Economic Mini-Series: Episode 2 – ‘The Homestead: An American Welfare Story’

Posted by Phil

The idea of the family farm is absolutely fundamental to the American story. From the original plantation owners in the colonies, to the great migration westward in search of land and opportunity, key to the American nostalgia is an affection for the family farms and rural communities that feed it. While the American agricultural revolution is of course worthy of note and historical study, the reality is that today farms across the country are welfare queens, lobbying for and receiving huge hand-outs from the government. The agricultural subsidies are not only wasteful spending, but contrary to the claimed ethos and values of the farmers that receive them.

The Federal government spends at least $20 billion a year in direct subsidies to American farms. Increasingly, these hand-outs go to major agriculture conglomerates that own and operate an increasing proportion of US farmland. Before those that do not take the subsidy cry slander about my charges, even those farmers that do not take government grants directly, benefit from the government tipping the balance in other ways. Price guarantees are used continuously in the US to support farmers by setting a minimum price at which their produce can be sold, and underwriting the difference.

The first, rather short point to make is that $20 billion a year could be better spent. Firstly, most of the farms that receive the subsidy would survive without, as their margin of profit/loss is greater than the $40,000-80,000 typical grant. Secondly, many of the recipients are not individual family farms trying to continuing a dying way of life,  but rather major agricultural holdings that are a large part of the reason for the decline this subsidy is designed to reverse. Counter-intuitive at best. Just plain stupid at worst.

The real point to be made is about what this subsidy represents philosophically, and the price controls mean for the ‘American way’. The rugged determination of the American farmer is a character trait that is rightly admired. An honest job, self-sufficient and providing for the community. Being paid $80,000 a year for choosing to be self-sufficient in reality means these farms are anything but. The price controls are even more ridiculous. These farms and their advocates spend their whole time complaining about Federal regulation of how to grow their food, what their hiring practices should be and their environmental responsibilities, and yet exist in an economic bubble where they are shielded from the realities of the market. If you choose to grow crop x, and the price plummets when it comes time to sell your produce at market, then why is it the business of the Federal government? Where in the principles of self-reliance we hear so much about is the idea that it is the responsibility of the Department of Agriculture that you picked the wrong crop? Hypocrisy is too kind a word.

Let us be clear, there may be strong reasons for providing minimum pricing and other measures, to prevent the excesses of the market. If however, that is what these farms want, then they should be honest about it, rather than moaning about the ‘threat’ of big government while all along snaffling more than their fair share of Federal resources.

It is a question of character. Are America’s farmers brave enough to practice what they preach? Is it to be self-reliance or an American welfare story? Maybe the right-wing will see shades of grey here while still practicing willful ignorance when it comes to the urban poor.