“A dead man farming? That was the unsettling image that came to mind last November, when a Miami television station analyzed the records of federal farm subsidies paid to South Florida residents. By cross-referencing payments against death notices, the reporters found that at least 234 people listed as deceased were still getting checks from Washington; some had been dead for as long as eight years. All told, about $9.5 million in farm subsidies went to folks who were pushing up plants, not harvesting them.” Michael Crowley, ‘Phony farmers’, Readers Digest.com June/July 2010
Well in happier times, Chicago economists used to condemn ghost freight charged for transported steel under the Pittsburgh-plus price conspiracy. One never expected that they would praise farm subsidies to ghosts under a corrupt Washington farm support program. Yet that is exactly what they did.
In April 1987, the prestigious Chicago Journal of Political Economy published an article by Bruce L. Gardner entitled: ‘Causes of U.S. Farm Commodity Programs’. The research for this paper was under-written by Chicago’s Center for the Study of the Economy and the State, directed by George J. Stigler, who also edited the JPE at that time. The paper gratefully acknowledged the advice and suggestions of Gary Becker and Sam Peltzman, also of the University of Chicago.
The paper identified the various farm programs of the United States federal government as “attempts to redistribute (income) efficiently to the farming community, in response to pressure from interest groups. The paper essentially ignored all relevant institutions, sheltered behind some very dubious econometrics, and concluded that farm subsidy programs that minimized excess burdens, or deadweight costs, fared better than those that did not do so. For the most part, the paper is fallacious about efficient redistribution, accepting unquestioningly Stigler’s and Becker’s rational choice nostrum that all surviving government programs are redistributionally efficient. At that time, such was the Chicago doctoral student’s intellectual burden. Gardner was on the right track about the importance of political pressure, though his paper is sadly deficient with respect to institutional details, and inexplicably ignores Mancur Olson’s much superior analysis of the logic of collective action.
If farm commodity support programs truly were redistributive in nature, they would take the form of lump-sum cash transfers. Mr Gardner, was surely taught that at Chicago. Or perhaps alternatively he was taught that complex price supports, opaque output restrictions, and non-transferable food stamps, minimize the cost of redistribution? Pray do not tell me that he learned that lesson at the feet of any free market economist. Adam Smith and David Ricardo would turn in their graves.
Professor Bruce Gardner, sadly, has passed on, but not before he became aware of the fallacy of that initial paper, I am quite sure. He would have benefited greatly had he been able to avoid the deconstructionist thinking about politics advanced by George Stigler and Gary Becker, and to have read instead Michael Crowley’s much better informed paper in Reader’s Digest.
Let me draw attention to a few statistics therein outlined. Redistribution from rich taxpayers to poor farmers does not hold up even to a cursory review, though that is a professed goal for the program. A government audit determined that of 1.8 million so-called farmers in receipt of federal funds between 2003 and 2006, 2,702 had adjusted gross incomes in excess of $2.5 million; and that many of these were foreigners, not generally eligible for U.S. government handouts. This group alone syphoned off $49 million in taxpayers’ monies. Seventy five per cent of all farm subsidies go to just 10 per cent of the nation’s wealthiest corporate farms. Small struggling family farms are at the bottom of the heap; and, if you are a poor black farmer, please do not even bother to apply. So much for the farmers’ poverty program!
As for the poor consumer, well that is a real joke. In 1996, Congress approved subsidies to farmers as long as they did not develop their land, even if they planted no crops at all. Between 2000 and 2006, the government doled out $1.3 billion to farmers who do not farm. Import quotas on sugar cane, that subsidize U.S. suger beet producers, double the retail price of sugar, a staple ingredient of a poor person’s diet. Food stamps effect income transfers to the poor at enormously high excess burdens. What such families would not do for cash instead of food transfers.
As always, follow the money when attempting to explain the inexplicable in the Washington cess-pit. The agricultural industry employs 1,200 registered lobbyists in Satan’s City, and outlays some $133 million per annum to grease the farm support program. Lawmakers from agricultural states and districts access key congressional committees and feed out the grain that transforms itself into pork. For example, Senator Kent Conrad (D: North Dakota) makes sure that North Dakota, almost half of whose 647,000 residents residents live in urban areas, receives an annual average of $715 million in agricultural subsidies. Other members of Congress pump out the grain into their own pockets. For example, honest millionaire Senator Chuck Grassley (R: Iowa) pulled in $238,000 in federal subsidies between 1995 and 2006, while Senator Blanche Lincoln (D: Arkansas), no close relative of Honest Abe to be sure, has shifted out more than $700,000 to her family over a ten year period.
Any serious attempt to cut the federal deficit would do well to start with eliminating the entire farm subsidy program. Unfortunately, the probability that this will happen is lower than a snowflake’s chance in hell:
And shall the farm support program die,
Here’s 1,200 lobbyists, armed with $133 million per annum,
Will know the reason why.
(With apologies to R.S. Hawker’s refrain, warning King James II to restrain his executioner, when Sir Jonathan Trelawny was held in the Tower of London for resisting the Second Declaration of Indulgence):
“And shall Trelawny die,
Here’s twenty thousand Cornishmen
Will know the reason why.”
Hat Tip to Marjorie
Tags: high cost farm subsidy programs, high excess burdens, redistribution thrives in the fog of Foggy Bottom, subsidies to phony farmers, the Chicago fallacy
May 23, 2010 at 6:00 pm |
Does the paper really argue that the purpose of the redistribution was to promote a more equal distribution of income?
I
May 23, 2010 at 7:01 pm |
Bill:
I checked the paper to determine whether the author explicitly argued that the redistribution was from rich to poor. In fact, he is silent on that issue. So I have adjusted the column to reflect that silence.
Thank you for the thought.
May 24, 2010 at 4:50 am |
I started reading because of the DeLong flaming. I’m stopping effective immediately because your writing has gone from interesting and erudite to possessing Brad DeLong-style slander. “Clutches”? Really?
Good luck with your blog.
May 24, 2010 at 10:14 am |
John:
You are correct to take me to task for using the word ‘clutches’. I have revisited the column and made a few adjustments. For a long time I have disliked the Gardner paper for flying in the face of the real nature of the farm program. It is reflective of a particular period in Chicago economics. But I should not write when annoyed.
I hope that you may decide to stay with my columns.
May 24, 2010 at 3:36 pm |
Dear Mr. Crowley : Thanks for a well written expose of how our government continues to waste its taxpayer’s money . I plan to write to all of Delawares legislators ( M.Castle , T.Carper & E.Kaufman ) suggesting that they read your article and let me know what action they will take to address the problem as outlined in your article . I will share their response with you . I suspevt that you will never run out of outrageous material to share with your readers but , if that should happen , please consider reviewing the recently enacted “Medicare Prescription Drug ” bill , which disallows the Medicare System from negotiating drug prices with their manufacturer . Our Veteran Administration System is allowed to negotiate drug prices with their manufacturer and saves the taxpayers billions of dollars annually . If our legislators are really serious about addressing the financial difficulties that our Medicare System finds itself in why aren’t they amending the bill to allow price negotiation ? I think that we both know the answer to my question , but it would be interesting to learn why directly from our politicians in the beltway , don’t you think ? Reading your articles is one reason why I continue to subscribe to the Reader’s Digest . Thanks again and keep up the good work . Respectfully : P.M.Diodato Wilmington , Delaware
May 26, 2010 at 10:56 am |
Here’s my take on the issue: this subsidy thing seems to be a relic from the past – specifically it seems to be a relic from the Roosevelt Administration’s Agricultural Act which in part was declared to be unconstitutional. Just reading through the points being made I was reminded of what I read about the Agricultural Act, which in part was put in place to allow the Administration to control the output of wheat and other agricultural products, and to an extent involves the commerce clause.
Now the problem with any subsidy is that people begin to rely upon such largesse from the State, seeing it as a right, but that should never be the case.
What is wrong with the State determining the farming production? Well there are several things wrong with it:
1) it keeps food production prices artificially high
2) it keeps the supply artificially low.
3) if can affect the balance of payments (trade with other countries).
4) it can lead to farmers doing nasty things like deliberately dumping their produce – by this I mean throwing the produce into a pit and destroying it rather than selling on the open market.
I guess what I am suggesting here is that this form of government interference is not good for supply and demand in both the short term and the longer term.
My point 4 is something that I read about as happening here in Australia, especially with fruit. If the market price is not greater than the cost of getting the product to the market, then the farmers tend to become disgruntled and that is when they prefer to dump their produce rather than selling. What they do not consider is that we the consumer do not want to pay those higher prices… and if the price is too high then we will not make the purchase.
I guess what I want to convey is that I see those subsidies as something that is a relic of a past era, and as such the subsidies should be reviewed and removed as necessary.
May 28, 2010 at 5:38 am |
TAKE DOWN ALL THESE RAT BASTARDS ON FARM SUBSIDIES INCLUD-ING BLANCHE LINCOLN. I AM A WWII NAVY VET. THEY NEED TO KNOW
WHAT REALITY IS. INCLUDE THE LOBBYISTS AND ALL THE CONGRESS
NUTS THAT CONTINUE TO ALLOW THIS.
June 2, 2010 at 1:57 pm |
Mr. Crowley, I found your article about farm subsidies interesting, and while it is a tragedy that there is fraud involved, you have failed to investigate thoroughly what the farm bill money goes for every year. You have neglected to mention that the farm bill subsidies are what helps keep food affordable in the U.S. and that farmers prices in the U.S. are regulated by the government, which is one of the reasons it was put in place originally. And you have failed to mention that the farm bill also covers two other huge programs in the U.S – the food stamp program and WIC. I think it is a tragedy that writers encourage outrage from their readers while not adequately covering an issue. But then, that gift of omission is always an option for some, causes an article to attract more readers, and you can’t put it all in the article, there is not enough room. I realize you meant for the article to expose a flaw in the system, but do you have to neglect the good while pursuing the quest. The farm bill has no doubt benefited those who are fraudulent, but neglecting to tell the good that comes from the farm bill and that it does not just supplement fraudulent business is, in my opinion, fraudulent.
June 8, 2010 at 2:43 am |
Iam discusted to see what has been happening in D.C. CHECKS TO MILLIONAIRES, Foreign residents,and corpses, whats wrong with our so called gov. When people die , you are to send into the Social Security, and also for death notices, it,s ILLEGAL. and it`s about time the COUNTRY woke up and complained and have these lobbyists, and CONGRESS wake up!! This Country does not need this to go on. The FARMERS SHOULD PAY BACK BIG TIME AND THE CONGRESS SHOULD LOOSE 75% OF THERE SALARY FOR LETTING THIS GO ON!!! EVERY ONE IS TRYING TO SURVIVE, AND THIS IS HAPPENING!!! SHAME ON THE CROOKS IN THE GOVERMENT!!