Big spending on small part of economy
There are two things to keep in mind regarding the $1 trillion farm bill that President Obama recently signed into law at Michigan State University.
First, agriculture is a small component of both the U.S. and Michigan economies. According to the U.S. Bureau of Economic Analysis, the U.S. economy produced $16.2 trillion worth of output in 2012. Farming comprised $167 billion of this total, or about 1 percent. Only 1.5 percent of workers are employed in agriculture and related industries.
In Michigan, total economic output was about $400 billion in 2012, with farming constituting $4 billion of the total, or about 1 percent. Note that these Michigan figures actually inflate farming’s size because, unlike the national economy, the numbers for Michigan also include forestry, fishing and hunting, activities not usually thought of as “farming.”
The recent signing of the Farm Bill means that the federal government just committed to spend $1 trillion over 10 years to subsidize a tiny component of the economy that employs relatively few Americans.
Contrast farming with manufacturing. Nationwide, manufacturing output was $1.1 trillion in 2012, making up 6.7 percent of the economy. In Michigan, manufacturing output was $66.2 billion in 2012, or 16.5 percent of the state’s economy. Moreover, 8.7 percent of American workers are employed in manufacturing and the same is true for 13.7 percent of Michigan workers. We still manufacture a lot of output in both the United States in Michigan. Yet, we are able to do it without a $1 trillion manufacturing bill!
Second, consider the direction of the subsidies in the farm bill. According to the New Republic, the bottom 80 percent of farmers, the so-called “mom-and-pop” farmers that are romanticized in popular culture, receive an average of $5,000 in subsidies a year. The subsidies largely take the form of government-subsidized crop insurance. In contrast, many large corporate farms collect upwards of $100,000 each and some get more than $1 million in subsidies, as there are no income limits to receiving the subsidies.
And how are these subsidies paid for? The Farm Bill reduces the Supplemental Nutrition Assistance Program (or “SNAP,” which is more widely known as “food stamps”) by approximately $8 billion over 10 years. This translates into a roughly $90 per month cut to those lower income households that are affected. The increase in the subsidized crop insurance program described above costs $7 billion over 10 years.
These two points give credence to the view that this farm bill is really bad public policy. But this should also give pause to those who believe that only government can mitigate income inequality, as many politicians claim to want to do. As the farm bill case illustrates, these same politicians at times work directly against this goal.