Eight Myths About Farm Subsidies That Both Parties Keep Repeating

There are two kinds of speeches about farm subsidies, and I have heard both until my ears bled. In the first, a politician in a clean hat stands at a county fair and says that the federal government is all that stands between the American farmer and the wolf. In the second, a different politician in a different clean hat stands in front of a chart and says that farm programs are a giveaway to billionaires in tractors. They cannot both be right. Usually neither is.

The record is more interesting than either speech. I am going to take eight claims, state each one fairly, test it against the way the farm bill is actually built and what the Department of Agriculture itself reports, and give a verdict. I will not use current dollar figures, because they move every year and the structure is what matters. Where you need a number, I will tell you where to look.

A word on the structure first. The farm bill is organized into titles. The commodity title covers programs like Price Loss Coverage and Agriculture Risk Coverage for a list of named crops. The crop insurance title covers the subsidized insurance I describe in Hail Hits Your Wheat Field and a Crop Insurance Claim Moves to a Check. The nutrition title covers SNAP and related food programs. There are also titles for conservation, trade, credit, research, rural development and more. Keep that map in your head.

Myth 1: "Most of the farm bill goes to farmers"

The claim. The name says it all. A farm bill is for farms, so the bulk of the money must go to the people who farm.

The test. Look at the Congressional Budget Office's scoring of the farm bill, which is public and which you can read in a few minutes. By that scoring, the nutrition title is the largest part of the bill by a wide margin. The commodity and crop insurance titles together are a fraction of it. I explain how food aid ended up in this bill in Why Food Stamps Live in the Farm Bill and Whether That Marriage Should Last.

Verdict: Myth. The largest share of farm bill spending is not farm programs at all. It is food assistance. That cuts both ways. It means the farm subsidy debate is smaller than the headline, and it means a "farm bill" cut can be mostly a food aid cut.

Myth 2: "Corporations own most of the farms"

The claim. The family farm is dead, and giant corporations have taken over.

The test. The Department of Agriculture defines a family farm as one where the principal operator and people related to the operator by blood or marriage own most of the business. By that definition, the Department's Economic Research Service reports that family farms are the overwhelming majority of American farms, including most of the large ones. USDA also sorts farms by gross cash farm income into small family farms (under $350,000), midsize family farms ($350,000 to $999,999), large-scale family farms ($1 million or more) and nonfamily farms.

The confusion comes from the word "corporation." Many family farms are organized as corporations or limited liability companies, for liability, tax and succession reasons, and the Census of Agriculture counts them as corporate farms. A family that incorporates the farm so that the land can pass to the next generation has not become Wall Street.

Verdict: Mostly myth, with a real kernel. The kernel is that production is concentrated. A relatively small share of farms, mostly large family operations, produces most of the output. That concentration is a legitimate concern, but it is a different claim from "corporations own the farms."

Myth 3: "Every crop is subsidized"

The claim. Washington props up all agriculture.

The test. The commodity title applies to a named list of crops: wheat, corn, soybeans, rice, peanuts, cotton and a few others. Fruits, vegetables, nuts and most livestock operations are outside the commodity title's price and revenue programs. Specialty crops get help in other ways, including research money, marketing programs and, for many of them, access to crop insurance, but a lettuce grower does not get a Price Loss Coverage check. A cattle rancher has no price support at all.

Verdict: Myth. Subsidy is concentrated in a handful of field crops, which is why a lot of Americans eating a salad, steak and berries are eating foods that are not directly supported by commodity payments. It is also one reason the programs are criticized as favoring a few regions and a few crops.

Myth 4: "Crop insurance is a free check"

The claim. Farmers collect government money whether or not they lose anything.

The test. Walk through the example I gave in the hail post. The farmer buys the policy and pays a premium, even though it is subsidized. She carries a deductible: at 75 percent coverage, she absorbs the first quarter of any revenue loss. The claim requires a documented cause of loss, a notice of loss on a deadline, an adjuster's visit, and records going back years. A good year pays nothing.

But here is the fair part. The premium is heavily subsidized by taxpayers. The subsidy is a real transfer, and it is a legitimate subject of debate. The honest description is "subsidized insurance," not "a free check" and not "a pure market product." Whether the subsidy should be capped or means-tested is an argument conservatives should be making.

Verdict: Myth, with an asterisk. It is insurance with a taxpayer discount.

Myth 5: "Subsidies are why groceries are cheap"

The claim. Without farm programs, your grocery bill would double.

The test. Start with where a food dollar goes. USDA's Economic Research Service publishes the "food dollar" series, which splits what consumers spend on food among the farm itself and everything after: processing, packaging, transportation, wholesaling, retailing, food service and marketing. The farm's share of that dollar is a minority, and the rest goes to the parts of the chain that farm programs do not touch. A subsidy that supports crop prices or farm income, even a large one, can only move the price of the raw ingredient, and the raw ingredient is a modest part of what you pay at the register for a box of cereal.

What really made American food cheap is productivity: better seeds, better machinery, better fertilizer, bigger scale, a transportation network that moves food quickly and trade that fills the gaps. Subsidies may have made some commodities cheaper by encouraging more production, and economists argue about how much, but the idea that the grocery bill hangs on them is a stretch.

Verdict: Mostly myth. Both sides overreach on this one. The left says subsidies make junk food cheap, and the right says subsidies keep your family fed. The evidence supports neither in the strong form.

Myth 6: "The sugar program is a free market"

The claim. Sugar farmers compete like everyone else.

The test. The federal sugar program works on three levers. It gives processors loans at set rates, which put a floor under the price of raw sugar. It uses marketing allotments that limit how much sugar processors can sell domestically. And it uses tariff-rate quotas that limit how much foreign sugar can come in at a low tariff. Together they keep the U.S. price of sugar above what it would be in an open market. Supporters note that the program is designed to operate at little or no cost to the Treasury, and they argue that foreign sugar is itself subsidized by other governments.

That is a real argument, but notice what it concedes. The program does not run on market prices. It runs on limits on supply and on imports, and the cost is passed to consumers and to food manufacturers who buy sugar. Economists on the left and the right have criticized it for decades.

Verdict: Myth. Calling the sugar program a free market is like calling a toll booth a scenic overlook. Whatever you think of the sugar program, it is not a free market. It is a managed market, and the managers are the Department of Agriculture and Congress.

Myth 7: "Farm subsidies make farmers rich"

The claim. Farmers are living large on government checks.

The test. Farm income is volatile, and the Department of Agriculture reports that many farm households rely on income from off-farm work, which for a lot of small farms is the larger share of the household's earnings. Payments are tied to production, so the farms that produce the most receive the most, which is a fair criticism. The law includes payment limits and an income test, and critics argue that definitions and arrangements let large operations stay under the limits. The 2018 farm bill widened who counts as a "family member" for purposes of management, a change opponents say dilutes the limits. I mention it so you can look it up, not so you take my word.

Verdict: Half myth. A small farm is not getting rich on subsidies. But the distribution of support does tilt toward the biggest producers, and that is a fair target for reform.

Myth 8: "Ending subsidies would be a free-market win with no downside"

The claim. Cut the programs and farmers will adapt.

The test. The best test is history. In 1996 Congress passed Freedom to Farm, which set payments on a path to decline, and it was meant to wean farmers off the government. When prices collapsed in 1998, Congress, including the party that wrote the law, passed emergency payments year after year. I tell the story in From the 1933 Farm Act to Freedom to Farm, How the Safety Net Got Built. The fixed payments were not a safety net when prices fell, and the political system could not stand by.

There are two more problems. Farmers in other countries get support from their own governments, so American growers compete against subsidized rivals, and unilateral withdrawal does not give them a level field. And farming carries risks, weather and prices, that nobody can control and that an investor cannot diversify away.

Verdict: Myth in its strong form. Promising that ending farm programs costs nothing is like announcing a diet at an all-you-can-eat buffet. The free-market case against farm programs is serious and worth making. A promise that ending them would cost nothing is not. If you want to end a program, you need a transition plan that survives the first bad year.

What the myths have in common

Notice what these myths share. Each takes a true fact and stretches it into a slogan. It is true that the nutrition title is large, so "farm bill money goes to farmers" is false. It is true that larger farms get more, so "farmers are getting rich" is not entirely wrong. It is true that productivity made food cheap, so "subsidies made food cheap" is mostly wrong. A good conservative should be the first to want the facts straight, because our case does better with them.

Here is what I believe the facts support. A safety net for weather and price risk is reasonable. Programs that tie money to what a farmer plants, or that favor one crop and one region, are not. The sugar program is the easiest to defend badly and the hardest to defend well. Crop insurance is subsidized, and it should be debated as such. For related reading on myths in other areas, see seven trade myths both parties repeat, tested against the record, seven tax myths that scare working families and cost them money and who really pays a tariff, following the dollar from dock to shelf. For why prices work the way they do, I, Pencil and the price system, how nobody plans your breakfast is the best primer, and for the debate about what causes high grocery costs, price gouging laws sound fair and then the shelves go empty is a fair test of a popular remedy.

Three questions to ask before you repeat a farm-policy claim

You do not need a degree in agricultural economics to spot a bad claim. Ask three questions.

1. Which title? Is the speaker talking about commodity payments, crop insurance, nutrition, conservation or something else? A claim that blends them all is a claim to distrust.
2. Which crop and which farm? A statement about corn growers in one state says nothing about a berry grower in another or a cattle rancher in a third. Programs differ by crop, by region and by the size of the operation.
3. Which year? Prices, payments and rules change from one farm bill to the next, and a figure from one year can be badly out of date in another. Ask where the number came from and when.

If a politician cannot answer those, he is giving you a slogan, and slogans do not pay the bills of a family that farms.

The bottom line

• Most of the farm bill is food aid, not farm programs. Read the Congressional Budget Office's scoring and see for yourself.
• By USDA's own definition, the great majority of farms are family farms. The real issue is that support follows production, so the biggest operations collect the most.
• Crop insurance is subsidized insurance with a deductible, not a free check, and the sugar program is a managed market, not a free one.
• When you hear a politician say that farm programs feed America or that they enrich billionaires, ask which title of the farm bill they mean. The answer will tell you whether you are hearing a fact or a slogan.