Congressman Tom McClintock

Representing the 4th District of California

Subsidy Amendment to Farm Bill

May 17, 2018
Amendment offered by Congressman McClintock to H.R. 2 – Agriculture and Nutrition Act
Subsidy Amendment to Farm Bill
Committee of the Whole House
May 17, 2018
Farm subsidies – essentially taking money from taxpayers to inflate the price of their groceries – was never a good idea.  They are the poster children of corporate welfare.  After all, the vast proportion of them go to large corporations – not small family farms.  
Sixty percent of American farms get no subsidies at all – contradicting the claim that somehow American agriculture couldn’t exist without them.
We spend $20 billion a year subsidizing 40 percent of our farms.  That’s about $160 a year out of the direct taxes of an average family in America.  That doesn’t include the cost to consumers from higher prices.  The sugar program alone cost consumers $3.7 billion in higher sugar prices – adding nearly $30 more to their grocery bills.  
Subsidies hurt taxpayers.  They hurt consumers.  And they even hurt farmers in the long run.  
Prices are signals sent by consumers over what they want to buy and the amount they’re willing to pay.  If left alone, they tell producers what consumers want more of and what they want less of.  If consumers want less soybeans and sugar and more wheat and cabbage, prices for soybeans and sugar decline and prices for wheat and cabbage increase.  Producers respond by planting less soybeans and sugarcane and more wheat and cabbage.
Unless, of course, government distorts those price signals through subsidies.   Producers end up planting more of what consumers don’t want and less of what they do.  Thus, producers are artificially induced to perform below their potential productivity.
Many of the subsidies today are in the form of crop insurance.  Farmers get heavily subsidized insurance to guarantee them profits for their products.  Who pays the subsidies?  Taxpayers.  
What is insurance?  It is the monetization of risk.  It is the way markets can assign a dollar value to the risk that one undertakes in any human enterprise.  The higher the risk, the more expensive the insurance.  By subsidizing crop insurance, we once again corrupt the price signals that farmers need to make rational decisions.  If crop insurance for soybeans is expensive, the market is warning farmers not to rely on soybeans.  If taxpayers subsidize the cost of that insurance to lower its price, we are encouraging risky behavior by masking the cost of the risk.  Once again, that produces bad outcomes for taxpayers, consumers, and ultimately the farmers themselves – because they’ve been led toward higher risk by distorted price signals.
Nor is subsidized insurance necessary for farm loans – bankers loan to other non-subsidized parts of the farm economy without subsidized insurance.  
There are no good arguments for continuing these subsidies.  Most farmers don’t get them right now.  Those who do tend to be major corporations and not family farmers.   
My amendment preserves these subsidies for the next two years and then gradually phases them out over the next ten – assuring that producers who have grown dependent on these subsidies have plenty of time to adjust their operations.   But at the end of this process, we will have a much more efficiently functioning agricultural market that is accurately responding to the needs of consumers rather than to the whims of government bureaucrats.
Experience is important to heed.  New Zealand is four times more dependent on agriculture than the United States, and it once maintained extensive farm subsidies.  In 1984, New Zealand ended those subsidies.  What happened?  Farm productivity, earnings and output ALL ROSE.  What do New Zealand farmers say about that?  The Federated Farmers of New Zealand says that it – quote – “thoroughly debunked the myth that the farming sector cannot prosper without government subsidies.”
It is long past time to debunk that myth in our own country, restore to consumers the power to command what producers grow and restore to producers the accurate price signals they need to maximize their productivity in a free and undistorted market.
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