The Des Moines Register recently recently ran an editorial advising us to not buy into the idea that Iowa farmers “feed the world”. As the Register documented, “Only half of one percent of U.S. agricultural exports went to a group of 19 undernourished countries that includes Haiti, Yemen and Ethiopia.” Some farmers and their supporters have a vested interest in making sure that fellow citizens hold them in a special position because they produce the food we eat. They perpetuate that meme in order to get special treatment by our government, for example by not having to either stop or pay for polluting our waters, and by receiving a 60% subsidy on their crop/revenue insurance premiums, among many others.
Every week, most of us buy food from all over the world at our local grocery stores. It may be wonderful to be able to buy local fresh food, but it is not a necessity. International voluntary free trade is what has allowed us, and much of the rest of the world, to avoid starvation when local producers fail for any reason. Farmers should be given no more credit than other producers of all kinds of products. As Adam Smith wrote in 1776 in his book, The Wealth of Nations, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
Link to Register editorial: http://www.desmoinesregister.com/story/opinion/editorials/2016/10/09/editorial-dont-expect-iowa-farmers-feed-world/91735242/
Craig Hill’s editorial explaining the importance of crop insurance to farmers made a lot of sense. (“This much is certain – For farmers, crop insurance is essential” 10/5/2016) Most business and individuals buy insurance to reduce risk, and, as Mr. Hill explained, farmers have plenty of risk. What he did not explain is why taxpayers need to subsidize about 60% of the premium. Contrary to his opinion, it definitely is a handout. Farmers, on average, have much more wealth than the average person. It doesn’t matter that much of the wealth is tied up in land values. Land can be sold for cash just like any other asset. Crop insurance is a good idea, it just should not be subsidized by taxpayers. In the next farm bill, a couple of years from now, we need to eliminate the taxpayer subsidy for crop insurance.
Link to Register article: http://www.desmoinesregister.com/story/opinion/columnists/iowa-view/2016/10/04/much-certain-farmers-crop-insurance-essential/91551614/
According to a report in the Des Moines Register today, 10/26/2015, the last bird flu outbreak cost taxpayers $1 billion. (See link below.) The payments to chicken and egg producers included the cost of the birds that were destroyed, the cleanup, and “indemnity payments” to cover their losses.
I understand that we citizens, through our government, need to prohibit diseased meat from entering our food supply. I don’t understand why producers are not insured against such a foreseeable risk. If we have a law that prohibits diseased meat from being sold, and if we do not provide producers with a taxpayer paid bailout, then producers will do one (or more) of three things: they will reduce their own risk by splitting large flocks into smaller, geographically separated flocks; they will buy insurance to cover the risk; or they will take the financial risk of loss upon themselves.
To the extent that taxpayers bail out producers, they will not take the necessary steps to manage and reduce their own risks. We need to give notice to producers that they will not be bailed out in the future.
Link to Register article: http://www.desmoinesregister.com/story/money/agriculture/2015/10/25/bird-flu-when-return/74334080/
Today, 9/16/2014, The Des Moines Register once again reinforced the idea that there is something inherently wrong with increasing income inequality. (See “Ag economy cited in study showing growth in rich-poor gap” – link below.) In a free market, where government does not interfere except to stop fraud and force, people only become wealthy by producing things that others value and purchase voluntarily. Under free market capitalism, voluntary trade only makes every participant richer.
Unfortunately, we don’t have a free market in much of our agricultural sector. So, an important question is how did the wealthy gain their wealth. If they gained their wealth by receiving subsidies from our government, then they gained their wealth by making others poorer. Today, farmers receive various kinds of government subsidies, both directly and indirectly. For example, crop insurance premiums are subsidized 60% by taxpayers, regardless of the income or wealth of the farmer. And, crop insurance not only covers losses from natural disasters, it also covers loss of profits due to lower crop prices. There should be no subsidy at all for crop insurance, but it is particularly distasteful when the subsidy goes to the rich. So, we must blame our own government’s policies for at least some of the unjust and immoral aspects of income and wealth inequality.
If seems as if all businesses now require some type of welfare program. The definition of economic development is grants or loans or special tax breaks given by our government to businesses. Banks get their welfare indirectly – from loan guarantees from many government programs. Of course our farmers must be protected from losses by government – through crop insurance subsidies that not only cover natural disasters, but actually protect against price declines. All types of energy companies receive special tax credits or tax breaks. The biggest manufacturers in Iowa receive large tax credits for research. Now, Mediacom and John Deere want a grant of $800,000 from the federal government to help bring high speed internet to farmers who buy high-tech, internet connected tractors that cost hundreds of thousands of dollars. We should say no! We need to reverse the trend of expecting taxpayers to fund all types of economic development. Just as with with individuals and families, welfare for businesses create dependency. Our economy will continue to grow sluggishly as long as we look to government to manage our economic development.
Taxpayers subsidize about 60% of the premiums that farmers pay for crop insurance – regardless of how wealthy the farmer is, regardless of the income of the farmer, and regardless of whether or not the owner actually even works on a farm. Crop insurance covers not only losses due to disasters, but it also covers losses due to low prices. There is no ethical, moral, or food security reason why wealthy farm owners should be receiving any subsidy. Most farms, like most other businesses, need disaster insurance. But, there is no good reason why taxpayers should subsidize the premiums. Farmers say they need a 5-year farm bill so that they can properly plan. That is understandable. Let’s let them plan on not receiving any subsidy on their crop insurance.
The Farm Bill should not pass until the following changes are made:
Separate the food stamp program (the SNAP program) from the rest of the farm bill. The huge size of the food stamp program dwarfs the farm subsidies and, in effect, hides them. Farm subsidies need to be exposed to a more open process. It would also help make the food stamp program more transparent.
Stop subsidizing crop insurance. Make farmers pay 100% of the cost. If that raises the price of food, so be it. If it reduces farmers’ incomes, so be it. Subsidizing crop insurance is not a proper role for our government. Today’s federally subsidized crop insurance not only covers losses due to unforeseen disasters, it also covers drops in revenues! If farmers had to pay the full price for their coverage, they might prefer higher deductibles and lower levels of coverage. But to add insult to injury,many farmer who receive subsidies are also very wealthy. There is no good reason why wealthy farmers should be subsidized, even for crop insurance. If our goal is to help poor farmers, then surely the subsidy should be phased out as a farmer’s wealth and income increase.
Establish a maximum amount of subsidy that can be received by any individual or commonly owned group of farms under all farm subsidy programs combined. Again, we shouldn’t be subsidizing big farmers or farm organizations.
Don’t place tariffs on imports unless the country of origin first places tariffs on our exports to that country. Free trade is beneficial to all. It is voluntary! It requires no intervention by government other than to resolve disputes. Free people should not be forced exchange or be prevented from voluntarily exchanging with another party. Amazingly, under the current Farm Bill, we pay Brazilian cotton farmers almost $150 million per year as compensation for the damage done to them by the subsidies we provide to our U.S. cotton farmers! Is that not insane trade policy?
Separate the “rural development” programs from farm subsidies. Again, the tens to hundreds of millions of dollars spent in this area are hidden within the much larger primary subsidy programs. It is questionable whether or not rural economic development is even a proper role of government. In any event, consideration of spending for rural economic development should not be mixed with farm subsidies.
Tie environmental practices to any subsidies granted. We shouldn’t expect perfectly clean water in our lakes and rivers. Wild animals have defecated in them forever. But, it reasonable to expect farmers to not fowl the water down stream from them, and to pay for damages when they can be reasonably determined. The idea of requiring minimum buffer strips between farms and rivers and lakes is reasonable.