Government Subsidies

Every few years, or so, lobbyists and farmers descend on Washington to try and get their share of what has become an almost $300 billion pie – the new farm bill. In the process, they confirm what agricultural historian R. Douglas Hurt has called “the dependency of farmers on the federal government for survival.” The trade off for survival is that farmers are increasingly regulated and controlled by Washington.

There have been nine different “farm bills” enacted by Congress between 1965 and 2008. But, according to Hurt, most have followed the general policies first set out by the Agricultural Adjustment Act of 1933, as amended in 1949.

• In 1965, the Food and Agricultural Act was enacted under President Johnson. The act provided direct income payments via price supports for wheat, cotton, feed grains and other major crops to farmers who agreed to participate in existing acreage-reduction programs. “Essentially,” Hurt writes, “1960s farm policy remained tied to the ideas developed during the 1930s to control production, shrink surpluses, and increase prices and income.”
• In 1970, the Agricultural Act was enacted under Nixon. It ensured price supports and gave farmers more freedom to produce by allowing voluntary land set-asides. But Congress limited payments on a single crop to $55,000 per farmer annually.
• In 1973, the Agricultural and Consumer Protection Act came at the end of Nixon’s term. The bill brought back the concept of “target prices” – if the market price dropped below what the federal government set as the loan level, the Commodity Credit Corporation would make up the difference to individual farmers. To get these payments farmers had to agree to farm a limited number of acres.
• In 1977, the Food and Agriculture Act was enacted under Jimmy Carter. It increased price and income supports and established a farmer-owned reserve for grain. The bill was huge and included provisions for Food Stamps and agricultural research.
• In 1981, the Agriculture and Food Act was enacted in Ronald Reagan’s first term. That year, Congress tried to set an upper limit on the bill’s cost and each commodity group tried to get as much of that pie as they could. After bitter debate between farm groups, Congress gave up trying to set a limit and simply modified existing target prices and acreage controls. The bill expanded foreign food aid programs through Public Law 480 (AKA “Food for Peace”). In spite of the controls and expanded overseas shipments of food, production boomed and commodity surpluses increased.
• In 1985, the Food Security Act (also under Reagan) “differed little from past farm legislation,” according to Hurt. “Farmers demanded government support, and they got it.” A host of technical adjustments were made that had farmers reading the fine print late into the night. The act also introduced a long-term program to take land out of production. Those provisions eventually evolved into the Conservation Reserve Program. Marginal land was replanted in grass. Under this act some large producers were paid millions. Between 1985 and 1987, government spending for price and income supports grew from $17.8 billion to an estimated $35 billion.
• In 1990, the Food, Agriculture, Conservation and Trade Act was enacted under the first George Bush. The bill tried to move toward a market driven farm economy by freezing target prices and allowing more planting flexibility. For the first time, there were provisions for certifying growers as “organic” producers, and the Rural Development Administration (RDA) was set up to promote small rural communities.
• In 1996, the Freedom to Farm Act was passed by a Republican Congress and signed by President Bill Clinton. That year, farmers were enjoying the highest crop prices in 20 years, and were still receiving 21 percent of their income from the government. So, the Republicans wanted to wean farmers off of federal subsidies. Freedom to Farm was the first major attempt at change since the 30s. It systematically reduced federal payments to farmers to zero over seven years. In return, farmers could produce any crop in any amount, as long as they didn’t farm the acres previously set aside for the Conservation Reserve. American farmers are efficient, and so when the Act allowed them to plant what they wanted, they glutted international markets with commodities and the high prices collapsed. Only two years after Congress tried to reduce payments, they were back making emergency payments particularly to the largest farmers. Government payments went from 21 percent of the average farmer’s income to around half. By the autumn of 2000, Congress provided $32.3 billion in ag subsidies.
• In 2002, the Farm Security and Rural Investment Act was enacted under the second President George Bush. The previous year, the House and Senate couldn’t agree on a farm bill and the whole program was threatened by the terrorist attacks on Sept. 11, 2001. Billions were quickly funneled to national security and farmers were afraid their programs would be cut to pay for the “War on Terror.” Almost a year passed before the new legislation was enacted. It provided $90 billion in additional farm spending over 10 years for a total of $190 billion. It increased subsidies in return for production controls and capped payments to individual farmers to $360,000. The Act also funded new conservation programs.
• In 2008, the Food, Conservation and Energy Act was enacted when Congress overrode President Bush’s veto. It continued most of the previous bill’s programs with a total price tag of $288 billion over five years. Some of the changes included increases in Food Stamp benefits for poor families, increased support for the production of cellulosic ethanol, support for locally grown foods and farmers’ markets, and research into pests, diseases and other agricultural problems.

With so much money at stake, most farmers agreed with one Iowa farmer who said, “To put it very bluntly, if you’re not farming the government today, you’re not doing a very good job.”

For better or worse, Don Lee (left) says that the federal programs have produced cheap commodities. “Take a look at our food industry,” Don says. “Our food industry has been a huge benefactor of the farm program because what it’s done is made the raw materials they buy inexpensive and consistently available. And available at a high quality.”

Mark Kaliff (right) says that government payments were the only thing that helped his large operation – and others – get through the agricultural recession of the 80s. “They were critical in those times. That was how they even stayed going at that time.” Mark is part of a very large, extended family operation that received almost $280,000 in government payments in 2007, according to the Environmental Working Group. “There’s four families operating together,” he says. “This is our only source of income, is farming. So, payments seem big, but as you divide the acres to the amount of people, that’s a big investment we have… There’s a lot of debt and a lot of risk that [we] take on every year. And we pay a lot of taxes and support the community with all the inputs that we buy.”

There is, of course, a ripple effect for government payments. Jim Ermer (left) is an implement dealer in York, Nebraska, and his business benefits indirectly from government subsidies. “We are not subsidized in any way by the government, but our customers are. So, it affects us directly. So, how much does government subsidies mean to us? A lot.”

Elaine Stuhr (right) is a former state senator from Bradshaw, Nebraska, and she says that individuals need to get involved in influencing legislation. “Anyone can lobby,” she says. “I’ve always felt that one person can make a difference. One person because you can bring your idea to that Congressman, and then someone else might join you.”

The importance of government subsidies and control doesn’t mean that farmers necessarily like them. Heather Derr (left), for instance, says, “The government can be a real blessing, and can be a real headache… I appreciate the disaster payments. I appreciate the help the government gives us. However, personally, it’s not that great of a deal for us. I cannot speak for others. I honestly wish they weren’t there.”

Organic farmer and businessman Dave Vetter (right) says he has trouble calling any farming operation “successful” if half the income is coming from the government. “That was a battle we fought early on,” he says. “We go tell them what we’re going to do. They say, ‘You can’t do that.’ And I said, ‘I’m not here to ask you what I can do, I’m here to tell you what I’m going to do. If your program fits, fine. If it doesn’t, I don’t care because from what my observation, you don’t manage very well. Why should I let you manage my farm?’”

R. Douglas Hurt says that one benefit of the farm bills through the years has been low prices for consumers. “By century’s end, Americans spent less than 12 percent of their disposable income for food, the lowest rate in the industrialized world.” So, the Farm Bills might be more accurately called “cheap food bills.”

Written by Bill Ganzel, the Ganzel Group. First published in 2009. A partial bibliography of sources is here.