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February 16 2011

30 Ideas for 30 Days: Day 29

Nicole Kurokawa Neily

If you were obligated to pay way more for the same product than you needed to, would you be upset? Of course! Yet this situation happens all the time in the United States because of government interference in the agricultural market - and nobody notices. It's time to fix this problem!

 Suggestion #29: Don't renew the Farm Bill.  

American agricultural policy is composed of lots of small policies that add incrementally to the price of food - resulting in higher end prices for consumers. In some instances, farmers receive price supports for their products to keep the price of goods higher than they would be in a free market; in other cases, the federal government sets price floors for certain goods. Here's what Nobel Laureate Paul Krugman says on page 101 of his Macroeconomics textbook:  

Just like price ceilings, price floors are intended to help some people but generate predictable and undesirable side effects... suppose that a price floor is binding: what happens to the unwanted surplus? The answer depends on government policy. In the case of agricultural price floors, governments buy up unwanted surplus. As a result, the U.S. government has at times found itself warehousing thousands of tons of butter, cheese, and other farm products. (The European Commission, which administers price floors for a number of European countries, once found itself the owner of a so-called butter mountain, equal in weight to the entire population of Austria.) The government then has to find a way to dispose of these unwanted goods.  

Krugman goes on to state, "to avoid the problem of dealing with the unwanted surplus, the U.S. government typically pays farmers not to produce the products at all." Think about it: your tax dollars are being used so that some are also paid to not grow their products at all. Huh.  

While we're at it, don't forget the tariffs imposed on some agricultural goods from overseas, which raise the price of goods that would otherwise compete with domestically grown products. And, of course, the effects of government policies that favor certain industries (like ethanol) with special favors and tax breaks, which further distort the market.  

Taken together, these policies raise the price of goods and services in America. But who ends up being hurt the most? The poor - who spend a higher percentage of their disposable income on food.  

Let's save a boatload of money by scrapping the Farm Bill, with its myriad subsidies, benefits, carve-outs, and favors for the U.S. agricultural market. Allow commodity prices to be determined by an open, free, fair market, and take the government's thumb off the scale. This will lower the price of food - increasing the purchasing power of our most vulnerable neighbors. As it stands, the Farm Bill redistributes money from the poor to the wealthy - and that needs to end. 

IIndependent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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