Sunday, August 21, 2011

Food programs and out-of-control federal spending

With so much news regarding the national debt featured prominently in the major media of late, I thought it might be worth while to look at the debt – and it’s attendant federal spending – from a uniquely agricultural perspective.
Many – perhaps most of you – reading this blog are engaged in the production of food. This being the case, two aspects of federal spending are perhaps more immediate to you than to others.

The first is federal spending on direct or indirect aid to farmers and ranchers.

The second is federal spending on food programs – that is to say, the amount of federal money given to people to purchase food.

These things are immediate and important to us (I too am engaged in food production) because they bear on the huge problem of the burgeoning national debt and how it relates to each of us directly. The problem of the debt is self-evident and important (or should be) to all Americans. More on this in a moment.

As food producers, we make up somewhere between one and two percent of the population, so the immediacy with which we view federal spending on farm/ranch support is not shared with the other 98-99 percent of the population.

Since nearly all federal spending on food programs is channeled through the USDA, and is therefore nearly always described as “ag spending” and equated with money paid directly to farmers and ranchers, food programs are of immediate concern to us as well.

While we represent at most two percent of the population, food programs give federal cash directly to more than 50 million Americans, fully one-sixth or about 17 percent of the population. Federal spending on food programs is therefore understandably immediate and important to those folks, too.

Now let’s look at the numbers associated with the federal debt, and since they are so large, let’s put them in a context we should all be able to understand. First the huge numbers:

Annual income for the United States: $2.17 trillion ($2,170,000,000,000)
Annual spending for the United States: $$3.82 trillion ($3,820,000,000,000)
Annual NEW DEBT for the United States: $1.65 trillion ($1,650,000,000,000)
Existing debt for the United States: $14.271 trillion ($14,271,000,000,000)
U.S. budget cuts from debt ceiling legislation: $38.5 billion ($38,500,000,000)

To get a good feel for these numbers, simply cut off the last eight zeroes and think about them as the annual budget for your family.

Your annual income: $21,700
The amount of money you actually spent: $38,200
Debt you added to your credit card: $16,500
Previous unpaid balance on your credit card: $142,710
Spending you decided to cut to “fix” your indebtedness: $385

Just imagine the conversation with your credit card company. “I know I’ll owe you more than $150,000 at the end of the year – my total earnings for seven years – but good news! I’m not going to charge any movie rentals from now on, so instead of charging $16,500 this year, I’ll only charge $16,115! Of course I’ll never be able to make any actual payments on what I owe you, but, I’m sure my kids will make it good someday…”

In keeping with this theme, let’s say we tell our credit card company that we’re actually prepared to exercise even more spending restraint. In addition to no longer charging movie rentals, we will also no longer make our annual donation of $328 to the local school’s lunch program. Therefore, we’ll argue, instead of borrowing $16,500, we’ll only borrow $15,787. We’ll still not make any payments to the credit card company, nor will we plan to ever make such payments. Someone will take care of that in the future. In the mean time, we’ll have reduced (albeit by a tiny fraction) our rate of borrowing. That’s fair, isn’t it? We're doing a good thing, right?

Okay, let’s turn away from the imaginary family and back to the federal budget. Using the same “chop off the last eight zeroes” method for the moment, we see that completely eliminating the USDA from the federal budget will have even less impact on the federal budget than the “cuts” derived from the most recent round of debt ceiling legislation. Put the zeroes back, and you see that getting rid of the USDA entirely cuts only $328 billion from federal spending.

Cutting the USDA won’t fix the problem. But cutting the USDA, particularly if it were done suddenly, would almost certainly cause terrible problems for rich and poor alike.

Firstly, more than 66 percent of the USDA budget goes to providing food for the poor. Think about that for a moment. During budget talks, it's always trendy for major media talking heads to regurgitate numbers showing that "rich" farmers are receiving unneeded "welfare" dollars from the federal government. The truth, however, is that for every three dollars of ag spending, two go directly into the electronic accounts of the 17 percent of Americans who qualify for food assistance. Of the remaining dollar, only about 60 cents go to farmers. The remaining 40 cents goes largely to bureaucratic overhead and to research. With the possible exception of military spending, which is done on an entirely different scale, I'd argue that it is in ag spending where the taxpayer gets, by far, the best return on investment. Nowhere on the planet is food less expensive, nowhere on the planet are the "poor" so very, very wealthy.

But out of control spending is destroying the U.S. economy, and with it the future of our country. I can see no good reason not to remove farmers and ranchers from the federal teat. So long as private crop insurance is available and so long as the government does not continue to manipulate commodity markets (in order to keep food prices artificially low), farmers and ranchers can do just fine.

But it took more than half a century to get where we are regarding federal support of farming and ranching. The weaning process will take time.

It'll take time as well to wean the poor from food programs. A sudden end to those programs would be catastrophic. The poor would no longer be able to buy food – at least not with government funds. Some would have to sell off personal possessions to buy food. Some would have to budget and scrimp and save. Some would starve.

Since food is the most inexpensive thing we buy in this country, you might ask yourself why more expensive items can’t be eliminated first? As I see it, every other federal program should be on the table as well. If we all share the burden of giving up some of our treasured federal cash, the pain will be negligible. But the weaning process should be gradual and well planned.

A sudden end to farm payments would cause many farmers to fail. Fewer farmers would produce less food, and prices would soar. In fact, not only would prices soar, real food shortages would occur. Genuine food insecurity would begin, ushering in hoarding, riots, and all manner of disruption.

Agricultural research would come to a stop, and with it the ability to continue increasing yields and fighting pests and weeds.

It’s clear that abruptly “slashing” the USDA would have serious unintended consequences.

My point in this essay is neither to advocate “slashing” government programs nor to imply that government programs, including the USDA, are too important to be cut.

The point is that cuts have to be made to save both the economy and the country, but they have to be made over time and with a full understanding of the disruptions many of the cuts will make.

In truth, there are very few segments of society who cannot live without federal entitlement dollars. However, a great many segments have become dependent over time on these entitlement programs.

In my mind, the best thing for all of us – farmers and ranchers and food program recipients – is to become completely independent of, and no longer rely on, government entitlement programs.

This would be a fundamental change for all of us, and change is scary. But try to think about a system where you are completely in charge of your farm or your ranch or (in the case of those mired in the depths of the food programs) your life.

Is there really that much downside to no longer being under the thumb of faceless Washington bureaucrats or beholden to the whims of “transformational” politicians?

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