To-may-tohs or To-mah-toes, the Government Should Leave Them Alone

A piece from the Kansas City Star this weekend highlighted current political disagreement over “Know Your Farmer,” a $65 million program run by the U.S. Department of Agriculture designed to educate people about the sources of their food, and something I’ve written about on the blog before. According to the Star, some politicians have taken issue with the program’s slant toward organic farmers over conventional farmers.

When the government promotes one business over another, it chooses economic winners and losers — something that government officials have no special skill for doing well. Some argue, though, that this governmental expenditure hardly rivals the ones for conventional farming:

Bruce Babcock, an economist and director of the Center for Agricultural and Rural Development at Iowa State University, said it was “ironic” that [Sen. Pat] Roberts and others objected to the USDA spending $65 million on Know Your Farmer.

Babcock pointed out that commodity producers received $5 billion over the last two years, and the crop insurance industry received $7 billion.

Just because one group gets a subsidy does not mean that another group should get a subsidy as well. In fact, I would argue, consumers and taxpayers are better off if neither get subsidies.

Agriculture, like all businesses, is best left to the marketplace. Subsidies lower the cost of producing politically favored products; this distorts the market by shifting the supply curve. In the case of agriculture, subsidies have led to an overabundance in the production of certain commodities, like corn and soy, which drives down their prices relative to other products, making them less expensive to purchase and use as ingredients in other foods.

Agricultural subsidies have decreased the price of — and, thus, increased the demand for — products like high fructose corn syrup and corn feed for livestock. Some researchers have suggested that such subsidies have led to poor health outcomes and higher rates of obesity. Some disagree with this claim, although still and other researchers, including the American Medical Association, maintain that the subsidies have led to an increase in unhealthy foods in the United States. At any rate, more corn is being grown and subsequently incorporated into people’s diets than would otherwise happen. The subsidies have also lead to an increase in corn-based ethanol production, which costs taxpayers and may well result in marginal increases in environmental harm.

In real terms, subsidies don’t make food less expensive. Rather, they divert taxpayer funds from the market price of food to the production stages of farming. This influences farmers to grow more of the subsidized crops than people would otherwise demand, and so taxpayers end up paying more for their food than they would in an otherwise free market.

Some may argue that the promotional program discussed by the Star helps organic farmers to gain an advantage similar to that of conventional farmers. If people are interested in organic foods, though, they will purchase organic foods. Indeed, films like Food, Inc. and books like The Omnivore’s Dilemma have convinced many that they should vote with their wallets for organic foods. It’s unnecessary for the government to create an educational program to support organic farming.

Although $65 million is a small expenditure in comparison to the overall budget for agriculture, it still represents a substantial amount of taxpayer funds. Whether it be subsidies or educational programs, the government oversteps its role when it encourages one business over another, or one form of agriculture over another. If government officials truly want people to consume healthier food, the best strategy would be to level the playing field by eliminating subsidies and promotional programs, instead letting market forces work.