The slow but steady dismantling of agricultural subsidies

I know a fair amount about historical agricultural policies since those are the data I tend to analyze.  But I don't follow what's going on with agricultural policy on a day-by-day basis as much as I should.   If you do want up-to-moment briefings on what's going on, the place to go is FarmPolicy.com, which should be blogrolled below.

Anyway, just a brief observation here to say that it looks to me like agricultural subsidies (except for ethanol) appear to be going away over time, slowly but surely.  Even crop insurance funding is being cut back, one area of subsidy growth in recent decades (see this post for some nice background).  Many of the beneficiaries of this government largess are the insurance companies rather than farmers.  But farmers have a nice big premium subsidies, too.  Budget pressure will likely help to widdle subsidies down even further, especially since farmers seem to be fairing better than most during this recession.

But let me emphasize, slowly but surely.

The one thing that might change that is climate policy.  I can't tell if the ag. folks are dead set against cap-and-trade because (a) they are true die hard denialists; (b) they think they'll benefit from climate change because inelastic demand means their profits will soar when their crops get hammered; or (c) they're holding out for some serious subsidies.

Here's an idea for a short review paper I would like to write one day soon:  measure the total value of agricultural subsides, both explicit and implicit (like those implicit in sugar import quotas and tariffs), and show how they have changed over time.  It's not too hard to find data on most of these things over at http://ers.usda.gov/, but what would be interesting is to show how all subsidies combined, say as a share of the U.S economy, share of agriculture, and share of government expenditures, has evolved over the last 80 to 100 years.  I don't know of a paper that puts all this in one place and shows this broad perspective.  If no one does it in the next year or so I might just write it myself.  Of course, loyal readers of GG&G would see most of the pretty pictures here first.

But at the moment I really have too many other things to do...

Comments

  1. "measure the total value of agricultural subsides"

    Sounds very interesting but it's so hard, of course, to define what counts as a "subsidy" ... would this include the services of economists at land grant universities and USDA ERS who help producers make better management decisions? Would it include federal infrastructure spending that makes it cheaper for producers to market their grain (rail, roads, ports, telecommunications)? Would it include the cheap water policies for western farmers who irrigate? And on and on... not all of these subsidies are necessarily at the federal level or associated with the USDA in particular.

    Hopefully you would have alternative measures might distinguish between the explicit and (highly) implicit subsidies.

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  2. Jeff: I don't think it's too hard to draw reasonable lines here. No, I would not count USDA-ERS, as they hardly help farmers make better decisions, and their budget is a pretty tiny number anyway. Dito for extension economists at universities. Besides, education certainly belongs in a different class than subsidies, no?

    The tough judgement call would have to be water in the west. That's a tough one.

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  3. "Budget pressure will likely help to widdle subsidies down"...

    External forces will whittle subsidies down. Widdling would be the recipients pissing the money away.

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  4. In response to "ag folks" and their assumption that ineslastic demand will boost profits "when their crops get hammered". Most models I've seen show a very slight increase in US GDP due to climate change, attributed mostly to agriculture.

    As for climate policy, is a tax/subsidy policy (ie, cap and trade or carbon tax/subsidy) that incentivizes forest expansion and decreases agricultural production better than ag subsidies? I am doubtful

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  5. Michael,
    Something very similar to what you are proposing has been done for ag subsidies in India: Gulati and Narayan (200?) The Subsidy Syndrome in Indian Agriculture. Oxford University Press. ISBN: 0195662067.
    Ashok Gulati (IFPRI's Director in Asia) and Sudha Narayan have provided detailed breakdowns for three kinds of subsidies, on power, fertilizer and water.

    ReplyDelete

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