Thursday, May 15, 2008

More Farm Subsidies that Rip of the Tax Payer

Yesterday the U.S. House passed a 290 billion dollar farm bill that will continue the long tradition of farm bills that benefit farmers at the expense of the vast majority of the tax paying public. The bill includes 43 billion dollars in subsidies for crops like rice, wheat, cotton, corn, soybeans and others. Agricultural subsidies do not benefit the general public and only benefit the people who receive the subsidies everyone else ends up paying more through taxes. Agricultural subsidies also create distortions in the market so that the prices that people pay for farm products at the stores no longer represent the true price, as they are paying a hidden cost and farm production no long represent what production would be in the free market. Agricultural subsidies lead farmers to over produced farm products which keep store prices artificial low, but not the true prices since people still pay them through taxes, the only difference is that they no longer have the ability to easily base their purchasing decision off the true prices. Also over production caused by government subsidies leads to the over the use of farm land, fertilizer and pesticides/herbicides, which harms the environment.
Along with that the bill would encourage the government to buy "surplus" sugar and sell it to ethanol producers. The problem with this is that if their is "surplus" sugar on the market, it means that sugar farmers are producing more sugar than can be sold on the market for the given price and prices should fall to reflect the other production, or production should fall to bring the market into balance and with out government intervention that is what would happen. With the government buying up "surplus", sugar prices will stay artificially high meaning that the public will be paying more for sugar and products that contain sugar than they would with out government intervention.
The bill also contains 23 billion dollars in crop insurance, while crop insurance is a good thing for farmers, it is something they should pay for themselves the same way that most, if not all other businesses, pay for their own insurance. Their is no reason that farm product insurance can not be handled by the commercial insurance market or risk managed using the future market, yes it would cost farmers more but it is a cost of business that is faced by most if not all other businessmen and should be paid for by the tax payers.