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CGD in the News

Letters to The Editor: Farm Subsidies: Necessary Evil? (Washington Post)

July 2, 2006

While the series “Harvesting Cash” shines a much-needed spotlight on inefficiency, inequality and high cost of U.S. farm policy, the July 2 article “Farm Program Pays $1.3 Billion to People Who Don’t Farm” missed a crucial point about efforts to reform that policy.

As the article noted, direct payments, decoupled from production, were originally intended to replace price-linked subsidies that encouraged farmers to produce more. To the extent that government-subsidized production of rice, for example, has decreased, then decoupling has been effective.

Unfortunately, Congress reversed itself and approved new subsidies when prices declined in the late 1990s and then institutionalized increased subsidies in the 2002 farm bill. While the recent trade negotiations in Geneva failed ["Trade Ministers Give Up on Compromise; Geneva Conference Collapses Over Agricultural Tariffs and Subsidies," news story, July 2], any eventual agreement will require reductions in these trade-distorting subsidies.

Unless it suddenly becomes politically possible to eliminate subsidies, then using decoupled direct payments to compensate farmers (more often landowners) will be a necessary part of the package.