Farm Subsidies: “Plus ça change…”

Great article on farm subsidies on the front page of the New York Times this morning:

It seems a rare act of civic sacrifice: in the name of deficit reduction, lawmakers from both parties are calling for the end of a longstanding agricultural subsidy that puts about $5 billion a year in the pockets of their farmer constituents. Even major farm groups are accepting the move, saying that with farmers poised to reap bumper profits, they must do their part.

But in the same breath, the lawmakers and their farm lobby allies are seeking to send most of that money — under a new name — straight back to the same farmers, with most of the benefits going to large farms that grow commodity crops like corn, soybeans, wheat and cotton. In essence, lawmakers would replace one subsidy with a new one.

Surprise, surprise. Like my NC State colleague Mike Roberts wrote in a post last week:

These subsidies have been tough to justify for a very long time now. Today’s budget pressure just might be able to break them. But don’t hold your breath. These subsidies have been around since the Great Depression and while they’ve gently declined over time in importance, they’ve been tough to kill.

Regulatory Capture, Redux

There really is no reason why we should keep subsidizing agriculture in this country. For over a half century, we have been encouraging developing countries to open themselves up to international trade. But for international trade to make sense for a country, that country must be able to tap into its comparative advantage — what it does best. For most developing countries, what they do best is agriculture.

By subsidizing our own farms, we are systematically screwing over agricultural producers in developing countries, for whom the marginal value of one dollar of income is probably much higher than the marginal value of the same dollar of income for someone in the Midwest.

This is what happens under regulatory capture — which appears to be the theme of this blog for this week — when the interests of a large group of people spread out diffusely across all electoral districts (in this case, taxpayers) are offset by the interests of a smaller, more organized group (in this case, farmers) whose members are concentrated in certain electoral districts.

Required Reading

The entire New York Times article I quote from above should be required reading for students of public policy, as it is very instructive on the political economy of farm subsidies:

The new subsidy is being championed by Senator Sherrod Brown, Democrat of Ohio, and Senator John Thune, Republican of South Dakota.

Mr. Thune, a leading voice in favor of deficit reduction, received at least $80,000 in campaign contributions since 2007 from political action committees associated with commodity agriculture, according to data compiled by the nonpartisan Center for Responsive Politics, which tracks campaign spending. Mr. Brown has received $5,500 in PAC contributions from such groups in that period.