The real cost of agricultural subsidization

By Nick Obradovich

Have you ever been to the Midwest and thought highly of the rustic cornfields that stretch as far as the eye can see? Have you ever been tantalized by the notion of "corn-fed beef"? And, if so, have you ever pondered the absurdity of it all?

Why do American farmers grow 67 million acres of corn each year, sell it below the cost of production and plant it again the next year? Why is corn-fed beef (as ruminants, cows naturally eat grass and have numerous afflictions when fed corn) considered a delicacy?

The answer: corn is one of the five main agricultural products heavily subsidized under the U.S. Farm Bill.

Agricultural subsidization is defined as the practice of giving governmental financial support to farmers to supplement their incomes, guarantee product supply level and/or maintain price stability. For a number of reasons, subsidization has been an influential part of U.S. agricultural policy for over 70 years.

Early on, subsidies were used to maintain higher, stable prices, so that poor farmers during the Great Depression could stay in business and provide the country with food. Now, subsidies are used to keep the prices of corn and other products artificially low.

Today, the price of a bushel of corn is about a dollar beneath the true cost of growing it, according to Michael Pollan, the author of "The Omnivore's Dilemma."

There are a few generally cited (but flawed) reasons for policies of agricultural price support. The first is that subsidized corn leads to cheap food for consumers and leaves them with more purchasing power for other goods.

Yet, government subsidies come from you and me, the taxpaying consumers. We pay large sums of money, through our tax dollars, to maintain the artificially low price of corn.

According to Daniel T. Griswold, director of the Cato Institute's Center for Trade Policy Studies, "during the past 20 years, farm programs have cost America's non-farm households a cumulative $1.7 trillion. That is how much non-farm households would have in the bank today if they had been allowed to save and invest what they have been forced to surrender."

Apparently, cheap commodity prices aren't really all that cheap.

The second argument farm subsidy advocates cite in support of their cause is that these policies provide pastoral family farms with the welfare needed to survive.

This argument is also flawed. For one, according to USDA income statistics, the vast majority of farming in the United States today is no longer conducted by small, low-income families, but by wealthier families and large agribusinesses on a massive, industrial scale.

In addition, even if these subsidies were intended for the benefit of low-income family farmers, the policy of using taxpayer dollars to keep afloat inefficient industries in which we lack a comparative advantage is simply wasteful.

The third, and possibly most utilized argument, is that subsidies are needed to keep agricultural production domestic in the interest of national security.

The faults in this argument are twofold. First is the assumption that a removal of subsidies will shift all agricultural activities abroad. In fact, two-thirds of American farmers currently produce for the market without government support and would remain domestic even with the removal of agricultural subsidies.

Moreover, subsidies could actually be detrimental to national security. By keeping the price of certain products, like corn, artificially low, America forces farmers in developing countries, who otherwise would have comparative advantage, out of business.

Agriculture is one of the few industries in which developing countries can compete in the global market, and our subsidies are crushing their chances. It's fairly obvious that continued global poverty is detrimental to U.S. national security.

The benefits of farm subsidies seem to be superficial and are, perhaps, completely nonexistent. The costs, however, are all too real.

Why is the U.S. one of the first nations in history to have high obesity rates positively linked to poverty? Again, the answer is partially related to the artificially cheap price of corn.

Sugars derived from corn are cheap and abundant, as are the empty calorie foods that these sugars are used in. When eating on a strict budget, as many poor U.S. citizens do, it is simply more cost-effective to buy a two-liter bottle of Coke than a pack of carrots.

I have briefly summarized many of the arguments for subsidies. It is clear, however, that farm subsidies have cost U.S. taxpayers too many trillions of dollars and have long outlived their usefulness. It is finally time for them to go the way of the U.S. small-farm owner.

Nick Obradovich is a sophomore economics and environmental studies double major.