Nov 21, 2018

Thanksgiving Is the Perfect Time to Think about How Policy Shapes Our Food Choices

Christian McGuire Communications Associate, Chad Reese Managing Editor

This week, millions of Americans will celebrate a holiday that, perhaps more than any other, is all about food. And while most of the attention will be on details like getting the turkey started early enough in the morning to be ready in time for dinner, it’s also worth spending some time thinking about the vast number of state and federal policies that shape how and what we eat.

Farm subsidies are one such policy, and Mercatus scholars have scrutinized them for a number of years. Recent legislation has favored subsidized crop insurance over direct payments to farmers, but both end up providing large financial benefits to a select few. As Michael Farren recently noted, large farms receive nearly all of the benefits from farm subsidies, even though the program was originally intended to protect small farmers from market fluctuations or natural accidents. From 1995 through 2014, nearly 90 percent of farm subsidies went to the largest 20 percent of farms. The top one percent of farms received about a quarter of the benefits. 

Matthew Mitchell asked a related question in 2014: if farm subsidies were meant for small and vulnerable farmers, how did large agribusinesses secure so much of the funding? One possible answer may lie in the political contributions of agricultural special interests. According to Dr. Mitchell, when Congress held several key votes on the matter in 2013, agribusiness groups donated considerable sums to those who supported farm subsidies. In fact, members who supported the subsidies received nearly three times the amount given to those who did not vote for the bills. Subsidies also redistribute money from taxpayers to large farms even though these farmers are considerably wealthier than the average American. Dr. Mitchell points out that farm household income has outpaced the average since the early 2000s. According to his research, farmers’ income is now 53 percent above average.

Further, economists of nearly every stripe oppose subsidies. According to Dr. Mitchell, that’s because agriculture is an excellent example of an industry where markets work well. He argues that “as a commodity industry with free entry, agriculture exemplifies the textbook definition of a competitive market that ought to operate without interference.” When farm subsidies distort what could otherwise be a thriving and efficient market, deadweight loss results. In a 2015 study for the Mercatus Center, Jayson L. Lusk concluded that eliminating crop insurance could generate nearly a billion dollars for the US economy.

Both sides of the political spectrum have something to gain from reforming agricultural programs. Some may cheer for a reform that reduces corporate welfare by ending a subsidy that transfers wealth from taxpayers to high-earning businesses. Others can celebrate a more market-based approach to agriculture. And everyone can enjoy the fruits of increased economic growth.

So if politics interrupts dinner this holiday season, know that there are at least two things that can unite the whole family: good food and good food policy. That’s something to be thankful for. 

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