Food Stamps and Farm Subsidies: Curious Bedfellows

Today the House voted on the Farm Bill so everyone is talking about the latest fireworks in DC. I caught some news on my commute home from work which got me thinking. Uh Oh!

I’m not an expert on the subjects of food stamps and farm subsidies but there is something interesting about the fact that these two items have historically been combined into a single funding bill.

On one hand you have government funding for food producers. On the other hand you have government issued tickets, redeemable in food. The farm bill, as it’s commonly referred to, budgets federal money to be spent both on farm subsidies and the Supplemental Nutrition Assistance Program (SNAP), better known as food stamps.

What are farm subsidies?

The federal government under the Interstate Commerce Clause sets the prices of certain food commodities. These fiat prices are set below what the market would dictate, which means, farmers are forced to sell the food they grow for less than what it costs them to produce it. The feds also dictate how much of a particular item farmers can grow. Growing too much, even for their own needs, can land them in court facing hefty fines. So the government in it’s infinite wisdom created farm subsidies. Farm subsidies are monies that the government pays to farmers to make up, at least in part, for the lost revenues that occur as a result of price fixing and restricting harvests. The result of all this is that the farming industry has become known as subsidy farming. Besides having to be proficient in farming the land, farmers have had to learn the ins-and-outs of filing paperwork and lobbying the federal government for subsidy money to stay afloat.

How does the food stamp system work?

Food stamps (SNAP) are doled out to people who qualify for federal assistance because of low income. Grocers who accept food stamps trade these tickets for food. These tickets, now in the form of a debit card, are entered in to the grocers books as income with each transaction. The retailer is then reimbursed from the federal reserve bank for all the food stamps they accepted. Only particular food items may be purchased with food stamps. Food manufacturers lobby Congress to make sure their items are on that list. Grocers also make big profits under the SNAP program. It’s easy to see where the pressure to increase federal food stamp funding comes from. Of course we’re told the motives of the system are not driven by profit, but sympathy. We can’t allow children to starve in the streets now can we. Cue violins.

My theory on the matter.

So who benefits by tying farm subsidies to food stamp spending? It’s obvious that farmers need those subsidies to survive when government forces them to sell themselves out of business. It’s also obvious that no one wants to be holding the controls when kids start starving to death for lack of funding. Combining these two items ensures the farmers get their money by tugging at the heartstrings of society over the thought of hungry children, and the food manufacturers also get their money when food stamp recipients spend them on their products.

This is what is known as crony capitalism. It’s not unrealistic to think that if the government got out of the way, or at the very least, if congress was not for sale, this whole mess could be rectified by the market. Regulations in the farming industry make it impossible for small family farms to compete. The majority of food produced in the US comes mainly from huge farming corporations – the ones who many times create the very legislation that serves to eliminate their competition. These massive farming businesses are also the ones who can afford to staff lawyers and lobbyist to ensure those government dollars keep flowing their way.

It’s not rocket science. The more people who farm, the more food there is to go around. Price fixing and regulations make it much more difficult for farmers to produce. The less food that is produced, the more food will cost and the less people will be able to afford it without government assistance.

When congressman cater to lobbyist; When government sets prices; When government spending is monetized by a central bank which creates money out of thin air; markets cannot do what they do best – solve problems and satisfy the needs of consumers. When markets are restricted, no one should wonder why there are starving children. Unfortunately, not too many people connect the dots to realize that Government created the problem, which they demand only they can fix. All they need is a little bit more control.

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2 thoughts on “Food Stamps and Farm Subsidies: Curious Bedfellows

  1. Your prescription doesn’t seem to work in India, which is on this very issue, is far more ‘free market’. The fact is that hyper-competition has never worked for the producer. Equally the fact is, the poor are not in a position to look after themselves.
    Yet, I loved the way you pointed out the paradox. A fantastic post and extremely thought prvoking. My compliments.

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