Obama Takes Aim at Big Farm Subsidies: Doing Away With Direct Payments


Image via Hayden Real Estate

Obama's remarks last night on clean energy and pursuing a cap and trade system for carbon emissions have grabbed the most attention in the green community. But he made another important statement that's getting overlooked: he called on Congress to stop wasteful subsidies given to large farms—those 'direct payments' to big agribusiness that cost $5.2 billion a year. And they don't even require farmers to produce a crop.As he's preparing to deliver a budget to Congress on Thursday, part of Obama's speech was making the case for eliminating $2 trillion of wasteful spending—including ending "direct payments to large agribusinesses that don't need them."

Obama's Ambiguous Assault on Direct Payments
What that means, exactly—as is the case with many sound bites in presidential speeches—is vague. But farm groups have some ideas:

From Reuters:

Two farm-group spokesmen said the president apparently meant a farm subsidy known as direct payments that was created in 2002 and is made regardless of crop prices or farm profits.

The $5.2 billion that compose the direct payments typically go to the bigger farms, and sometimes, they don't go to farmers at all—the Washington Post found that $1.3 billion dollars from the direct payment program don't go to farmers who don't farm at all. So what would Obama do to curb the spending? It's open to speculation:

"It's funny wording," said Ferd Hoefner of the National Sustainable Agriculture Coalition. His belief was Obama would back a $40,000-a-year limit on direct payments, half of the amount now allowed.

What Exactly is a Direct Payment, Anyway?
Basically, it's a subsidy awarded to farmers based only on the size of their farm, and the commodity they (ostensibly) grow. It doesn't take into account crop prices at all—farmers get a fixed amount of money every year. And I say ostensibly because farms don't even have to grow the crops they receive the subsidy for. It's awarded for the crop that's historically grown on each farm: from USDA:

"Fixed direct payments are not tied to current production or prices and do not require any commodity production on the land. With planting flexibility, farmers are not confined to growing the historically produced crops for which they are receiving direct payments"

It doesn't seem to make sense—a program that rewards a farm simply for being large, regardless of whether it grows a crop?

Ending Direct Payments
Even some farm groups that benefit from the subsidy know that direct payments are no good:

Groups like the National Farmers Union said direct payments were indefensible in good times and insufficient aid when markets slump . . . price supports and counter-cyclical payments are more popular among farm groups.

I'm with the National Farmers Union, and Obama, I suppose (given that his plan thus far is uber-vague). It seems ridiculous to continually give money to farms regardless of the price for commodities--it just gives them a further advantage over small farms that could truly use the subsidy. Big farms get more money from the payments, and can therefore be more competitive.

Ending the practice is another story--we'll have to keep our eyes peeled for any big agriculture ideas when Obama delivers the budget.

More on Farm Subsidies
Subsidy -Laden Farm Bill Up for Vote this Week
EWG Reveals Who Benefits Most from Direct Subsidy -Laden Farm Bill
U.S. House Farm Bill Draft Supports Subsidizing Sugar for Ethanol

Tags: Agriculture | Barack Obama | Economics | Farming

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