies paid annually by taxpayers has any measurable effect on prices paid for food by households below the poverty line.
These agricultural subsidy programs, far from addressing the needs of the poor, are mainly designed to serve wealthy farmers, not urban families in poverty or even rural households with modest or low incomes. Seventy-nine percent of all farm subsidies are paid to the top 10 percent of the largest farm operations, and farmers in the top 1 percent income bracket on average collect $1.5 million in annual farm subsidy welfare checks. In comparison, 80 percent of all farms receive only 9 percent of the total amount of subsidies paid to agricultural producers.
In addition to direct agricultural subsidies, other indirect income transfers to farmers — such as import quotas and marketing orders — fail to have any substantive effects on the nutritional and food-security status of those low-income households. In fact, rather than reducing food prices, some of these U.S. agricultural policies intentionally raise them. In particular, tariffs and quotas on imports and marketing orders designed to restrict market supplies — especially for sugar, dairy products, orange juice and tomatoes — increase food prices paid by all consumers. Compared to wealthier households, low-income households spend substantially higher percentages of their incomes on food. As a result, increases in food prices, resulting from trade barriers and other supply-control policies, impose greater burdens on those low-income households.
Instead of wasting as much as $20 billion on food subsidies that neither lower food prices nor improve food security, Congress should consider investing some of those savings in substantially more effective alternatives. One approach that yields benefits for everyone is increased public funding for agricultural research and development. An enormous body of research-based evidence has shown that, over the long run, agricultural R&D improves agricultural productivity, increases food crop and livestock production, and lowers agricultural commodity and food prices, benefiting poor, middle income and wealthy households alike.
Last, although imperfect, household income and food safety-net programs like the Supplemental Nutrition Assistance Program have been shown to have positive effects in the short term on the nutritional status of the poor. From that perspective, spending on SNAP, as opposed to wasteful subsidies, would represent a more effective use of taxpayer resources.
There is no poverty and nutrition alleviation rationale for U.S. farm subsidies because they do not have any meaningful effects on poverty. These programs simply transfer government monies mostly to well-off folks who can afford competent lobbyists but are in no need of government handouts.
Ryan Nabil is a global macroeconomy and agricultural policy researcher in the Economic Policy Studies department at the American Enterprise Institute. Vincent H. Smith is the director of Agricultural Policy Studies and a visiting scholar at AEI. He is also a professor of economics in the Department of Agricultural Economics and Economics at Montana State University.