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Thursday, December 01, 2005

 

Corporate Welfare

Agriculture is one of the most interfered-with industries on earth. Across the world, government subsidies wreak havoc with farm economies. Though we haven’t made much progress in eliminating the payments, this concept is increasingly understood by Americans. Many people believe that the low income of farm families justifies farm subsidies. But in reality most of the subsidies go to large farms and big agricultural businesses. Recently President Bush said that the U.S. would eradicate its farm subsidies “as other countries do the same.” I would like to know what is preventing him in the first place. Eliminating these subsidies would save tax payers money, lower the cost of food, encourage international trade and lower global poverty, as well as promote increased domestic production. What’s less appreciated is that subsidies also cause environmental problems. By encouraging the cultivation of unneeded marginal land, overuse of scarce environmental resources, and increased use of chemicals, farm subsidies harm the land as well as consumers.

The government spends $9.3 billion dollars a year on farm subsidies. Apart from the apparent burden on tax payers, it hurts Americans in a number of other ways too. The Organization of Economic Cooperation and Development estimated that in 2004 government subsidies cost the country $46 billion dollars a year through direct taxation coupled with the high domestic food prices brought on through the tariff quotas that kept lower priced foreign food out. Cutting these subsidies would save a lot of tax payer’s money, like 9.3 billion a year, and would lower domestic food prices, especially helping lower income families that spend a higher portion of their budget on food. By abolishing these subsidies we would rely more on foreign produced food. We would then be able to save $46 billion dollars a year through cheaper food from international trade along with the money we would save in taxes. Also, many farmers from poor countries would be able to raise their incomes, and this would be a significant step to ease tension between third world countries and the U.S.

 

Lastly, by supporting prices above the market-clearing level, governments encourage farmers to expand production. Agricultural subsidies that stimulate larger production further increase the tax burden to consumers, and impede international trade. In some cases the government actually pays farmers to not produce their maximum through deficiency payments. This program encourages farmers to intensify production and to plow up more land, often highly erodible, to qualify for larger government deficiency payments. These practices would be reduced, along with the use pesticides and chemicals, if subsidies were eliminated.


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