The things you learn on the Internet. At the Volokh Conspiracy Ilya Somin reports on a case in front of SCOTUS regarding the raisin crop:
Things did not go well for the federal government in today’s oral argument in Horne v. US Department of Agriculture, the raisin takings case. Nearly all of the justices were highly skeptical of the government’s claim that forcible confiscation of large quantities of raisins somehow does not qualify as a taking of private property that requires “just compensation” under the Fifth Amendment. The forced transfer is part of a 1937 program that requires farmers to turn over a large portion of their raisin crop to the government so as to artificially reduce the amount of raisins on the market, and thereby increase the price. Essentially, the scheme is a government-enforced cartel under which producers restrict production so as to inflate prices.
It can be quite a jolt when you realize how far the United States is from a real free market. It would be interesting to know exactly which program, and its breadth.
But, of course, the real question is this: should there be a real free market in food? It should be well-known that the government regularly buys up excess corn; and, back in the 90s, the GOP briefly attempted to eliminate the agricultural subsidies. The Economist provides a quick light-weight summary here:
To this day, to be treated as a farmer in America doesn’t necessarily require you to grow any crops. According to the Government Accountability Office, between 2007 and 2011 Uncle Sam paid some $3m in subsidies to 2,300 farms where no crop of any sort was grown. Between 2008 and 2012, $10.6m was paid to farmers who had been dead for over a year. Such payments explain why Tom Vilsack, the agriculture secretary, is promoting a rule to attempt to crack down on payments to non-farming folk. But with crop prices now falling, taxpayers are braced to be fleeced again.
American farm subsidies are egregiously expensive, harvesting $20 billion a year from taxpayers’ pockets. Most of the money goes to big, rich farmers producing staple commodities such as corn and soyabeans in states such as Iowa.
The conservatives tend to maintain a skepticism about ag subsidies which I sometimes agree with and sometimes believe is rooted in an ignorance of how people might behave in the face of food shortages. The Cato Institute provides this debate from 2007 on the subject of ag subsidies and how the dismantling of New Zealand’s subsidies impacted the country. Daniel T. Griswold asserts the conservative case:
There is no dismissing the New Zealand experience. The government largely dismantled its farm programs and none of the consequences Bob predicts came true. Its citizens did not suffer any shortages or disruptions of food supplies. Productivity of New Zealand farms accelerated after reform and they now compete successfully in global markets, especially as dairy and livestock producers.
In contrast, the output and income of America’s most supported crops have lagged behind the performance of non-supported products that compete in free and open markets. According to the U.S. Department of Agriculture, cash receipts for the most supported crops, including corn, soybeans, wheat, cotton, sugar beats, and sugar cane, rose an unimpressive 14 percent from 1980 to 2005. Meanwhile, cash receipts for non-supported crops, including fruits, vegetables, nuts, and greenhouse products, soared by 186 percent. Subsidized farmers are selling out their future competitiveness in the market for the sake of federal handouts.
Bob Young provides the opposition:
The New Zealand and Australia cases are held up to us on a fairly regular basis. Australia has had, and continues to have, support programs for their producers. They are now in the middle of providing disaster assistance to their producers — assistance their producers certainly need. They also operated their wheat market under a single-buyer/single-seller framework up until the very recent past. New Zealand made the jump they did when their entire economy and government were on the brink of bankruptcy. They undertook massive government reforms that cut across literally every agency. Dan might be willing to entertain such an idea, but I’m not so sure that we as a nation are ready to make that leap.
Finally, Dan talks about the farm programs as producing environmental degradation. In part because of the rules a producer must operate under to be eligible to participate in farm programs, and in part because farmers are the best day-to-day environmental stewards in this country, the average erosion rate from an acre of farmland has dropped from 7.2 tons in 1982 to 4.7 tons in 2001. Wetland protection has increased sharply and wildlife habitat has expanded significantly. Even on those disgusting corn acres — the acres that provide the feed for our livestock and are helping with our nation’s energy supply — the nitrogen used to produce a bushel of corn fell from 1.3 pounds in 1983 to 0.94 pounds in 2006.
In 2013, Bloomberg Business joined in:
A Depression-era program intended to save American farmers from ruin has grown into a 21st-century crutch enabling affluent growers and financial institutions to thrive at taxpayer expense.
Federal crop insurance encourages farmers to gamble on risky plantings in a program that has been marred by fraud and that illustrates why government spending is so difficult to control.
And the cost is increasing. The U.S. Department of Agriculture last year spent about $14 billion insuring farmers against the loss of crop or income, almost seven times more than in fiscal 2000, according to the Congressional Research Service.
The Bloomberg article is quite long and indicates the implementation of our current ag subsidies is making everyone unhappy:
With new farm legislation stalled on Capitol Hill, largely over Republican demands for deeper cuts in food stamp spending, the cost of crop insurance is drawing fire from both ends of the political spectrum.
The Environmental Working Group says the insurance encourages farmers to make riskier plantings, secure in the knowledge they will be paid even if the crops fail. The free-market Club for Growth, meanwhile, derides the program as a government handout for millionaire farmers.
Then there’s this gem:
“We shouldn’t look at crop insurance as the least evil policy,” says Josh Sewell, senior policy analyst with Washington-based research group Taxpayers for Common Sense. “It’s not like our choice is to send checks one way or send checks another way. We could just not send checks.”
As many have said before me, common sense is neither. My observation over the years has been that if the name of a group includes “taxpayers”, then it’s a bunch of guys who are only concerned about their wallets.
While I’m sure that such a wart on what we like to think of as a free market is hard to integrate with the market – and can lead to fraud, as many engineers would consider this an instability in the system – I don’t think they really make the case for eliminating ag subsidies, only reforming them (and on that, no opinion). On the conservative side there seems to an assumption that this is about economics, not about assuring the food is available on a regular basis.
So how much food do we produce? The EPA has this page:
In round numbers, U.S. farmers produce about $ 143 billion worth of crops and about $153 billion worth of livestock each year.
And what about California, recently the subject of water rationing? Richard Cornett at Western Farm Press, in 2013, gives his thoughts:
So a loss of California ag production would hit hard consumers’ wallets and their diets would become less balanced.This is because our state produces a sizable majority of American fruits, vegetables and nuts; 99 percent of walnuts, 97 percent of kiwis, 97 percent of plums, 95 percent of celery, 95 percent of garlic, 89 percent of cauliflower, 71 percent of spinach, and 69 percent of carrots and the list goes on and on. A lot of this is due to our soil and climate. No other state, or even a combination of states, can match California’s output per acre.
Lemon yields, for example, are more than 50 percent higher than neighboring states. California spinach yield per acre is 60 percent higher than the national average. Without California, supply of these products in our country and abroad would dip, and in the first few years, a few might be nearly impossible to find. Orchard-based products specifically, such as nuts and some fruits, would take many years to spring back.
Soon, the effect on consumer prices would become attention-grabbing. Rising prices would force Americans to alter their diets. Grains are locked in a complicated price-dependent relationship with fresh fruits, vegetables and meats. When the price of produce increases, people eat more grain. When the price of grain rises, people eat more fruits and vegetables. (In fact, in some parts of the world, wheat and rice are the only “Giffen goods” – a product in which decreasing prices lead to decreasing demand.) Young people and the poor in America, more than others, eat less fresh fruit when prices rise.
In some respect, I hope the ag subsidies act to spread farming out, rather than concentrating it.
