F.D.R.'s Disastrous Experiment
Updated November 21, 2010, 07:00 PM
Burton Folsom Jr. is professor of history at Hillsdale College. He is the author of "New Deal or Raw Deal: How FDR's Economic Legacy Has Damaged America."
If the newly elected Republican congressmen and senators are really serious about their desire for limited government, they should move swiftly to curtail the huge farm subsidy program. It has been a failure right from its start in 1933 under President Franklin Roosevelt. F.D.R.'s Agricultural Adjustment Act sought to cure the problem of overproduction of crops, and low prices for those crops, by paying farmers not to produce. If farmers were paid not to produce on part of their land, they would harvest smaller crops and that would in turn raise prices of those crops.
What happened when we paid farmers not to produce? First, Americans had to pay more for bread, corn and cotton shirts. The higher prices for farmers meant price increases for customers buying farm products.
Second, because farmers were growing smaller crops, we used up more quickly the food being grown, and soon had to import the very crops we were paying farmers not to produce. In 1935, the U.S. imported 36 million pounds of cotton, 13 million bushels of wheat, and 34 million bushels of corn.
In other words, we paid farmers not to produce what we were paying foreigners to send us from overseas. All of this during a Great Depression, when 10 million Americans were unemployed and needed the cheap food the U.S. government was refusing to allow farmers to produce.
Why did such a strange farm subsidy system survive and persist? Not because it worked well, but because farmers lobbied to keep it. They enjoyed the extra income from being paid to set aside part of their land. Subsidies beat the whims of a free market. Since our farmers are the best equipped farmers in the world, why not drop the subsidies and let them grow what they can, and let the U.S. export food to the rest of the world.
nytimes.com
Who Eats Cotton Anyway?
Updated November 21, 2010, 07:00 PM
Brian Riedl is the Grover M. Hermann Fellow in federal budgetary affairs at the Heritage Foundation.
Farm subsidies represent a solution in search of a problem.
We are told the farm economy cannot function without subsidies. However, nearly all subsidies go to growers of just five crops: wheat, cotton, corn, soybeans and rice. By contrast, fruit, vegetable, livestock and poultry operations receive nearly nothing, yet still produce two-thirds of the farm economy, with stable prices and healthy incomes. Why can’t the Big Five crops function in the same free market?
We are told food is too vital to national security to leave to the free market. This is the same misguided logic that has induced calls for a federal takeover of health care. It’s unclear how a centrally planned, bureaucratic, economically illiterate farm subsidy system that doesn’t help the farm economy aids national security. (And who eats cotton, anyway?)
We are also told that subsidies alleviate farmer poverty. Setting aside the Norman Rockwell imagery, farm subsidies are America’s largest corporate welfare program. Congress targets most subsidies toward large commercial farmers, which report an average annual income of nearly $200,000.
More than merely ineffective, farm policies impose substantial harm. They cost Americans $25 billion in taxes and another $12 billion in higher food prices annually. Environmental damage results from farmers overplanting crops in order to maximize subsidies. By undermining America’s trade negotiations, subsidies raise consumer prices and restrict U.S. exports. Cotton subsidies undercut African farmers, keeping them in desperate poverty. And as Michael Pollan, author of “The Omnivore’s Dilemma,” has written, by promoting corn and soy (from which sugars and fats are derived) rather than healthier fruits and vegetables, farm subsidies contribute to obesity, rising health care costs, and early death.
The real problem is that farmers’ incomes fluctuate yearly due to crop and weather unpredictability. This can be solved inexpensively with Farmer Savings Accounts and improved crop insurance. With a $1.2 trillion deficit, outdated, unnecessary farm subsidies must be included in broad-based budget reforms.
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