Reining in wasteful agricultural spending can help America reclaim its fiscal future
This week, the House Republican Study Committee (RSC) released their alternative Fiscal Year 2022 budget, entitled Reclaiming Our Fiscal Future, which presents a bold plan to balance the federal budget in just five years. While the budget covers the full range of both mandatory and discretionary spending, the RSC rightfully targets agriculture as one area that can produce savings for taxpayers and create a more free-market agriculture economy that improves opportunity for farmers. The Republican Study Committee deserves credit for its bold and principled approach at a time when it’s easy to cave to agricultural special interest groups and abandon fiscal restraint entirely.
Few would oppose a well-functioning safety net that supports farms struggling to stay afloat in the aftermath of natural disasters or other unforeseen hardships. However, the modern farm support system is not a safety net; it is a tangled web of market-distorting subsidies and price controls that are disproportionately funneled toward the largest and wealthiest agribusinesses—and American taxpayers foot the bill. According to the Environmental Working Group, the richest 1 percent of farmers received almost one-fourth of the total farm subsidies in 2019, and the top 10 percent received almost two-thirds. At a time when deficits are ballooning—and millions of Americans are struggling to make ends meet—it is increasingly indefensible to subsidize the income of millionaire and billionaire agribusiness owners.
The RSC budget provides an extensive list of specific reforms that would begin to rectify our agriculture spending and help America reclaim its fiscal future. Among them:
Crop insurance reforms. Currently, taxpayers subsidize about 60 percent of the premiums when farmers purchase crop insurance approved through the Federal Crop Insurance Program. The RSC budget would reduce this to a still generous 30 percent, while also eliminating the government’s reimbursement to crop insurance companies for administrative expenses. This would save taxpayers more than $32 billion over the next 10 years.
Farm operations of all size—even the largest, most successful operations—are currently eligible to receive subsidies for crop insurance. There is also no limit to how much subsidized insurance farmers can purchase. This allows owners of mega-farms to receive more than $1 million in crop insurance subsidies from taxpayers. The RSC budget proposes a sensible, incremental reform championed by Sen. Chuck Grassley (R-Iowa) that would cap the overall amount of crop insurance subsidies a single farm can receive.
Commodity support programs. In addition to generously subsidized crop insurance, farmers collect commodity subsidies through programs called the Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC). PLC provides a payment to farmers when the nationwide price for a commodity falls below a threshold, and ARC pays farmers when revenues fall below recent levels. However, farmers can already protect their revenue and yield through generously subsidized crop insurance, which should be more than sufficient to help manage risk. PLC and ARC also allow farmers to get paid twice for the same loss, since they provide payments for losses that may be already covered by federally subsidized crop insurance. RSC proposes eliminating ARC and PLC, which would save taxpayers more than $56.5 billion over 10 years.
Free trade. Since the Trump administration waged an ill-advised trade war with China—as well as long-time allies—farmers have been hard hit by retaliatory tariffs that restrict their market access abroad. Rather than sending additional payments to farmers to make up for lost income that is a direct result of our own poor trade policies, the RSC seeks to check President Joe Biden’s authority to unilaterally impose tariffs by implementing Rep. Warren Davidson’s (R-Ohio) Global Trade Accountability Act. In order to thrive, farmers need market access—not more subsidies. That’s why R Street encourages policymakers to reject misguided protectionism and pursue promising trade agreements: rejoining the Trans-Pacific Partnership; finalizing a post-Brexit agreement with the United Kingdom; and negotiating similar deals with other willing trading partners will open markets for American firms and lower barriers for American consumers. Promoting free trade and preventing future tariff abuse is the best way to ensure a strong agricultural economy.
Of course, federal spending on agriculture is just a drop in the bucket when confronted with $3.1 trillion deficits. If policymakers are serious about righting America’s unsustainable fiscal trajectory, they must be prepared to answer many tough questions. Eliminating waste in the farm safety net and ending subsidies for wealthy farmers should be a comparatively easy one.
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