FARMING SUBSIDIES
During the early 1930’s the government created a price minimum on farming goods. These price minimums were typically higher than the market prices because farmer’s incomes became too low. This was due to the fact that supply was progressing faster than demand, and because of technological innovations. In turn the government decided to pay a percentage of a farmer’s income every year or “subsidize” them. However, even though this was a good deal for farmers back in the day it may not hold as true today.
What are the pros and cons associated with this policy? Some people argue that government subsidies are a good thing because they help farmers maintain a stable income. Without subsidies there is not enough money generated from public demand of farming goods. Since the supply of farming products is growing much faster than demand for farming products, compared to historical averages, the overall income of farmer has decreased. On the other hand, many people argue farming subsidies are a bad government policy because only the small percent of the population are farmers. Back in the 1930’s almost 20% of the population were farmers so this policy made sense. However in the 21st century the percentage of farmers has dropped to 1%. Therefore why should the common taxpayer be liable for paying for only a small portion of the population?
While the opposition of government subsides on farming incomes bring up a good point, they sometimes forget to understand how important agriculture is to our nation. Despite the fact that a lot of our other consumption goods are outsourced, we are a major exporter of farming goods such as wheat and corn. And ultimately this brings up another big point. Even though the government subsidies are designed for all sizes (net income) of farms, the distribution of wealth is uneven. For example even though small farms (incomes less than $15,000) make up about 70% of the total farms they only receive about 30 % of the government’s money. Yet, big farms (incomes more than $50,000) that make up 20% of the total farms receive about 30% of the government’s money. That does not seem exactly right. So why does this occur?
The general theory behind this is that big farms that make corn and other products such as meat are what really fuel the industry, specifically the fast food industry. Big corporations such as McDonalds and other fast food places are the buyers of the big farm products. These companies in turn will lobby to congress to keep these large subsidies for big farmers. In turn the American taxpayer will be forced to keep fueling what they cannot directly perceive.
Ultimately did the price minimum and subsidies really help solve the problem of equality of price between farm goods and other goods? Today the parity price ratio is about .6 so other goods are on average more. Then why do we still these? It is because of the farming industry is now more about helping big name corporations than helping the little guy.
What are the pros and cons associated with this policy? Some people argue that government subsidies are a good thing because they help farmers maintain a stable income. Without subsidies there is not enough money generated from public demand of farming goods. Since the supply of farming products is growing much faster than demand for farming products, compared to historical averages, the overall income of farmer has decreased. On the other hand, many people argue farming subsidies are a bad government policy because only the small percent of the population are farmers. Back in the 1930’s almost 20% of the population were farmers so this policy made sense. However in the 21st century the percentage of farmers has dropped to 1%. Therefore why should the common taxpayer be liable for paying for only a small portion of the population?
While the opposition of government subsides on farming incomes bring up a good point, they sometimes forget to understand how important agriculture is to our nation. Despite the fact that a lot of our other consumption goods are outsourced, we are a major exporter of farming goods such as wheat and corn. And ultimately this brings up another big point. Even though the government subsidies are designed for all sizes (net income) of farms, the distribution of wealth is uneven. For example even though small farms (incomes less than $15,000) make up about 70% of the total farms they only receive about 30 % of the government’s money. Yet, big farms (incomes more than $50,000) that make up 20% of the total farms receive about 30% of the government’s money. That does not seem exactly right. So why does this occur?
The general theory behind this is that big farms that make corn and other products such as meat are what really fuel the industry, specifically the fast food industry. Big corporations such as McDonalds and other fast food places are the buyers of the big farm products. These companies in turn will lobby to congress to keep these large subsidies for big farmers. In turn the American taxpayer will be forced to keep fueling what they cannot directly perceive.
Ultimately did the price minimum and subsidies really help solve the problem of equality of price between farm goods and other goods? Today the parity price ratio is about .6 so other goods are on average more. Then why do we still these? It is because of the farming industry is now more about helping big name corporations than helping the little guy.