The question of who gains from a particular subsidy is not as simple as one might think. The database of federal farm payments provided this week by the Environmental Working Group provides useful insights into who gets farm-program money. But it does not fully answer the question of who really benefits from some subsidies.
The EWG database is informative. Under federal law, the amount people pay in income taxes is confidential. But federal farm payments received by individuals or businesses are public information available under the Freedom of Information Act. The EWG, an environmental advocacy organization, took on the herculean task of organizing some 350,000 annual payments into a user-friendly database that can be searched by state, county, congressional district, ZIP code and so forth.
When this data first became public years ago, some were startled to learn that media mogul Ted Turner and NBA star Scottie Pippen got substantial checks. So did ABC reporter Sam Donaldson, who got tens of thousands of dollars in subsidies for mohair produced on a New Mexico ranch he owns.
But economists who live in glass houses should not throw stones. Go to www.ewg.org and enter zip code 55108. You will see that I got $10,816 in federal farm payments in 2003-2005.
My payments were for land that enrolled in the Conservation Reserve Program in 2001. These are filter strips with grass or trees along two streams running through our farm. They reduce runoff and sediment in the streams and provide wildlife habitat.
So I am on the gravy train along with Sam Donaldson and Ted Turner, right? Yes, to the extent that government payments went into my bank account. But if the program were abolished, I would not be any poorer.
The annual payment I get for my CRP tracts was a bit above rental rates in my county when I first enrolled the land in 2001. But rents have risen. Now I could get more by renting the land to a neighbor. So the program does little for my income or net worth.
I don’t grow wheat, corn, or soybeans so I don’t get those program payments. But the benefits of such crop subsidies go beyond what shows up in the EWG database.
To find them, you need to look at my real estate tax statements instead. Over the same period that I got $10,816 in CRP payments, the assessed value of our 200 acres of land increased by $40,000.
That is because farmers are making money – or anticipate they will in the future – and are bidding up both annual rents and purchase prices. Much of that added value is due to the generosity of subsidies in the farm bill passed shortly after President Bush was inaugurated.
It is also due to state and federal subsidies for ethanol or mandates for its use. And in the specific case of our farm, it also includes increasing government mandates for the use of wind power. The farm is on the Buffalo Ridge in southwestern Minnesota. There already are turbines on three sides of it. Minnesota households will pay more for power because of such mandates. That inevitably increases the net worth of people like me who own windy land, but that is another story.
So I am benefiting from federal agricultural subsidies in a major way, but one that does not show up in the EWG database. Indeed, even if I had no CRP land, I would still see my wealth increase by thousands of dollars a year because of federal legislation.
Asked about the fact that 10 percent of recipients get 66 percent of federal payments, House Agriculture Committee Chairman Rep. Collin Peterson, D-Minn., responded, “That’s probably in the same proportion as the food they produce. That’s the way it’s designed to work. I have more concern about landowners who are not farmers getting payments.”
The congressman and his colleagues on the Ag Committee need to understand there is not much they can do about landowners benefiting. The issue was decided 186 years ago, when British economist David Ricardo demonstrated that in the long run, landowners capture all of the extra value when farming becomes more profitable – whether from higher grain market prices or from government subsidies. That happens whether they appear as payees on any checks or not.
That brings us back to the CRP Program. I was disingenuous in stating that for me the CRP program is no more profitable than renting the ground to an active farmer. That is true, but if the CRP program were abolished, over 30 million acres across the nation might come back into crop production. That would make commodity prices fall and so would land prices. So as a landowner, this conservation program increases my net worth. And it would do so even if I didn’t have any land in the program myself.
Oh what a tangled web we weave, when first we practice to subsidize.
© 2007 Edward Lotterman
Chanarambie Consulting, Inc.