A Project of The Annenberg Public Policy Center

Farm Bill Funds Distribution


Q: In the farm bill, how much money goes to direct subsidies for farmers, what percentage goes to higher income farmers and how much is allotted for feeding the poor?

A: About $26 billion will be spent on direct payments to farmers over the next five years. We can't give a figure for exactly how much will go to "upper income" farmers, but the income limits are set quite high. The lion's share of the bill's $307 billion cost ($209 billion) will go for nutrition assistance.

FULL QUESTION

Could you please provide information on the current farm bill: How much is direct subsidy to farmers, what percentage is paid to higher income farmers and how much is in food stamps and other aid to the poor to acquire food?

FULL ANSWER

The Congressional Budget Office projects that the Food, Conservation and Energy Act of 2008 will cost $307 billion over five years. Of that amount, $35 billion is to go to agricultural commodity programs, including what are known as "direct payments," and $209 billion to nutrition assistance, such as what has been known as the food stamp program but will be renamed the Supplemental Nutrition Assistance Program, or SNAP. (Makes one wonder why it's called the "farm bill.") President Bush vetoed the bill on May 21, but by the end of the next day both the House and Senate had voted to override his veto.*

Direct payments, which are one form of commodity subsidy in the bill, are given to farmers without regard to their financial situation. Payments are based on acreage and historical production – but the farmer need not be currently growing anything on the land. In 2009, under the new law, about $5.2 billion will be handed out through this program. Critics of direct payments, and there are many, say they distort the market, sending money where it's not needed.

It's hard to project how much of the total will go to farmers who are "higher income," although a couple of points are worth noting. One, the U.S. Department of Agriculture estimates that average farm household income in 2008 will be pretty healthy – $89,434 (though $75,805 of that will come from off-farm sources). As we said earlier, direct payments have nothing to do with financial need.

And two, in 2007, according to the Environmental Working Group (EWG), a nonprofit that analyzes U.S. farm subsidies and their beneficiaries, a total of 1,234 recipients collected direct payment subsidies worth $120,000 or more each, and 149 recipients received more than $250,000 each. How did they get so much, when current law limits direct payments to $40,000 per person ($80,000 per couple)? Often by subdividing large farming operations into complex, interlocking corporations, partnerships and joint ventures. One large farming enterprise collected more than $1 million in direct payments in 2007, according to EWG.

The new law includes rules designed to reduce the ability of large operations to game the system and collect huge amounts in direct payments. Also, it includes income limits: Farmers can't participate in the subsidy programs at all if their non-farm income exceeds $500,000 ($1 million for couples), and they'll be ineligible for the direct payments program specifically if their farm income is more than $750,000 ($1.5 million for couples). Those ceilings, however, aren't expected to put much of a dent in the outlays.

One last note: Not all farmers are created equal in the eyes of the government. The greatest amount of aid by far goes to those who farm "staple" crops, such as wheat, corn and soybeans. Fruit and vegetable farmers historically haven't been eligible for any of the subsidy programs. The new law changes that, to a small degree.

*A clerical error may delay the enactment of trade provisions in the bill, but not the farm or nutrition sections of it.

-Viveca Novak

Sources

Herszenhorn, David. "Farm Bill, Facing Veto, Goes to Bush." The New York Times, 16 May 2008.

Herszenhorn, David. "Reaching Well Beyond the Farm." The New York Times, 20 May 2008.

Herszenhorn, David. "Farm Income Up, but Subsidies Stay." The New York Times, 24 April 2008.

Orszag, Peter A. Letter to Sen. Tom Harkin. Congressional Budget Office, 13 May 2008.

Cook, Ken and Chris Campbell. "Amidst Record 2007 Crop Prices and Farm Income Washington Delivers $5 Billion In Subsidies." Environmental Working Group, Web site accessed 20 May 2008.

Morgan, Dan and Gilbert M. Gaul and Sarah Cohen. "Farm Program Pays $1.3 Billion to People Who Don't Farm." The Washington Post, 2 July 2006.

Riedl, Brian M. "Seven Reasons to Veto the Farm Bill." Backgrounder #2134, The Heritage Foundation, 12 May 2008.

"2008 Farm Income Forecast." USDA Economic Research Service, updated 12 Feb. 2008, accessed 20 May 2008.