Are US Farmers the Real Welfare Kings and Queens?

Decades of farmer legislative success have made producers in many agricultural segments into lieges of the state. While farmers have no problem getting a fill suckling on the teat of government subsidies, these same farmers think it is un-American for poor people (especially Black ones) to get similar government help.

I won’t waste space calling for an end to farmer welfare programs. Presidents Ronald Reagan and Bill Clinton, the two most popular presidents in the last 70 years, (measured by end of term Gallup job approval ratings) both  put a great deal of effort into reining in these programs. They failed miserably.

Farm subsidy payments ballooned under Donald Trump. Between 2019 and 2020, total direct government payments to farmers increased  over 107 percent. In 2020, direct government payments to farmers set a new record $51.2 billion, or 43.8% of net farm income (also a new record). The subsidy payments are just the tip of the support farmers get from the government.

Note: To be fair, part of the reason for the 2020 record is because of the impact Trump’s disastrous trade war had on farm income. Trump’s trade war was just one of the avoidable and continual disasters that marked  Trump’s presidency. Fairness or un-fairness of trade agreements have absolutely no impact on trade balances. The difference between a country’s exports and imports always equals that country’s net national savings. https://www.frugalron.com/the-curse-of-liberalism/

Trump gave us real world proof of the futility of a trade war by having the second largest trade deficits in US history (second only to  Republican President George W. Bush).  Many other industries suffered because of Trump’s trade war fiasco, but they didn’t get huge subsidies to bail them out like farmers did.

Slogans like “Don’t complain on a full stomach” are just fine on a pickup bumper, but don’t stand up to real scrutiny when talking about farmer welfare payments. Somehow, products like meat, potatoes and eggs miraculously make it from farm to market without government help (with the exception of grading and health inspections). Highly perishable products like fruits and vegetables also rely on market forces to set prices and get them to the grocery store with little or no government interference.

Many countries around the world manage to get farm products to market by relying on good old fashioned capitalism. These countries do this in spite of the international market distortions caused by US farm programs. The reason the US has an abundance of food is because we have terrific soil , climate, infrastructure and technology – not because of farmer welfare payments.

Let’s look at the gravy train…

The core of US farm programs are support for corn, soybeans, wheat, rice and  cotton. The Commodity Credit Corporation (CCC) loan programs guarantee farmers loans for all the covered grains they produce. The per bushel price may be higher than the market price. The interest rate is subsidized. Next, the Price Loss Coverage Program guarantees farmers a “Target price” for their grain or cotton. If the average market price over the year is below the target price, farmer’s get a check for the difference. Livestock producers that market all their grain through their livestock also collect this subsidy.

As any conservative capitalist will tell you, “The best cure for low prices is low prices.”  The market distorting government programs provide price floors for farmers protecting them from the full impact of supply and demand driven price drops.  No other industry in our capitalistic economy gets these protections. 

If the above sounds like a “Minimum Wage” program, you are catching on. The only differences are target prices are updated every four years and are much more generous than minimum wages.

Besides eliminating a good chunk of price risk for farmers, the government also subsidizes crop insurance for them in case of poor yields. Depending on the level of coverage, this insurance is subsidized from 38-80 percent of actual cost.

To Republicans, when farmers get highly subsidized price insurance, that is part of the “Farm Safety Net”.  If a low income Black person gets government subsidized health insurance, that is socialism.

Ethanol

The Renewable Fuel Standard mandates gasoline and diesel producers  blend renewable biofuels into their supply. In 2022, the law mandates blending 36 billion gallons of ethanol. This represents an amazing 40 percent of the corn grown in the US. Biofuel producers also receive tax credits to subsidize production.

For a group of people that are absolutely opposed to government mandates, farmers conveniently look the other way when government mandates the gasoline industry use 36 billion gallons of ethanol annually. Consumers certainly don’t seem to want the stuff, based on huge billboards advertising “ethanol free gas”.

Farmers claim accurately that ethanol helps the US maintain energy independence while creating less greenhouse gasses than gasoline. Yet, when farmers and Republicans are confronted with President Joe Biden’s “Build Back Better” act that will make a far bigger impact on energy independence and lowering greenhouse gas emissions than ethanol, all  the concern about energy independence and climate change disappears.

It is interesting that Biden’s plan includes$320 billion for clean energy tax credits, $105 billion for resilience investments, $110 billion for clean energy technology, manufacturing, and supply chain investments and incentives, $20 billion for clean energy procurement and $960million to retrofit fuel storage to handle bio-fuels. Biden’s bill does not include any mandates.

By 2035, auto makers claim they will no longer produce gasoline powered cars. Bet the farm on this. Republican farmers, who regularly complain that government can’t do anything right, will be demanding that government come up with a solution for what to do with all the millions of bushels of corn now used for ethanol.

The ethanol mandate highlights even more hypocrisy. The federal government often requires its suppliers hire a workforce that is representative of the population where the company is located. Government might also mandate their employees get vaccinated  to protect themselves and other employees from dangerous diseases.

To most farmers, forcing private companies to hire more Black people or women is extreme government over-reach, socialism or for sure – communism! As well, most farmers agree that mandating protections from disease are infringements on basic liberties.  However, if government mandates 36 billion gallons of ethanol on a public that doesn’t want it, well, that of course, is completely different.

In fact, it isn’t at all different. It is hypocrisy to embrace one government mandate that gets rid of 40 percent of the corn grown in the US while criticizing other government mandates that improve and protect lives.

Milk

Socialism has many faces. One of them is certainly Federal Milk Marketing Orders (FMMOs). Only a few people claim to actually understand these voluminous tomes to bureaucracy – and most of them are lying.

About 75 percent of milk produced in the US is marketed through FMMOs. They are designed to get dairy farmers a “fair” value for their milk. For capitalists, and most non-agricultural producers, a fair value is a market clearing value and doesn’t have any government involvement.  These rules involve the federal government in farm milk price discovery and the FMMOs also stifle competition. But wait, isn’t that socialism?

Sometimes it takes more than subsidies.

If the “fair” value of milk established by the FMMOs isn’t enough, dairy farmers can also use the Dairy Revenue Price Protection Program to buy price insurance. The federal government subsidizes the insurance from 44 to 55 percent based on the level of coverage.  So, one might ask, “If dairy farmers are for government subsidized price insurance, what is so different for working poor people getting government subsidized health insurance?”

So, taxpayers are funding FMMOs to keep consumer milk prices higher than they would otherwise be. At the same time, taxpayers are heavily subsidizing price insurance for a group of people who are vehemently against tax payer subsidized health insurance for poor working people.

Unfortunately for dairy farmers, FMMOs and the army of bureaucrats that administer them can’t completely isolate farmers from market forces. Consumers have discovered they can drink almonds. The dairy alternatives market was valued at $22.6 billion in 2020 and is projected to reach $40.6 billion by 2026.

For some struggling dairy producers, the solution is more government in the form of federal government mandated milk prices and production quotas. The late Soviet dictator,Joseph Stalin,   would be so proud.

Sugar

While corn, soybean, rice, cotton and dairy farmers make a mockery of free market capitalism, they are in the minor leagues compared to sugar producers.

Most US sugar comes from sugar beets produced in the Red River Valley in northwest Minnesota and eastern North and South Dakota.  Sugar beets are the most inefficient way to produce sugar and can’t compete with imported cane sugar. Having worked in the Red River Valley, I can tell you there is no money in farming like sugar beet farming.

Sugar producers use government enforced import quotas to stifle foreign competition. Then, they formed a cartel and use market quotas to further stifle competition. Rather than letting government set prices and quotas like dairy farmers propose, the sugar producers get away with doing this themselves.  Analysts at the American Enterprise Institute estimate these policies inflate U.S. sugar prices by 69 percent above the global sugar price and provide $1.2 billion worth of annual support to sugar growers and processors. This makes sugar the fourth most subsidized crop in absolute terms.  americanactionforum.org/…/primer-agriculture-subsidies-and-their-influence-on-the-composition-of-u-s-food-supply-and-consumption

According to the CATO Institute, “The U.S. sugar program is a prime example of discredited economic central planning in action.” https://www.cato.org/policy-analysis/candy-coated-cartel-time-kill-us-sugar-program

This is just another example of the hypocrisy among the same farmers that decry policies that help poor people as socialist.

What do these subsidies and anti-capitalistic programs accomplish?

Economists say  excess profits are capitalized into the factors of production. In other words, farm subsidies and protections from market forces jack up land prices. These excess profits are not distributed evenly. With or without the farm welfare programs, there is a bell shaped distribution of profits among farmers. Lots of producers are in the middle range with some very profitable and some very unprofitable operators on each side.

The subsidies and market distortions contribute to the concentration of larger farms. These programs supercharge the earnings of the most profitable operators. Profitable operators will expand to maximize profits. At the same time, these programs have raised land prices far above where they would otherwise be. This is a powerful incentive for less profitable operators to sell out. Who wants to work 16 hour days, seven days a week when you can sell the farm and be an instant millionaire?

Also, these programs are self perpetrating. A farm bill is passed and raises land prices. Four years later a new farm bill will be passed by – you guessed it – congressmen from districts heavily populated by farmers. The lobbyists will tell the legislators that land prices and rents have risen dramatically since the last bill was passed. The only solution is to raise loan rates, target prices and all the rest to higher levels. And, the cycle repeats again.

I should admit that during Frugal Ron’s 12 plus year farming career, I maximized every farm program available. However, I always looked at them as glorified welfare programs and never looked down at government programs for poor people that needed more help than I did. Again, that is what this article is really about. Farm programs are here to stay. The point I’m trying to make is farmers should not be against government programs that help poor people achieve basic human needs while gobbling up every farm welfare dollar available themselves.

White privilege

It is worthwhile to try and understand the impact of White privilege in agriculture and how this relates to the dichotomy of the money and special protections White farmers get.

There are very few first or second generation US farmers. Frugal Ron can attest to how difficult it is to make it as a farmer when paying market rates for land, machinery and cattle without substantial off-farm income. Most farms are multi-generational enterprises, and there is good reason for that.

One of President Franklin  Roosevelt’s New Deal creations was the Farmers Home Administration (FmHA) loan program in the 1930’s. FmHA gave aspiring farmers low interest, long term loans to buy foreclosed or abandoned farms, usually with no money down. Men with families that got one of these loans usually got a draft deferment and didn’t have to fight in WWII.  Commodity prices were very high during the war and shortly thereafter, enabling many of these farmers to pay their loans off early.

If you Google “fmha discrimination lawsuits”, there is a long list. I can relate to the discrimination. My father was the most blatantly racist and anti-Semitic person I’ve ever known. And, he was an FmHA loan officer for over 30 years.  While I don’t expect he ever got to turn down a Black farmer’s loan application in west-central Wisconsin, his being able to hold his position in FmHA for as long as he did speaks volumes about the culture of the organization from the 1930’s into the 60’s. The kinds of opportunities FmHA provided, or more importantly, didn’t provide, shaped the agriculture we see today in the US. FMHA discrimination is a major reason there are so few Black farmers.

These opportunities are important. In my lifetime in agriculture, I never met a US Jewish farmer. Yet, in Israel, they are the world’s most productive and efficient producers.

The net result of this is that almost all of today’s multi-generational farmers have never have had to fill out a job application. They never had to worry about getting laid off. Or, if their car didn’t start in the morning, getting fired for being late to work.

If they are good at what they do, farmers make phenomenal amounts of money. If they aren’t good managers, unless they really screw-up, they can sell out and be very wealthy. This is an example of White privilege that most Black people can only dream about.

This helps to explain why a Farm Journal poll in January 2019 found that Donald Trump had an 83 percent approval rating among those in the agricultural business. This wasn’t just due to the massive subsidies Trump bestowed on farmers. During the height of Trump’s disastrous trade war, when dairy farmers were dropping like overweight old people in a hot yoga class, Trump’s farmer approval rating was still over 80 percent. These numbers are double what Trump’s overall job approval rating  averaged through his term.

I use Trump’s approval rating or vote percentage as a proxy measure for racism. This is an accurate measure. Because of Trump’s unique level of stupidity, he is the only president in US history that mucked up everything he touched. His presidency is remembered for hundreds of thousands of un-necessary COVD deaths, record setting job and GDP destruction, record setting deficits and percentage spending increases, over 16,000 lies and attempting to overthrow our electoral democracy. Details and data sources are at  https://www.frugalron.com/the-trump-disaster/

While Trump is a fake conservative, a fake billionaire and a fake Christian, there is no denying he is a genuine racist. Looking at the results of Trump’s presidency,  the only reason anyone would ever want him back is that they share his racism. Hence, I find Trump’s popularity rating as an excellent measure of that group’s racism.

Racism and White privilege’s impact

Nothing gets farmers more defensive than talking about their subsidies. Typically, farmers will justify these government handouts by saying that farmers work really hard and that they need them. No argument here on either point.

However, when Obamacare, housing subsidies or food stamps are brought up, these are totally different. Pollsters won’t get this response, but someone very involved with agriculture will get an unvarnished answer along the line of “Niggers just sit on their asses all day and never do any work. They just sit around doing drugs and collecting welfare.” Ask one of these farmers if they’ve ever known a Black person and you’ll get an answer like, “I know all about them.”

Republicans also are sure that safety net programs for poor people are just a waste of money. On this point also, they are very wrong.

According to David L. Kirp, a professor of public policy, “Half a century ago, 123 three- and four-year-olds, all of them African American and all from low-income families who lived on the wrong side of the tracks in Ypsilanti, Mich., participated in an experiment. About half attended a pioneering early education program called Perry Preschool, while the control group did not have the same opportunity. Remarkably, researchers have been able to track the lives of most of these children ever since. The fact that lifelong benefits — including greater academic success, higher earnings and better health — began with two years of high-quality preschool has commanded widespread attention.”

“A study published this summer by Nobel Prize-winning economist James Heckman and his colleagues takes the implications of Perry a giant step further. This research demonstrates that the children of the Perry preschoolers are also better off because of their parents’ experience.”

“As the Perry preschoolers grew up, they became better educated and developed greater socio-emotional skills than the control group. They became better parents — their children grew up in more stable two-parent families that earned, on average, about $10,000 more a year — enough to lift many of them out of poverty.”

This healthy upbringing has had a prolonged impact on the children of the Perry preschoolers. Compared to the offspring of the control group, they were substantially less likely to have been suspended or assigned to special education, and more likely to have graduated from high school. Now in their 20s, they’re more likely to have jobs and be in good health and less likely to be divorced.

The bottom line: Good early education accelerates upward social mobility across generations.

Another point, “expanding Medicaid eligibility for low-income families. In a recent American Economic Review article, Andrew Goodman-Bacon, an economist at the Federal Reserve Bank, concludes that, as much as a half-century later, early childhood Medicaid eligibility reduces mortality and disability, increases employment and improves health. Since its inception in the 1960s, “Medicaid has saved the government more than its original cost and saved more than 10 million quality adjusted life years.”

“Another study has found that when the children who grew up in Medicaid-eligible households were in their 20s, they were more likely to have gone to college than those whose families, despite their similar economic circumstances, had the misfortune of living in a state where their families were not eligible for Medicaid. Now they are earning more and paying more taxes.”

“Critics have used the Supplemental Nutrition Assistance Program (SNAP) as a punching bag, the nanny state exemplified, ever since the passage of the Food Stamp Act in 1964. This critique is flat-out wrong. A 2018 report by the Center on Budget and Policy Priorities concluded that SNAP has helped to dramatically reduce child poverty and that twice as many children would live in deep poverty without the program.”

“Recent research shows that the food stamp program has had a decades-long effect on the health, economic self-sufficiency and the overall well-being of children who came of age in those families. These children are more likely to graduate from high school and enroll in college, earn more and stay out of prison.”

Summing up…

The image of all farmers being rugged individualists that are the American dream of entrepreneurial independence is a myth. Crop, dairy and sugar farmers are essentially wards of the federal government. They owe their existence to federal handouts, mandates and federal protections from capitalism, competition, weather and market forces. This isn’t opinion, this is fact.

It is ridiculous to ask that these farmers just be more responsible and work a little harder and  that they will miraculously break away from their government dependence. Yet, these same farmers need to recognize that the same advice is equally ridiculous for most low income Black people that weren’t born with the same opportunities multi-generational farmers were born with.