Are All Farms Created Equal When It Comes to Subsidies?

The Bipartisan Policy Center’s plan to control the federal deficit, which argues convincingly for cutting distortionary and unfair elements of the tax code, occasionally seems to encourage the very same a few pages away. One such proposal, entitled “Reduce Farm Program Spending”, might on its face warm a fiscal conservative’s heart; indeed, Reason’s October feature on cutting government spending proposes just that. Unfortunately, the BPC proposal argues for revoking the subsidies of only one segment of the market, ignoring an opportunity to challenge the misguided principle of government support for agriculture.

While farm subsidies are currently paid to all eligible firms based on output, the BPC’s plan would eliminate payments only for farms grossing over $250,000 while preserving supports for their smaller counterparts. The report’s authors argue that small farms are unfairly put “at a disadvantage” in the marketplace because of USDA commodity payments, 62 percent of which do indeed go to large-scale farmers. As a result, the BPC task force concludes, this “inequity” should be remedied by continuing subsidies for small-scale operations.

It’s true that government support for large commercial farms is unfair and inefficient, but it’s not any fairer to turn around and favor their smaller, less productive, less resilient counterparts. If, as the authors imply, small producers “have difficulty surviving in the marketplace” because they don’t receive a large enough share of federal subsidies, they have no better claim over taxpayer dollars than their larger, better capitalized, more stable competitors.

Indeed, mightn’t both the fairest and most economically sensible solution be to revoke all subsidies, allowing the consolidation and growth of successful and self-sufficient large farms and letting smaller, struggling ones disappear? Such a policy would (fairly) treat all businesses the same and (fairly) allow consumers to choose what businesses to support through their purchases, all the while trimming the federal budget.

As Anthony Randazzo and I recently noted, the BPC’s proposal for a new federal tax on soda falls into the same pitfall of promising fairer, more equitable tax policy while suggesting policies that would accomplish the opposite.

For more info on the harm that agricultural subsidies do the economy, check out Cato’s Chris Edwards here.