Organized Crime

In 1996 President Bill Clinton signed into law a “freedom to farm” bill that was supposed to end most farm subsidies. At the time, the primary form of farm subsidy was price supports—price floors that are forcefully imposed by the state that are above free-market prices.

Ending price supports would certainly allow agricultural markets to work more efficiently, but it is rare indeed—and a bit odd—to observe government voluntarily ending a subsidy program that benefits a powerful political constituency, namely, wealthy corporate farmers. The reality is that the subsidies did not end; they just took on a different form.

A principle of public choice economics is that politicians will always do all they can to disguise subsidies to less-than-meritorious groups, such as millionaire corporate farmers. If they can subsidize them through protectionism, or price supports, this is much preferred than simply writing the millionaire businessman a check. The latter policy would make it too easy for the taxpaying public to smell a rat. But price controls had created such gross distortions in agricultural markets that government apparently decided that it was finally time to get rid of them—sort of. In their place came “transition payments” that were supposedly designed to temporarily ease the pain and suffering of the poor millionaire farmers who had lost their guarantee of above-market prices for everything they sold.

This ploy was yet another example of the public being duped by a government bait-and-switch scheme. The transitional payments were never truly transitional, and they were probably never intended to be. The power of the agricultural lobby was never diminished, and it immediately went to work lobbying for increases in the new subsidies and to make them permanent. And they have succeeded. Each year there is an avalanche of “supplemental spending bills” that increases the amounts of corporate farm welfare the American taxpayers must fork over amounting to tens of billions of dollars annually.

By calling the programs “transitional” congress guaranteed itself a perpetual stream of campaign contributions from farmers, who could be relied upon to lobby and cough up millions of dollars in cash, year after year, in return for legislated extensions of the programs.

How this system of farmed robbery works was explained in a February 1, 2005 article in USA Today about Texas cotton farmers. The article featured one Eugene Bednarz, who had harvested four-thousand bales of cotton. Altogether, that year’s cotton production was expected to exceed 7.5 million bales, the best yield in more than fifty years.

This also meant that there would be the largest theft of taxpayers’ income by the farm lobby in more than half a century. The way the new system works is that if the market price of cotton falls below a government-mandated price support level, then the government will use taxpayer dollars to pay the farmers the difference between the actual price they get for their cotton and the arbitrarily-determined price-support price.

At the time, the market price of cotton was 35 cents per pound, with the price-control price set at 52 cents per pound. A bale of cotton weighs about five hundred pounds. Thus, Mr. Bednarz was paid the difference—17 cents—for each pound of his cotton. Consequently, the government wrote him a check for $340,000 for doing absolutely nothing. No consumer or taxpayer received any benefit whatsoever in return. Texas cotton farmers as a whole figured to benefit in this way to the tune of some $637,500,000 in that year.

Cotton, wheat, corn, soybean, and rice famers make out like bandits through this scheme, while others, such as sugar farmers, plunder the taxpayers in a slightly different manner, through government-mandated supply reductions that push up prices three to four times the world price. Everything that is made with sugar becomes more expensive as well.

Virtually everything government does increases the cost of living by driving up prices. Yet, most Americans still believe in the fairy tale that it is the free market that causes higher prices and that it is government, through benevolent and omniscient regulation, that is needed to “save” us.