December 4, 2012

Farm Subsidies and the Fiscal Cliff

There are a bunch of stories floating around on potential cuts to farm subsidies as part of the "fiscal cliff" negotiations.

I often go to farm industry association reporting on these issues.  The Cattle Network linked to this Reuters story.  One quote from this story fits my own previous work on farm subsidies.

The White House would cut crop subsidies, crop insurance and conservation but not food stamps for the poor. The farm bill approved by the House Agriculture Committee would get half of its $35 billion in savings from food stamps and the rest from crop subsidies and conservation. Some Republicans would cut deeper still into food stamps.

In this working paper, Jong Hee Park and I found that the Democratics defended food stamps while the Republicans expanded the size of farm programs while cutting food stamps.  This probably isn't surprising, but the complicated part is that these changes were only observed under unified government.  (This paper hasn't gone anymore.  So it is a retired working paper).

Today, the one thing that both sides seem to be support is cutting direct payments to farmers and increasing crop insurance.  I'm struggling to find more details on these plans, but direct subsidies are generally thought of being less distortionary than other forms of subsidies and protection.  But I guess politicians are looking for savings, not necessarily efficiency. 

The fiscal cliff could be the opportunity for real reform, but this was also the belief in the 1980s.  I remain hopeful.  More to come.