Farm subsidies, huh, yeah

What are they good for? Absolutely nothing.

A few thoughts on an editorial in Wednesday's USAToday (HT: CFG).

First of all, I don't like subsidies. I hate that Romney said he supported them and I like that McCain (I think) said he didn't. I think they distort the market for food, not only in the US but also throughout the world. We're essentially paying higher taxes (the subsidy money comes from somewhere, right?) for the right to pay less for our food (subsidies create incentives to stay on farms and produce more food than you would have otherwise, therefore increasing supply and decreasing prices). But these lower food prices (again, because of the increased supply) make competition from foreign farmers difficult to impossible because they aren't getting subsidies. This means that they now have to find some other means to make money and feed their families or just return to their abject poverty. All because we wanted to protect the jobs of a few farmers.

But, you say, food prices are skyrocketing. How can that be? Well, because the government is heavily subsidizing many of the green energy technologies, like ethanol, there is also high demand for crops such as corn. (In other words, in order to feed my son the corn on the cob he so loves, I'm competing with the ethanol producers to buy that "next" ear of corn. Our competition has the effect of bidding the price up.) In order to meet this significantly higher demand, government needs to further subsidize corn, which creates more incentives for farmers to continue to grow corn. Now we're making more corn that we would need in the absence of subsidies. But, we only have so much land that can actually grow these crops, so this competition for crop-friendly land pushes the prices of farmland higher, making the cost of being a farmer, whatever you decide to grow, more expensive. Further, because more people are growing corn to meet the increased demand for corn from ethanol producers, fewer people are growing wheat or barley or hay (or chickens, cows, and pigs). With fewer people producing these goods, supply goes down and pushes their prices up. Voila! We now have higher prices on every aisle at the grocery store.

But back to the article. The point of the article is to discourage subsidies, but I don't agree with a couple points.

1): "Government has a role in helping farmers through bad times, and it shouldn't base farm policy solely on today's prices, which could plummet down the road, as they have before."

As you can guess, I don't necessarily agree with this statement. First of all, if it feels it should help any farmer through rough times, why not help all farmers through rough times, regardless of who owns the farm and what crops they grow. This obviously isn't the case. (The article actually mentions this later.) Second, why just farmers? Why not expand it to accountants, telemarketers, and software developers? All of us are in careers that could easily lose out to competition?

2): "Almost two-thirds of those subsidy dollars go to the wealthiest 10% of farmers, including big agribusiness outfits that ought to be able to prosper without government handouts."

Even though the ends of this argument are laudable, I still don't like it. Again, why should it matter who owns it? Is the point of subsidies to protect our food supply or to protect the farmers (and our romance with working on a farm)? My guess the argument for subsidies is a little bit of both. The argument against doesn't care about either as they're both bogus. It distorts the reason subsidies are bad. The only advantages big, corporate farms have over small, family farms are economies of scale and diversity (they can invest in a more diverse selection of farm locations or crops than a smaller farmer). Should we reward the family farm because it isn't as productive or diverse as the corporate farm? At the end of the day, it takes people to work on a farm and it takes people to own a farm. If either the family farm or the corporate farm goes under, people will lose their jobs and people will lose their investments. Why should it matter who?