With the upcoming election on the horizon, I have heard a lot of discussion about our tax situation in the United States. But being the uninformed college kid that I am, I was not too concerned about this topic-until one day in my Fundamentals of Economics class. While sitting there a couple of weeks ago, I learned about the effects of rationing during World War II. What was most informative about the lecture was how corporate farmers and agribusinesses received more government money than smaller farms. That didn’t seem fair at all. Why did big farmers get more money than the little guy?
Back in the 1930’s the American government tried to raise the incomes of farmers. In order to do so the Government created a minimum price that consumers would have to pay for farming goods to ensure that the producers did not lose money. In doing so the demand for farming goods decreased and caused excess supply and loss of profits. To counteract, the government was forced to buy up a farmer’s entire excess crop. This wouldn’t necessarily be harmful if the government had a limitless amount of money, but unfortunately it is the taxpayer who ends up paying for the excess demand.
This type of system would work if the subsidies were based on incomes of farmers, but it’s not; it’s based on output. This means the government pays more to corporate based farming than independent farmers. Furthermore, while some people may argue that we should pay for the crops of all American farmers, I completely disagree. For one, farmers make up only one percent of the nation’s population. If it were 1930, I would completely agree that we should subsidize all our farmers since the industry was so significant, affecting almost 30% of the entire United States population. It would be an economic nightmare for almost a third of the country to not be able to make ends meet. But now this is not the case now and this legislation is taking money away from the consumer.
However, the most important reason why we should not subsidize farmers is because of corporate farming. Corporate farmers are large-scale or farming businesses that make an annual revenue of 500,000 dollars or more. Even though these types of farms only make up approximately 1% of farms in America they collect almost 12% of total government payments; they collect money almost ten times their numbers. Where as smaller farmsteads, that make sales less than $250,000, make up more than 60% of all farms only collect 15% in farm subsidies. Furthermore, these types of farms only have average net revenue of $2,500. But why do farming businesses with such large budgets still collect more government money compared to a small end farmer? This is because the government subsidies are meant to subsidize production, not people. The more production output the more money you get, the less production input the less you get. If this was not the case, the government would subsidize incomes not output.
I recognize that I am not in a farmer and situations can be hard to understand. Regardless it must be understood that we are not in an emergency that calls for the need of government interaction in a market. Once the government is involved, it can be very hard to make remove it. Although, I do not propose that we completely take farmers off government subsidies but rather wane them off the money a little bit each year for a span of year. And this is exactly what the Freedom to Farm Act tried to accomplish in 1996. This legislation was meant to completely dismantle the government’s farm price support system over a seven year period. However, it was quickly replaced by two acts that further increased the money given to farmers. This is not the way to solve a problem that was initially designed to help America’s farmers.
While agriculture is an important aspect of American culture and history it is currently causing our nation to suffer. Even though these subsidies helped farmers in the past it is only allowing farming corporations to benefit. The government needs to understand that by reducing farmers dependence on government money they will help promote perfect competition in todays market. Furthermore while it may seem better to promote production rather than income in our growing society, we should try to help our struggling farmers. Otherwise our nation will truly be in a debacle.
Back in the 1930’s the American government tried to raise the incomes of farmers. In order to do so the Government created a minimum price that consumers would have to pay for farming goods to ensure that the producers did not lose money. In doing so the demand for farming goods decreased and caused excess supply and loss of profits. To counteract, the government was forced to buy up a farmer’s entire excess crop. This wouldn’t necessarily be harmful if the government had a limitless amount of money, but unfortunately it is the taxpayer who ends up paying for the excess demand.
This type of system would work if the subsidies were based on incomes of farmers, but it’s not; it’s based on output. This means the government pays more to corporate based farming than independent farmers. Furthermore, while some people may argue that we should pay for the crops of all American farmers, I completely disagree. For one, farmers make up only one percent of the nation’s population. If it were 1930, I would completely agree that we should subsidize all our farmers since the industry was so significant, affecting almost 30% of the entire United States population. It would be an economic nightmare for almost a third of the country to not be able to make ends meet. But now this is not the case now and this legislation is taking money away from the consumer.
However, the most important reason why we should not subsidize farmers is because of corporate farming. Corporate farmers are large-scale or farming businesses that make an annual revenue of 500,000 dollars or more. Even though these types of farms only make up approximately 1% of farms in America they collect almost 12% of total government payments; they collect money almost ten times their numbers. Where as smaller farmsteads, that make sales less than $250,000, make up more than 60% of all farms only collect 15% in farm subsidies. Furthermore, these types of farms only have average net revenue of $2,500. But why do farming businesses with such large budgets still collect more government money compared to a small end farmer? This is because the government subsidies are meant to subsidize production, not people. The more production output the more money you get, the less production input the less you get. If this was not the case, the government would subsidize incomes not output.
I recognize that I am not in a farmer and situations can be hard to understand. Regardless it must be understood that we are not in an emergency that calls for the need of government interaction in a market. Once the government is involved, it can be very hard to make remove it. Although, I do not propose that we completely take farmers off government subsidies but rather wane them off the money a little bit each year for a span of year. And this is exactly what the Freedom to Farm Act tried to accomplish in 1996. This legislation was meant to completely dismantle the government’s farm price support system over a seven year period. However, it was quickly replaced by two acts that further increased the money given to farmers. This is not the way to solve a problem that was initially designed to help America’s farmers.
While agriculture is an important aspect of American culture and history it is currently causing our nation to suffer. Even though these subsidies helped farmers in the past it is only allowing farming corporations to benefit. The government needs to understand that by reducing farmers dependence on government money they will help promote perfect competition in todays market. Furthermore while it may seem better to promote production rather than income in our growing society, we should try to help our struggling farmers. Otherwise our nation will truly be in a debacle.