I agree with shift6. Farm subsidies, by and large, gotta go. Or, at least be changed in such a manner that there is no incentive to overgrow crops that aren’t useful in their current levels.
This is actually one of the most damning argument against food subsidies. Fructose doesn’t trigger satiety the way that glucose does, and the only reason that corn syrup is cheaper than sugar and therefore in everything is because it’s so heavily subsidized. FUCK YOU IOWA.
It’s not like that’s the reason we’re a nation of fatties, but it certainly doesn’t help.
The Washington Post recently did an interesting series of articles about farm subsidies. Among some of the “fun” examples of how subsidy money is wasted: $1.3B paid to landowners who have grown nothing since 2000 (and in some cases don’t even own farms); how private insurance companies benefit when the government foots the bill for disaster payments; and how farm subsidies are actually helping to destroy the small family farms they’re supposed to help, because the vast majority of money goes to large farms, which then get bigger.
Except that consumers are taxpayers who pay for the subsidies. Also propping up domestic prices keeps foreign producers out of the marketplace which raises prices as well.
Yes, the subsidy is a transfer, not mana from heaven. I didn’t imply that the subsidizing country is better off because of the subsidy; it’s usually going to be worse off because it will produce too much of the subsidized commodity.
The effects of a domestic production subsidy on an internationally traded good are a bit more complex. If the country is small relative to the world economy, the subsidy will increase domestic production but have no effect on the world price and hence the price consumers pay. If the country’s production has a substantial effect on world prices, then the domestic subsidy will lower the world price, and the price consumers pay. A domestic subsidy never increases the price consumers pay, and in neither case will we usually have reason to believe the subsidy made the domestic country better off.
Something of a tangent, but I noticed something interesting in this WP article:
Yowza: that’s a pretty big drop. And it’s spread over 24 years, so both Democrats and Republicans can be dinged for it! Good to know they take food safety issues so seriously! Now that’s what I call bipartisan support!
Skedastic, you are talking purely about subsidies. But I think (correct me if I’m wrong), a fair amount of the US’s agricultural policy is implemented as methods of reducing production, either through production quotas/ceilings, and/or simply paying some farmers not to farm. Obviously, if these policies exist and are relatively substantial, they’re likely to increase consumer prices.
But I don’t know the relative extent to which the government uses these different methods to support agriculture.
In general:
Subsidy = increased production, lower prices (because of the increased production), BUT the taxpayer foots the bill for that subsidy.
Quota/ceiling = decreased production, higher prices, but little direct cost to taxpayers via government channels. (they’re still paying through higher prices though…)
Wiki entry on farm subsidies. IIRC in the past U.S. farm subsidies would pay farmers to limit production, but now it guarantees them a price floor (i.e., makes up the difference between the market price and the floor price), which encourages overproduction.
Phil, yes, I was only talking about subsidies. U.S. (and other countries’) agricultural policies are of course not limited to subsidies but are rather a complex disaster of often completely contradictory policies. Both internal (e.g., milk marketing restrictions) and external trade restrictions, among others, tend to increase prices. I would guess that the overall effect of policy on food prices in the U.S. is lower average prices than would prevail in a free market, because I think that the total effect of direct and indirect subsidies to agriculture likely reduce prices moreso than trade restrictions and the like increase prices. But certain commodities, such as dairy, are likely to priced higher due to agricultural policies. I am not aware of any attempts to assess the overall effect of policy on an index of food prices, but that doesn’t imply that such attempts haven’t been made.