Seeking Liberty

Liberty is the Fruit from Which All Progress Grows

The Real Cost of Agricultural Subsidies

CottonBy Matthew W. Quinn

Imagine you’re a cotton farmer in West Africa.  One day, the man who comes to buy your cotton to be exported does not show up.  You go to the marketplace and find there is nobody willing to buy your cotton.  In fact, there is cheaper cotton available from abroad.

You now cannot sell your crop, or at least you cannot sell it for very much.  You need to buy food and fertilizer, and your children need medicine and money to pay for schooling.  You’re in trouble now.

Are these the workings of the free market?  No.  The reason the foreign cotton was able to price the West African cotton out of the market is because it came from the United States and was heavily subsidized.

Cotton subsidies are one of the most notorious examples of government agricultural supports and it gives American cotton producers an unfair advantage over more efficient producers abroad. For example, in Burkina Faso, it costs one-third as much to produce cotton as it does in the United States.  According to the British aid agency Oxfam, the only clear advantage American cotton growers have over competitors in Africa is their ability to get government subsidies.

Cotton Farming in Togo, 1928If American cotton subsidies were eliminated, the income of West African cotton farmers would increase 2.3 to 5.7 percent.  This additional income could pay for health care for four to ten individuals for an entire year, schooling for one to ten children, or enough food to feed one or two children for an entire year.  American cotton subsidies are more than double the amount of humanitarian aid we send to these countries every year.

Cotton subsidies aren’t the only villain.  According to the San Francisco Chronicle, heavily-subsidized American corn has flooded Mexico under the North American Free Trade Agreement, never mind the fact that “dumping” is illegal.  According to The Public Citizen, this corn is 30 percent below cost and Mexican farmers cannot compete with this.  This has destroyed much of Mexico’s agriculture and caused widespread hunger among the 15 million Mexicans who depend on the corn industry.

According to the World Bank, if First World nations eliminated all agricultural subsidies and tariffs, 144 million people would be pulled out of extreme poverty by 2015.  In the case of Africa, if the continent increased its exports by 1 percent, it would generate an additional $70 billion each year, more than five times the amount the continent receives in foreign aid.

Not only are American agricultural subsidies destructive to foreign economies, but they are destructive to our own.  American agricultural producers already received enormous sums of money when then-President George W. Bush added an addition $190 billion over 10 years in farm subsidies to the federal budget.  In a time of deficits, recession, and war, this kind of spending to essentially secure the votes of Iowans cannot be tolerated.

Furthermore, the practice of subsidizing agriculture puts the U.S. government in the position of both causing and treating major American health problems.  Subsidies to corn production make products containing unhealthy high-fructose corn syrup cheaper and thus more easily purchased and consumed in enormous quantities.

High-fructose corn syrup contributes to many health problems like obesity and diabetes and those cost money.  According to the New York Times, three-fourths of health-care spending goes to prevent “preventable chronic diseases,” many of which are caused by a poor diet.  For example, U.S. spends $147 billion to treat obesity and $116 billion to treat diabetes, as well as hundreds of billions more to treat cardiovascular diseases and other cancers that result from the typical unhealthy American diet.  30 percent of the increase in health-care spending in the United States in the last 20 years can be attributed to obesity alone.  If corn subsidies were reduced or eliminated, the amount spent on health care in this country would decline greatly.

Furthermore, by destroying the Mexican corn industry, American agricultural subsidies have also contributed to illegal immigration.  The former farmers in Mexico, not content to starve at home, have come to the United States regardless of whether it is legal for them to do so.  According to the Federation for American Immigration Reform, illegal immigration costs state, local, and federal governments $45 billion to $55 billion per year.

Although the farm subsidies were originally intended to preserve small family farms, the primary beneficiaries of federal largesse are not these farmers, but large agribusinesses.  Nearly three-fourths of all subsidies went to the top 10 percent of agribusinesses in 2001.  For example, Arkansas Tyler Farms received $8.1 million in subsidies, 90,000 times the average payment of $899.  Several Fortune 500 companies like Chevron and John Hancock Mutual Life Insurance receive large sums.  These subsidies enable agribusinesses to buy out family farms or undercut them using economies of scale.  This produces what one government official has called “the plantation effect.”

In short, Americans are being taxed to make the rich richer and the poor poorer, at home and abroad, and to make themselves fatter besides.

President Barack Obama, in one of the few fiscally conservative things he has done, has advocated cutting these subsidies.  In his Fiscal Year 2010 budget, subsidy payments to farmers making over $500,000 per year are being phased out, as are subsidies for cotton storage.  The elimination of storage payments alone will save $570 million, while eliminating payments to high-income farmers will save $126 million.  Eliminating direct payments to farms with sales over $500,000 will save $9.765 billion, while abolishing federal payment of crop insurance premiums and underwriting gains and fees will save $5.184 billion.

The above figures do not include the reduction in health-care costs that the resulting price increases in soft drinks will entail, the reduction in foreign aid that the enrichment of countries whose agriculture we are destroying will make possible, and the reduction in the costs of illegal immigration.

Although both houses passed a version of the budget, Obama has faced resistance in his efforts to trim the fat in this department.  Those of us who believe in free trade, fiscal responsibility, and assisting the poor both here and abroad should write our representatives and the president to encourage them to reduce or eliminate agricultural subsidies.

Earlier versions of this column appeared in The Red and Black and The Griffin Daily News.

R/B: http://media.www.redandblack.com/media/storage/paper871/news/2005/11/14/Opinions/Farming.Subsidies.Create.Poverty-2569985.shtml

GDN:

http://www.griffindailynews.com/pages/full_story/push?article-Agricultural+subsidies+a+drain+on+budget%20&id=3312012-Agricultural+subsidies+a+drain+on+budget

Filed under: economics, personal health, poverty, taxes, , , , , , , , , , , , , , , , , , , , , ,

10 Responses

  1. […] European food despite their vastly lower labor costs. The subsidies make that happen. The subsidies make the poor outside this country poorer. And who in this country will advocate for […]

  2. […] European food despite their vastly lower labor costs. The subsidies make that happen. The subsidies make the poor outside this country poorer. And who will advocate for […]

  3. It’s in reality a great and helpful piece of information. I’m glad that you just shared this useful tidbit with us. Please keep us informed like this. Thanks for sharing.

  4. Yes! Finally something about financial advisor marketing plan.

  5. I am not sure if you are aware of this. I read a posting just like The Real Cost of Agricultural Subsidies | Seeking Liberty the other day on .
    .. crudly I can’t remember the resource site just now nevertheless it was also about the veronicas lyrics too. I will get back to you if it comes to me.

  6. Hi, I do believe this is an excellent site. I stumbledupon
    it ;) I may revisit yet again since i have book-marked
    it. Money and freedom is the best way to change,
    may you be rich and continue to guide others.

  7. young Adult says:

    We are a group of volunteers and opening a new scheme
    in our community. Your web site offered
    us with valuable information to work on. You have done a formidable job and our whole community will be grateful to you.

  8. Great work! This is the kind of info that are supposed to be shared around the internet.
    Disgrace on Google for no longer positioning this
    put up upper! Come on over and visit my site .
    Thank you =)

  9. 1 says:

    It is the best time to make some plans for the longer term and
    it’s time to be happy. I have read this put up and if I may I want to counsel you some attention-grabbing issues or tips. Perhaps you could write subsequent articles referring to this article. I want to learn even more issues approximately it!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: