What do to about Washington’s spending problem? In great part thanks to the Obama administration’s urging, we see Washington resort to superficial cuts that bring more political pain than spending relief, such as suspending White House tours and furloughing FAA workers. If lawmakers were serious about realizing significant savings, then they should consider overhauling the nation’s broken agricultural programs. The 2013 Farm Bill is currently working its way through the congressional agriculture committees, providing a natural opportunity for Congress to re-evaluate these antiquated programs. The first program that should be first on the chopping block is direct payments for farmers.
The direct payment program is woefully out of whack with the current needs of the economy. Under the program, the federal government sends about $5 billion in checks to farm landowners and operators, regardless of their economic need or whether they even grow crops. Payments are calculated using established “base acres” and “historic yields,” not the crop producers’ current production choices.
Proponents of program argue that direct payments provide a safety net for struggling small farmers, but this is far from reality. Direct payments disproportionately benefit the biggest and most profitable farm companies in the country. And even among beneficiaries, most of the payments benefit a narrow group. According to research from the Environmental Working Group, the top 10 percent of farm businesses collected 59 percent of all payments in 2011. Each beneficiary received an average of $28,784. Meanwhile, 80 percent of farmers received an average of $1,364.
Like most government subsidy programs, direct payments were supposed to be temporary and they were supposed to wean their beneficiaries off government assistance. The program turned out to be neither. Direct payments as we know them have been in place since 1996 and the agricultural sector gets tens of billions in new federal support with each farm bill reauthorization.
Not only does the direct payment program lack economic sense, it lacks moral sense. Right now Washington is making cuts to other areas of the federal budget like transportation and education, while continuing to send $5 billion in automatic checks to the nation’s wealthiest farm companies. While most Americans continue to struggle in the down economy, it simply doesn’t make sense for their tax dollars to prop up the farm sector that is seeing record profits and enjoying higher-than-average incomes.
Momentum for cutting direct payments has been building lately on both sides of the aisle. The Democratic proposal to replace the sequester proposed eliminating the program. In the budget he released in March, House Budget Committee Chairman Paul Ryan called on the House Agriculture Committee to “to adjust support to [the farm] industry to reflect economic realities,” specifically singling out direct payments. Most recently, both of the current five-year versions of the Farm Bill do not include the program. (But disappointingly, both versions call for replacing them with a massive new entitlement program that will end up costing more than twice as much.) Cutting direct payments is a rare area of agreement in Washington, and Congress should strike while the iron is hot. If members can't bring themselves to cutting this widely-criticized corporate welfare program, then there’s little hope that they will cut any others.
Of course cutting direct payments in isolation will not fix our fiscal woes, but it’s a great place to start. The Farm Bill is a trillion-dollar spending bill that is chock-full of broken programs that are past their prime—tens of billions in additional savings are ripe for the picking. Congress simply has to be willing to start looking.