The ‘reverse Robin Hood effect’ of farm handouts

By Daren Bakst | The Daily Signal

The federal government takes the hard-earned money of taxpayers and gives handouts to farm households that generally make a lot more money than they do.

This wealth transfer subsidizes the $15 billion “safety net” for agricultural producers, which ostensibly exists to help these businesses address agricultural risk.

The U.S. Department of Agriculture recently released a report that shed light on this reverse Robin Hood effect.

The numbers are staggering. According to the Department of Agriculture, the median income for farm households that received commodity subsidies and crop insurance indemnities were both about $145,000 in 2015. That’s far more than double the median income of all U.S. households (about $56,000).

“In 1991, half of commodity-program payments went to farms operated by households with incomes over $60,717 (in constant 2015 dollars),” the USDA explained. “However, in 2015, half went to households with incomes over $146,126.”

There are similar trends when looking at the distribution of handouts in terms of the gross cash farm income of farming operations. For example, in 1991 and based on 2015 dollars, family farms with gross cash farm income greater than $500,000 received 25.5 percent of commodity payments. In 2015, they received 56.7 percent.

When compared with the past, these subsidies, far more than before, are going to the most prosperous farm households and farm businesses. Certainly, more production does come from larger operations than in the past, but this only explains the distribution of the subsidies. It does nothing to justify the scope or reasons for this massive wealth transfer.

The claim can’t even reasonably be made that the money has to be provided to help the agricultural sector with risk, because most agricultural production receives a small amount of subsidies. The reality is that almost all subsidies go to a small number of farm businesses, primarily the largest producers, who grow a small number of commodities.

There are, in effect, two farm safety nets in the United States. One safety net applies to most agricultural production. Based on a Congressional Research Service report, about 75 percent of agricultural production receives little in the way of subsidies. Further, any assistance that is provided generally helps farmers when they experience disasters and crop losses.

Then there’s the “crony safety net.” The Congressional Research Service points out that almost all of the farm program support (94 percent) goes to just six commodities (corn, wheat, soybeans, cotton, rice, and peanuts).

These six commodities account for just 28 percent of all agricultural production. In other words, almost all of the farm handouts are going to a small subset of agricultural producers for no logical reason.

It gets worse, though. The crony safety net isn’t focused on crop losses and disasters. Instead, it is primarily focused on helping these favored farm businesses with meeting revenue targets and making sure they don’t have to compete in the marketplace like other businesses—including most other farm businesses who also face agricultural risks.

If this weren’t bad enough, the crony safety net is duplicative, providing these farm businesses with more than one way to get taxpayer subsidies when they don’t make as much as they hoped.

Congress should put an end to this crony safety net. If there’s to be any safety net, it should at most provide assistance when there are major crop losses and disasters.

Such a system would minimize the reverse Robin Hood problem. The costs to taxpayers would be far less than they are today, and taxpayers wouldn’t be handing over their money just to help large farm businesses meet their financial bottom lines.

Image courtesy of Wikimedia Commons/Gilles San Martin