Every five years, new legislation is introduced and passed through the U.S. Congress to subsidize farmers and agricultural products. These bills provide benefits such as cash, minimum prices and crop insurance programs.
Most academic economists and policy analysts oppose agricultural subsidies, but that seems to have little impact on the continuous transfer of taxpayer money to farmers.
Scope of Farm Subsidies
These bills tend to be massive. President Barack Obama signed the $956 billion Agricultural Act into law on Feb. 7, 2014. Historically, direct cash payments to American farmers tend to range between $10 billion and $30 billion per year in 2014 dollars. These direct payments target wheat, rice, soybeans, oats, barley, sorghum, minor oilseeds, peanuts, corn and cotton.
Marketing loans set minimum prices for crops, encouraging overproduction beyond market demands for the aforementioned products as well as honey, chickpeas, wool and mohair. These payments range from $1 billion to $7 billion annually.
Other subsidies include countercyclical payments for crops, conservation subsidies that pay farmers to not grow crops, USDA farm insurance programs, special crop disaster assistance programs and taxpayer-funded agricultural research.
Reasons for Farm Subsidies
Before the Industrial Revolution, nearly all of the workforce was employed in farm labor. In 1790, for example, 90% of all working Americans were farm owners or worked on farms. Understandably, farmers were seen as economically crucial. Additionally, politicians got elected by being friends to the farmers.
Wealthy farmers have been successful in lobbying for government favors throughout history. Some subsidies existed in the U.S. prior to the Great Depression, but most modern programs date to the 1930s. It was thought that propping up farm prices would keep farmers from going bankrupt; the net result made food more expensive for people struggling to afford it.
Political economist James Buchanan noted that subsidies tend to never go away through a phenomenon he called Public Choice Theory; essentially, wealthy farmers have more incentive to fight for subsidies than consumers do to fight against them.