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I hope you all had a\u00a0very happy\u00a0Vax Day\u00a0yesterday and are eagerly awaiting your jabs in the coming months. I\u00a0know I\u00a0am. We\u2019ll talk more about the COVID vaccine in the future, but for now I\u2019d like to change gears and talk about something totally different: farm subsidies. (I know, I\u00a0know\u2014it\u2019s almost too much excitement for one newsletter, but let\u2019s all try to keep it together, shall we?)<\/p>\n\n\n\n
Anyway, you may be surprised to learn that, in the midst of a\u00a0global pandemic and continuing trade war(s), the USDA\u00a0just announced\u00a0that American farmers are having a\u00a0banner year in terms of income and profits:<\/p>\n\n\n\n
U.S. net farm income this year will jump 43% to $119.6 billion, the highest inflation\u2010\u200badjusted level since 2013, the government said Wednesday in a report. The projected surge occurred as the virus pandemic roiled the food\u2010\u200bsupply chain in the spring, driving grain prices down and meat costs higher.\u2026<\/p>\n\n\n\n
U.S. agriculture is on track for one of the three most\u2010\u200bprofitable years in a\u00a0half century. Adjusted for inflation since 1973, projected net farm income in 2020 will be surpassed only by 2011 and 2013 figures.<\/p>\n\n\n\n
So what\u2019s driving these major increases? Back to Bloomberg:<\/p>\n\n\n\n
The latest data show the increasing dependence of growers on government assistance after three years of trade and Covid\u2010\u200b19 aid on top of traditional subsidies. Farmers face a murky outlook next year if the Biden administration adjust[s] payments.<\/p>\n\n\n\n
Direct government aid, accounting for 39% of net farm income, rose to a record $46.5 billion from $22.4 billion last year. \u2026<\/p>\n\n\n\n
Yes, you read that right. This year, farmers (on net) will derive almost 40 percent<\/strong><\/em> of their income directly from the U.S. government. Forty percent.<\/p>\n\n\n\n As we\u2019ll discuss, a good chunk of these government payments come from the CARES Act, but much of it flows from earlier government programs. And all of it is due to American farmers\u2019 historically disproportionate pull in the U.S. Congress\u2014pull that has resulted in decades of massive, harmful, and (mostly) unnecessary taxpayer support. At least it can provide some broader lessons about U.S. subsidies.<\/p>\n\n\n\n So let\u2019s jump right in.<\/p>\n\n\n\n History and Context<\/strong><\/p>\n\n\n\n The United States has subsidized American farmers in some form since the\u00a0New Deal era\u00a0(the Agricultural Adjustment Act of 1933) and today doles them out primarily via one vehicle: the farm bill\u2014a large and complex piece of legislation that\u2019s renewed every five or six years and includes two main parts: (1) various types of support for domestic agribusiness (i.e., farm subsidies); and (2) \u201cnutrition\u201d (mostly the Supplemental Nutrition Assistance Program). Although we think of the farm bill as a\u00a0subsidy bill, it\u2019s actually heavily tilted toward nutrition\u2014in the last (2018)\u00a0farm bill, for example, more than 75 percent of federal outlays were actually for SNAP and related programs.<\/p>\n\n\n\n We\u2019ll talk more about this balance in a\u00a0moment, but for now let\u2019s focus on the subsidies. As noted by the Cato Institute\u2019s\u00a0Chris Edwards, U.S. government support for farmers is \u201cdeep and comprehensive\u201d: via the farm bill, the government \u201cprotects farmers against fluctuations in prices, revenues, and yields,\u201d and \u201csubsidizes their conservation efforts, insurance coverage, marketing, export sales, research, and other activities.\u201d Back in 2014, Congress made some significant revisions to the subsidy programs\u2014limiting direct payments and subsidies to certain farmers while amplifying federal crop insurance\u2014but the overall amount of money remained relatively steady in subsequent years..<\/p>\n\n\n\n That amount is\u00a0substantial<\/em>: according to the Environmental Working Group\u2019s\u00a0compilation\u00a0of Department of Agriculture data, for example, the federal government has provided approximately $424.4 billion in current\u2010\u200bdollar subsidies\u2014crop insurance, commodity payments, conservation payments, and disaster payments\u2014to U.S. farms since 1995 (the 2020 data are incomplete)<\/p>\n\n\n\n