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Farm Bill Subsidizes Urban Elites

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Farm Bill Subsidizes Urban Elites

June 25, 2018

In an era of excessive government spending, it should come as no surprise that each year thousands of urban residents are collectively paid millions of dollars in subsidies.  However, it is surprising they are receiving agricultural subsidies.

The House’s narrow vote of 213 to 211 to pass the farm bill last week sent a clear message that a majority of members are not serious about cutting back on corporate welfare in the agricultural sector.  When it comes to determining who can receive payments, the House bill makes it even easier for non-farmers to be subsidized.

The Environment Working Group (EWG) recently determined that 17,836 people who live in America’s 50 largest cities received $63 million in farm subsidies in 2015 and 2016.  Due to poorly-defined eligibility requirements, people from Detroit and Washington, D.C., where there are no farms, are receiving agricultural payments.

The farm bill’s loopholes are not new problems, and few signs point towards their elimination anytime soon, despite repeated calls from the Government Accountability Office (GAO) to enact clearer distinctions over who qualifies for commodity payments.

Beginning with the Agricultural Reconciliation Act of 1987, Congress has attempted to implement eligibility standards for receiving subsidy payments.  Over time, there has been a general tightening of what constitutes being “actively engaged in farming.”  In 2015, the Department of Agriculture instituted an eight-pronged set of guidelines in an attempt to cut down on abuse. However, vagueness in what counts as “supervision” and “management functions” along with an inability to enforce the rules has rendered restrictions ineffective.

As the previously presented data suggest, the problem of individuals qualifying for subsidies without stepping foot on a farm has not been resolved.  About 87 percent of farms are sole proprietorships, and these may receive excessive subsidies by counting an unlimited number of family members as “actively engaged.”  Being an extended family member of a farmer or making a small investment in a local farm could net individuals and their spouses $125,000 each in subsidies.  Yet, legislators seem unwilling to heed calls for clarification and reform when farm bill deliberations occur every five years.

Section 1603 of the House bill amends the Food Security Act of 1985 to allow farmers’ cousins, nieces, and nephews to be counted as family members for subsidies, and grants corporations the chance to count multiple members if they are a “pass-through entity.” These changes open the floodgates for even more non-farmers to claim subsidies.

Recognizing the wasteful nature of these loopholes, President Trump has called for a reduction in the $900,000 income cap of eligibility to $500,000 for anyone receiving a commodity payout.  This proposed limit would prevent urban billionaires from profiting off subsidies. A 2016 report by EWG revealed that 50 members of the Forbes 400 list received farm subsidies in the previous 20 years.

A bipartisan group of representatives tried to codify this cap into the farm bill during the original hearings, but their amendment (Amendment 51) was blocked from a vote. Also blocked was House Freedom Caucus leader Representative Mark Meadows’ (R-NC) Amendment 75 that would have tightened the definition of active engagement and limited farms to one manager.  By not including these protections against abuse of the system, the House farm bill was a step backward.

The Senate Agriculture Committee seems to be on track to preserve the vague definition, despite lone dissenter Senator Chuck Grassley’s (R-IA) pleas for reform.  While the Senate’s version of the farm bill does not mimic the House bill in making loopholes easier to exploit, it does not end subsidies to city-dwellers.  Substantial amendments are necessary to limit the number of eligible managers and require that they actually work on the farm. This would assure subsidies were targeted to rural communities.

Ultimately, basing eligibility on the number of actively engaged family members leads to abuse of the system.  A more efficient payment allocation methodology that examines the risks and needs of individual farms instead of blindly compensating based on managerial style or family size is desperately needed.  It should be common sense that farm subsidies should be sent solely to farmers, but until Congress comes to this realization, subsidization of urban farm “managers” will continue, at a cost to taxpayers of millions of dollars.

Stephen Vukovits is a contributor to Economics 21.  Follow him on Twitter @svukovits.

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