Source: AMERICAN ENTERPRISE INSTITUTE, 10/13/17


Agricultural policy is in disarray in the United States. Subsidies disproportionately flow to wealthy farm business owners through a multitude of programs, which are often duplicative or wasteful. The 2018 Farm Bill will be a chance to reign in government waste and implement common-sense reforms. This is the focus of “Agricultural Policy in Disarray,” a series of 15 papers written by leading agricultural economists evaluating how farm programs affect farm incomes, US food security, rural communities and poverty, the environment, and US trade relations.

The papers explore how farm-oriented programs authorized by the current farm bill funnel federal funds to households with above-average incomes and how such programs incentivize farms to operate in ways that waste economic resources. They present options for policy reform that would benefit US consumers, taxpayers, and families in poverty and the extent to which the programs waste society’s scarce resources.

Key Points
•There is no evidence that the US agricultural sector is experiencing a financial crisis or about to enter an era of financial stress. Current sector-wide net cash income is close to its long-run historical average and key financial indicators are close to the most favorable levels observed over the past 60 years.
•Many farm-oriented programs the 2014 Farm Bill authorized mainly funnel federal funds to households whose incomes and wealth are well above those of the average US household.
•The federal crop insurance program, which has been the largest source of farm subsidies over the past decade, creates incentives for moral hazard behaviors that expand crop production on highly erodible land and affect the allocation of land between alternative crops.
•Congress should consider terminating many farm subsidy programs—such as Agriculture Risk Coverage, Price Loss Coverage, federal crop insurance, the sugar programs, and marketing orders—that waste scarce economic resources, raise some consumer prices, and send taxpayer funded checks to relatively and very wealthy individuals.

For the full report, click here.