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This is Hubwonk. I’m Joe Selvaggi. Welcome to Hubwonk, a podcast of Pioneer Institute, a think tank in Boston. With growing concern that our nearly $2 trillion annual budget deficit contributes to inflation, higher consumer interest rates, and costly debt servicing, the soon-to-be-considered Farm Bill, which is predicted to cost $1 .5 trillion over the next decade, offers members of Congress an opportunity for substantial reductions in spending. The Farm Bill’s most costly features are the $30 billion in subsidies, which began as a Depression-era New Deal idea but has since snowballed into more than 150 U.S. Department of Agricultural programs. The current Farm Bill provides financial support for everything from insurance subsidies for farmers to direct payments when their crop yields are low, or product prices disappoint.
What is perhaps most surprising is not merely that the farming industry enjoys a degree of support and largesse, not known to other American industries, but rather that this public support is provided too large, successful farm operations, some with revenues in the millions or even billions of dollars. How has Farm Bill’s annual $30 billion spent? What arguments do its advocates make for this support? What distortions and unintended consequences flow from this massive intervention? And how might legislatures find savings to reduce a deficit that threatens us all? My guest today is Cato Institute’s Kilts Family Chair in Fiscal Studies,
Chris Edwards. Mr. Edwards has studied the issues surrounding farm subsidies for nearly two decades, testifying to Congress many times and writing on the subject for major news outlets such as the Washington Post and the Wall Street Journal.
Chris will share with us his views on the distortions and harms created by massive farming subsidies and discuss the opportunities for reform presented in his recent Cato Institute analysis entitled Cutting Federal Farm Subsidies. When I return, I’ll be joined by Cato Institute’s Chair in Fiscal Studies, Chris Edwards. Okay, we’re back. This is Hubwonk. I’m Joe Selvaggi and now pleased to be joined by the Kilts Family Chair in Fiscal Studies at Cato Institute, Chris Edwards. Welcome back to Hubwonk, Chris.
Chris Edwards: Hey, thanks a lot for having me, Joe.
Joe: Okay, great. Now, when I’m selecting any topic for the podcast, I always ask myself before the podcast, why will my listeners care about a topic? So, you know, let’s start at 10,000 feet. And when we talk about it, we’re talking about farm subsidies today, and I’m talking to you from high atop Beacon Hill here in Boston. I don’t know how many farmers we have here in Boston, but it’s not many. But I think our listeners will care about this topic deeply. But before we dive into the details, why would non-farmers care about the existence of farm subsidies or perhaps the future of farm subsidies?
Chris: Well, the federal government spends a lot of money on farm subsidies and has been for many decades. Every five years or so, it considers a big farm bill. And so, the farm bill in front of Congress this fall will cost about $1.5 trillion over the next 10 years. Now, the farm bill includes both the farm subsidies and the food stamp program. So, there’s subsidies to make rural members of Congress happy, and there’s subsidies to make urban members of Congress happy. But I think all of us as taxpayers should question the largesse here. Farm subsidies, which we’re going to be talking about today, are essentially subsidies for well-to-do people. It’s welfare for well-to-do. And that’s a really basic reason why we should question what it is that Congress is doing here.
Joe: Okay. And so, you’ve made a good sort of provocative opening statement. You note that it’s an enormous cost to taxpayers. We’re talking about trillions of dollars or one and a half trillion dollars over a decade. We’re going to talk about in sort of economic sense all the distorted incentives that these subsidies create, what economists would label moral hazard. We’ll get into what that’s all about. And the environment that some of these subsidies actually have negative effects on the environment, which I thought was very provocative. So, your newest paper at Cato is entitled Cutting Farm Subsidies. You suggest that subsidies can actually harm rather than help farmers themselves, particularly small farmers. You don’t touch this on your paper, but do consumers pay twice for subsidies? You know, as taxpayers, of course, but can we infer at least some inflation in food is owed to inefficiency cultivated in the farming industry? I know that’s a big question.
Chris: The general answer to that is no. The economic problem with farm subsidies is first, that it costs taxpayers money, and secondly, that it distorts farmer decision making. But there’s probably not much of any difference in retail prices to consumers, with some exceptions. So, for example, the sugar program under which the federal government assigns quotas to domestic producers and blocks imports that generally doubles the price of sugar in America. That’s one reason why a lot of manufacturers of sugary products like cola use a corn-based sweetener rather than sugar for their products.
So, there are dairy programs that tend to raise prices for consumers, too. But for most food products, the U.S. agriculture industry is enormously efficient, and it has become much more productive over the decades. And food prices have fallen. Generally, that’s all to the good. But the farm subsidies do distort what it is that farmers produce and how much they produce.
Joe: Okay, good. So, we’ll put a pin in that. Actually, we’re talking about an industry that is somewhat healthy. Despite the subsidies, it’s a very healthy industry. So perhaps that may obviate the need for subsidies. So, let’s start at the beginning. You characterize in your paper the different types of subsidies. I just want to define terms here.
First is among the types of subsidies is for insurance. We know that I’ll use an analogy, the government had historically subsidized insurance for people who live on the coastline so that whereas their house might be swept away by a hurricane and the costly insurance would be prohibitive the government steps in supplements that premium and thereby we have homes in flood zones that wouldn’t otherwise be there. We see this as a sort of a distortion. Make that argument here in the farm world: Why is subsidizing insurance for farmers a bad idea?
Chris: So, you’re absolutely right by the way, Joe, but you know the flood insurance I’ve written about that at the Cato website downsizinggovernment.org and there is a lot of sort of similarity here so that you know the U.S.
Department of Agriculture they actually it runs you know 150 or so programs and subsidies for farmers the largest single subsidy program which is over $10 billion dollars a year now is for crop insurance so mainly farmers of some of the big field crops are corn, soybean, wheat they are the main beneficiaries of crop insurance crop insurance takes two forms the federal government pays 62 percent on average of the premiums for farmers to buy crop insurance. They buy the crop insurance from 14 private companies who earn excessively high profits because the government has essentially guaranteed all these customers and paid 62 percent of the premiums for the farmers to buy this insurance, and then at the same time believe it or not the federal government spends $2 billion dollars a year of taxpayer money directly paying cash to these 14 private insurance companies to cover their administrative costs. I mean, have you ever heard of such a program where the government directly pays the administrative costs for a private industry?
It doesn’t make any sense. So, crop insurance is heavily subsidized, and farmers and insurance companies, you’ll make a lot of money off of this insurance. Farmers get more back from buying these insurance policies than they pay in insurance, which doesn’t usually happen in an insurance program. And so, this is the main distortionary federal farm subsidy program, and we can get into how it distorts the economics of farming and also creates environmental problems.
Joe: I want to double back to the farms, but I just wanted to find our terms. You also mentioned two other subsidies. I’m going to lump them together because they seem similar in my mind. One is to guarantee a certain income for farmers based, I guess, on the average income of their county. In other words, you go out there, you work hard, you farm, but if your income falls below a certain level, you get money from the government. And also, the price of your corn or whatever your product happens to be, if you have a certain price in the market, a spot price, if it falls below a certain level, yes, again, the government comes in and says, well, though the market, it trades at this level, we’re going to supplement your take from federal dollars. How does those work?
Chris: That’s right. So, after the biggest subsidy program, crop insurance, each around $10 billion a year, you have these two programs called ARC and PLC that provide various other types of subsidy for farmers to reach around $5 billion a year. But they generally depend upon the price of crop. So, the price of, you enroll in one of these programs that the government offers, you enroll for free, and if the price of a crop or your revenues are down, whatever the details of the program specify, then the government pays you a bigger payout. So, in years with lower crop prices, farmers get bigger subsidies under these two programs, ARC and PLC. Now these programs are in addition to the insurance. So, there’s double dipping going on here. If you’re enrolled in both the insurance and one of these programs and the price of the products you grow goes down, you get a big pile of money from the federal government under at least two different programs. And again, you need to think about what other industry gets this sort of coverage. I mean, you could think about a local restaurant, you can think about any manufacturing industry,
you could think about just about any industry, a high-tech industry. When the price of products goes down, the government doesn’t pay out money to companies. If you’re a software company and you’ve got a lot of competition and the price of your software goes down, the government doesn’t step in to make it up to you. So farming is a really unique and uniquely coddled industry. And it’s frankly, it’s a bit of a mystery why. I mean, there’s historical reasons why these subsidies, they go back to the New Deal in 1930s when farmers were in a particularly tough position and they made a lot less money than other Americans. But today, farm households are generally far wealthier than other American households. As far as I can tell, the farm agriculture industry is no more risky than many other industries.
Joe: I mean, I want to get to that before we talk about why these subsidies may be inappropriate. I just want to list all of them because, again, as we describe them, I’m sure our listeners are thinking, this can’t be true. I mean, first we talk about subsidy for insurance, which we imagine farming to be a risky business. Then protection against the price of your product is insured and the price of your income is insured.
But I think the icing on the cake is this last one I mentioned is there’s also disaster when unforeseen events occur. Of course, we know COVID-19 is a classic example, but all even localized events that can be characterized as disasters are subsidized in an ad hoc way. We just sort of say, okay, you got a problem over there. Here’s a bunch of money. Say more about that.
Chris: Well, you know, one of the, I guess you could say, sad ironies of the federal farm subsidies these days is that some of these farm subsidy programs, in particular crop insurance, have been expanded over the last two decades because some sensible members of Congress said, hey, instead of giving these ad hoc giant bailouts to farmers if prices fall, why don’t we put a permanent program in place to sort of automatically pay the set amount if the price of a product falls? So that’s why the crop insurance program has been expanded over the decades.
But that hasn’t prevented Congress from coming in repeatedly and bailing out farmers in a big farm package as well. And we’ve seen that in recent years. I mean, for example, President Trump, he got involved in trade disputes with other countries that hurt some of our farm exports. And Trump came in and they doled out $23 billion in special aid in the last couple of years of the Trump administration to subsidize farmers for the fact that he got us into trade wars with other countries. Like you said, COVID prompted tens of billions of dollars of extra subsidies. And just about every adverse weather event, you can imagine, Congress steps in with a special aid package for farmers, even though farmers are already compensated under the regular programs if there’s adverse weather events or flooding events or that sort of thing. So, there are many layers of subsidies aimed at farmers in Washington.
And again, Joe, I mentioned there’s about 150 different programs for farmers. There’s many smaller ones. For example, the federal government has an array of programs to help farmers export. The Department of Agriculture has offices in 100 cities abroad that are there to help farmers market their goods abroad. And again, what other industry in America has their own dedicated federal agency with 100 offices abroad helping them export their product? It’s just the level of subsidies and coddling here is really extraordinary.
Joe: Well, you even mentioned at the end, again, not to beat this too hard, but add on top of all this $4 billion in federal grants for research into agriculture. So again, can you imagine an industry, let’s say a software industry where the government goes out and researches how we could make your software better to the tune of $4 billion a year? That seems to be…
Chris: That’s right.
Joe: But again, one of the points we point, you know, people say, well, listen, you know, who might criticize other people’s, let’s say, windfalls? We’re looking at a $2 trillion deficit, which is mind-boggling. So there seems to be general consensus that it might be a good idea to pump the brakes and spend a little less money and find where we could spend less. So, let’s start talking about why you have concerns beyond the fact that it seems patently wasteful and extraordinary, as you say, coddling of a particular industry. But one of the first concerns you bring up in your paper is that although we imagine these sort of Tom Joad, you know, struggling farmers, you know, out there scraping out a living, you know, while we sit at our desk, your concern is these subsidies, the massive subsidies are not going to those little guys, but primarily going to large, wealthy farmers who are doing quite well without the subsidies.
Chris: That’s right. Over and over, you’ll see members of Congress who support these farm subsidies saying, oh, they’re just helping the small farmer in Kansas or Iowa or whatever. Frankly, they’re BSing you. These subsidies, the vast majority of them go to folks at the top. So, a basic metric that a number of studies have come to the conclusion that 60 % of farm subsidies from the biggest programs we talked about, 60 % go to the top 10 % of the wealthiest and largest farmers. So uh they’re highly concentrated and then in in in general uh to get to put another statistic here so if you go back to 1960 the average farm household earned about a third less than average us households they were poorer than other Americans. Today the average farm household in America earns 30 percent or more than the average American household so farm households in general are substantially wealthier than other
American households and then the farm subsidies are concentrated at the very top and then one more important point here is that so there’s about two million farmers in America but actually only about a third of them get the subsidies. In genera,l fruit and vegetable growers uh beef cattle poultry those folks uh generally do not get federal subsidies. It’s mainly the major field crops farmers of corn, soybean, wheat and a few other crops and also peanuts, uh they’re heavily subsidized but many farmers and indeed most farmers in America are able to operate and be prosperous without subsidies and so there’s a giant question why is it that the field crop folks the corn farmers and the like need these levels and levels of subsidies. I mean, the corn farmers for example not only do they get the payouts from these programs we were talking about but
they get this giant subsidy an ethanol you know which pushes up the demand for corn so there’s really an extraordinary amount of subsidy and a frankly a pretty small portion of American agriculture.
Joe: Okay so we’re talking about you know again these are not poor small farmers but rather large farmers who have let’s say some technical acumen but when we talk about subsidies I want to return back I keep mentioning this term, moral hazard. I see that throughout your paper, which is when you subsidize or moral hazard effectively is to guard against risk when one is protected from the consequences.
In other words, you know, if you’re not gonna get hurt, you take unnecessary risks, or risks you wouldn’t otherwise take. How does this sort of moral hazard, how does this sort of safety net that seems to exist at every turn, you know, for your income, for your product price, for virtually everything, how does this distort the choices individual farmers make about how, what they plant, where they plant it, when they plant it? How does that distortion manifest?
Chris: So, you’re right. I think the key word here is actually distortion. It’s the federal farm subsidies. As I mentioned, they’re concentrated in certain crops like wheat and corn. And so, there’s a number of distortions that take place here. Farmers are incentivized to plant sort of monoculture as people will say, certain crops like corn, rather than other crops that may actually be more suitable for their soil or their area of the country. Or it reduces the incentive to rotate crops. It sort of, it isolates the farmer a little bit from what the market demands and encourages them to plant what the government, where they can get the most government subsidies.
So, it distorts their crop choice. It distorts how much they plant. So, a lot of these, you know, farmland, when you think about it, there’s highly productive farmland, and then there’s less and less, more marginally less productive farmland. Think about wetlands or grasslands that maybe aren’t the most suitable for farming. One of the problems with subsidies is that encourages farmers to expand production on marginal lands that should be actually really used for other things like left as wetlands and the like.
This is one reason why environmentalists generally don’t like farm subsidies — because they see the subsidies as inducing farmers to increase farming on marginal lands. It shouldn’t be used for farming. And if you’re farming marginal lands, you’re more likely to use fertilizer and pesticides and other things to optimize your yields. And so, there’s these sort of double reasons why environmentalists are not fans of farm subsidies.
And so, to get into the politics a little bit, there’s a kind of a coalition in Washington of free market advocates and agricultural economists and environmentalists who don’t like farm subsidies and try to encourage Congress to reform every time the farm bill comes along. But the farm subsidy lobby is very powerful.
Joe: I want to get back to that for the end of our show to wrap it up why this might be the time for reform. I want to point out, of course, that any government program, we only have to look back to COVID to see that it’s also rife with scandal and fraud. The estimates are between a quarter and a third of COVID relief was wasted on fraudulent claims. I can’t imagine how when we’re talking about trillions, you know, hundreds of billions of dollars as a sort of an incentive, I have to believe there’s going to be some amount of fraud within these subsidies. In other words, again, to tie it in with your earlier statement, if I decide to plant corn in the desert because I’m paid, if it’s productive, and I’m also subsidized, if it fails, and I also have to spend quite a bit of money on fertilizer to make it happen, so I’m damaging the environment. But at the end of the day, if I just claim to have planted in the desert, I also might be entitled to some interesting subsidies.
Chris: That’s right. You know, all federal handout programs generate a substantial amount of fraud. I saw a headline the other day, you probably saw it too, Joe, where the unemployment insurance benefits during COVID, the GAO now estimates that there was $100 billion in fraud in that, which is absolutely extraordinary. But, you know, in the farm programs, a couple types of fraud: One is, in some of the programs, there are income limits. You know, if you’re a household earning over certain income limits, you’re not allowed to take the subsidies. But farmers find ways to get around those subsidy limits. One of the biggest scandals is actually, the biggest subsidy program, the crop insurance which we talked about, there’s no income limit. So, billionaires actually get the subsidies. Bill Gates, I understand, and other large landowners get those farm subsidies. So that’s one type of fraud. Farmers will get around limits that Congress puts on. And then there are other types of fraud, or I guess you could call it pushing the limits of these subsidy programs. And the environmentalist group, EWG, has written, for example, a lot of what’s called a prevented planting program. Under crop insurance,
if your land, if a farmer is prevented from planting in the springtime, let’s say, because his land floods, then the government will give him a payout to make up for the fact that he wasn’t able to plant. So, farmers are essentially, especially in areas nearby wetlands, they’re claiming that, you know, they weren’t going to plant on these acres that actually they weren’t really planning to plant on. And the government will give them payouts, you know, year after year based on the claim that they were going to plant these acres, but actually they weren’t able to. And so, the group EWG, they’ve written a lot about this issue. So, farmers, like most Americans, when handouts are dangled in front of them, will find ways to cheat and maximize the benefits from the government.
Joe: All right. Well, all right. I want to take it, twist it a little bit and take what you said earlier in the show. And you said, actually, these subsidies as bad as they are, and expensive as they are, and as distortive as they are, they don’t really bring up prices of commodities, of farming products. Let me talk about — you mentioned the Department of Agriculture actually advertises our products around the world and encourages our farmers’ products to be sold everywhere.
Let’s imagine this brave new world where there are no more subsidies, and perhaps this will have an effect on price of products. Would our products suffer in a world? Is the rest of the world subsidizing their farmers? And after, you know, let’s face it, farming is a risky business. It’s subject to global prices. Is everybody playing this game? And if we put an end to it, are our farmers going to suffer, you know, competing in a world full of subsidies?
Chris: So, Joe, I differ a little bit with what you just said, that farming is a risky business. Sure, it’s risky, but, you know, so is every other industry you can imagine. Look at the high -tech industry. Look at the restaurant industry. How long does that restaurant in the corner of the street where you live, how long does it last? Two or three years, then it goes bankrupt. So, yeah, farming is risky, but there’s all kinds of ways that farmers can and should be mitigating risk in the marketplace. But that’s, you know, maybe a different discussion. Yes, most countries subsidize, Europe subsidizes their farmers even more than the U .S. government subsidizes. Canada subsidizes a lot.
But there is actually one success story that I’ve written about quite a bit, which is New Zealand. New Zealand is five times more dependent on agriculture than is the United States, you know, sheep and dairy cow and all kinds of other agricultural products. They specialize in kiwi fruit. Five times more dependent on agriculture than the United States. But in the mid-1980s, the government was in a fiscal crisis and the government just decided to slash out completely, cut out completely, all of its farm subsidies. And it succeeded. Farmers protested initially at the start. They marched in the streets. But the government, you know, went ahead to its credit and reformed, and New Zealand now has the least agriculture subsidies of all the 35 or so OECD countries. And they stuck to that. The Union of Farmers in New Zealand, called the Federated Farmers, strongly against subsidies. They go around the world arguing that other countries ought to eliminate their subsidies.
So, what happened in New Zealand when they eliminated their subsidies? There were a few years of adjustment in the mid-1980s. So, farmers diversified the crops. They changed somewhat the crops, the crops and other uses of their agricultural land. One of the reasons why New Zealand now is known for kiwi fruit is that that was one of the new products a lot of New Zealand farmers decided to go into. But if you look back at the data now, and the OECD has data on this, New Zealand agricultural productivity soared in the ‘90s after these adjustments. And as these adjustments were taking place, New Zealand farmers became a lot more cost conscious. They lowered costs. They became a lot more efficient. So, I think if we were to eliminate subsidies in the United States, yes, farmers would have to make adjustments.
Maybe they grow less corn and more oats or something like this. There’d be adjustments in what they farm. There’d be adjustments in how they use their land. But I think in the end, farmers in agriculture would be more resilient. It would be more efficient. And it would be greener, I think, if we were to eliminate subsidies.
Joe: Of course, indeed, I appreciate you’re correcting me. It’s hard to know where the causational direction goes because it’s risky partially because that risk is subsidized. Were we to reduce the subsidy for risk, which is the moral hazard, if we say it’s taking on risk has problems, then of course farmers will adapt and create less risky crops and less risky growing strategies.
So, as you say, we have sort of cultivated, to use a farming term, risks taking without those subsidies less risk taking will be will be occurring right?
Chris: No, no, I think that’s right, and as I write in my new Cato study, there’s all kinds of ways that the agriculture industry without government subsidies could mitigate risk just like any industry i mean you know they can use financial contracts like forward contracts to guarantee prices or to lock in prices they can save more. I mean you know uh yes the agriculture industry is hit with uh drought years and is hit with excessively wet years and other problems but they can plan for that they know that they’re cycles in agriculture so you plan ahead and you save you pay down your debt so that when you’re in tough times you’ve got the you know the ability to borrow. You diversify crops you diversify your land holdings on different you know different types of land um so there’s all kinds of ways you can you know farmers can plan ahead like in any other industry and diversify to minimize their risk.
Joe: |So, I want to spend the last part of our conversation — while we we’ve talked about the harms uh created by uh farm subsidies we live in the real world where you know politics and public choice theory prevail, which is to say each one of these farmers is a constituent in somebody’s some congressional congressman’s uh district uh as you say their numbers are small but they have higher income perhaps more influence over their elected leaders um uh so you know you know this is a economics case of uh concentrated benefits and diffuse costs right none of us really sees in our when we pay our taxes all the money going to these farmers but the farmers definitely see the benefits of these subsidies. You know, how is it possible — now again you mentioned in the fall there’s going to be this this farm bill approval. How is it possible in the world where, as you say, it’s this toxic combination of rural farmers banding with urban SNAP recipients to eagerly spend, perhaps eagerly waste, a great deal of American taxpayer money?
Chris: So, a central and crucial factor to understand how Congress works, Joe, as you know, is the process of logrolling in Congress. Many, many, many bills pass and are signed into the law that do not have true majority support in the public and do not have true majority support within Congress. Congress bundles up together many individual provisions that each do not have majority support. But if they bundle them together and they get enough members of Congress from enough states and enough districts, it will pass in a big giant so-called omnibus bill. And this is the farm bill. So, the farm bill, as I said, most of the benefits go to a small handful of field crops. But over each recent farm bill over the last couple of decades, Congress has added more different types of subsidies and programs because they realize they need to buy off additional groups.
So, for example, fruits and vegetable growers didn’t used to get any subsidies. Now they’re getting subsidies. Congress legalized hemp growing in the last farm bill in 2018. Now hemp growers get subsidies from the federal government. So, each time, you know, groups, more and more different agricultural groups will say, ‘hey, all these other growers are getting subsidies. Why can’t we get them too?’ And so, Congress spreads the subsidies a little wider every time. And then, like you said, that makes just about every member of Congress in rural America happy. But then what about the urban members of Congress? Well, back, I think in the 1970s, Congress tied the food stamp program or SNAP to farm subsidies and it’s passed together in one big bill.
And, you know, to their credit, some conservative Republicans in the House in prior farm bill years tried to separate out the food stamp program and voting on the farm subsidy program, but the Senate wouldn’t go along with it. So, it’s all in one giant logroll and pushed through Congress. I think, you know, so right now the current farm programs run out at the end of this fiscal year, which is the end of this month, but Congress will extend the subsidies and then they’ll try to pass, I think, a big giant omnibus bill probably, you know, in the weeks leading up to Christmas when no one’s sort of paying attention, they’ll try to ram it through quickly. That’s what I think, unfortunately, is going to happen unless the people rise up and protest.
Joe: Well, it’s not just those of us who perhaps would like to see the government spend a little less, or in this case, certainly borrow a lot less. You mentioned in one of your later papers that Senate Majority Leader Mitch McConnell just wants to, you know, take this farm bill and just, you know, swiftly pass it. But you point out the fact that there is actually some leverage for those who are eager to see some of these subsidies reigned in that, as you say, it’s rolled in with the SNAP programs that perhaps Republicans would like to reduce. Why is now, let’s say, given that a lot of the leadership comes from rural communities, certainly on the Republican side, why would Democrats, and what is it within SNAP that all seem to object to? How would you effectively reduce that without hurting the less fortunate?
Chris: So, this giant $1.5 trillion farm bill is coming up. It’s got the farm subsidies, it’s got the food stamps, and I’ve written about what I think are the lowest-hanging fruit in terms of reforms that I think we should be able to pass if kind of logic held in Congress. So, on farm subsidies, the obvious reform I think is to start cutting back on the subsidies that go to the largest and wealthiest farms. There’s no reason why millionaire and actually billionaire landowners should be getting subsidies from the federal government. President Trump — a lot of mistakes, and a lot of bad policies — But to his credit, he did propose putting much tighter income limits on farm subsidy recipients every year He was in office. So that’s the obvious way to cut farm subsidies. The obvious way to cut food stamps, in my view — The food stamp program is exploded to about $120 billion a year in cost. It’s a very expensive program — But just in recent years, the Department of Agriculture has revealed that about a quarter of all the benefits in SNAP or food stamps, are for junk food, cola, potato chips, cakes, candies. So, the taxpayers are paying about $30 billion a year for lo -income Americans to eat junk food. It makes absolutely no sense.
Healthcare researchers and doctors have been complaining about this for years, that this creates very bad incentives. As I’ve written about in another recent study at Cato, low-income folks have a worse obesity problem than other Americans. People on the SNAP or food stamp program have poorer diets than other Americans. And yet, we’re subsidizing by $30 billion a year for folks to eat junk food. Makes absolutely no sense. So, the easy and simple and straightforward solution to this would be allow state governments to ask for waivers from Washington as some of them have in the past to say ‘hey, can we experiment with our food stamp program and disallow people from you know buying the junk food.’ That seems like an obvious way to start reforming the program.
Joe: That seems like it would get a lot of support from all levels. I mean those I don’t know if we’re channeling the Bernie Sanders of the world but the subsidies for millionaires and billionaires sounds like a part of his campaign speeches. I also think that you know perhaps those on the left will be sympathetic to this notion that these social determinants of health, this sort of you know junk food and you know encourages obesity. Obesity has all kinds of problems for health. So, you know in a sense there’s something in there for policy wonks but of course for people who have compassion for their fellow Americans and of course those people who say look every dollar we waste on a program is a dollar we don’t spend on something that’s more meaningful.
So, I think there may be a coalition. When is this debate scheduled to occur? You mentioned it’s you know it’s going to be extended but it’s likely going to be uh occur when we’re all eating uh Thanksgiving turkey or something like that.
Chris: That’s right. So, the you know the end of the federal fiscal year is the end of September here and these programs most of the programs in the farm bill sort of expire at that time. Congress will probably do a short-term extension for a month or two as the debate in the House and Senate Farm Committees carries on. There is some discussion and uncertainty whether Congress is going to try to force through a farm bill this year or whether they’ll kick it ahead to next year, but next year’s an election year that makes it even tougher for the farm state subsidy supporters. So, I think they will try to ram something through Congress this year. What I’m asking for more than anything is an open debate on this, that, you know, the House and Senate committees they have hearings and they invite opponents of subsidies for farm subsidies for millionaires.
They invite nutritionists to present the evidence on food stamps to their hearings. Usually House and Senate farm committee hearings they only invite supporters to these hearings it’s not really very democratic, so I want an open process, I want open debate. These are important issues and I want a full debate before Congress goes just ramming through a farm bill as they usually do.
Joe: Oh yeah that’s a common theme here on our podcast that the sunlight is the best disinfectant I think cares sober reasoned analysis would do everyone a world of good so we’ve run out of time I want to have for our listeners who for whom we’ve piqued their interest in this particular topic and want to become engaged perhaps and in figuring out how to you know catalyze a better solution where can our listeners find your work?
Chris: Just Chris Edwards at CATO if you Google that you’ll find all my recent pieces on farm subsidies and as well as food stamps or SNAP. I’ve written a couple of studies and numerous blog posts and op-eds in in recent weeks on these issues farm subsidies I’ve been writing about for 20 years and asking for reforms. I think there’s more of a chance than ever, especially with the you know the giant deficits in Washington. There’s more I think that we have a better chance than ever to start reforming these programs.
Joe: Wonderful. Well, you know again this is not a new topic for you but perhaps for many of our listeners, so I’m thrilled that you’re able to help us become more informed and perhaps activated thank you for joining me again on Hubwonk.
Chris: Thank you.
Joe: Okay, bye.
Joe: This has been another episode of Hubwonk if you enjoyed today’s show there are several ways to support Hubwonk and Pioneer Institute it would be easier for you and better for us if you subscribe to Hubwonk on your iTunes podcatcher. It would make it easier for others to find us if you offer a five-star rating or a favorable review we’re grateful if you share Hubwonk with friends if you have ideas or comments or suggestions for me about future episode topics you’re certainly welcome to email me at Hubwonk at pioneerinstitute.org please join me next week for a new episode of Hubwonk.
Joe Selvaggi discusses the cost and consequences of the $1.5 trillion decade-long subsidies in the farm bill with Chris Edwards, Chair of Fiscal Studies at the Cato Institute. These subsidies have the potential to negatively impact incentives for consumers, producers, and those concerned about the environment.
Chris Edwards occupies the Kilts Family Chair in Fiscal Studies at Cato and is the editor of downsizinggovernment.org. He is a top expert on federal and state tax and budget issues. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation. Edwards has testified to Congress on fiscal issues many times, and his articles on tax and budget policies have appeared in the Washington Post, the Wall Street Journal, and other major newspapers. He is the author of Downsizing the Federal Government and coauthor of Global Tax Revolution. Edwards holds a BA in economics from the University of Waterloo and an MA in economics from George Mason University. He was a member of the Fiscal Future Commission of the National Academy of Sciences.