U.S. farmers faced big challenges in 2020. Problems included trade disputes, low prices, and severe weather. Yet farmers ended the year with their highest net income in seven years. Where did all that cash come from?
In actual dollars, farm income is at its lowest in more than a decade. But in 2020, federal government subsidies equaled nearly 40% of farmers’ income. That was a 107% increase over 2019.
A subsidy is money given by a government to help a business keep the price of a product or service low. Low prices allow consumers to afford basic goods like milk or gas or services like housing or education.
Subsidies can also keep a struggling industry afloat. In 2008, the federal government funded the banking and automobile sectors. It did so to protect millions of jobs and prevent serious economic collapse.
Farmers, who must “[wait] for the precious fruit of the Earth” (James 5:7) and deal with the whims of weather and politics, often get government subsidies too. The subsidies help pay for supplies, equipment, and labor.
But subsidies have a big downside. They allow prices to go down. Low prices usually increase demand. Producers then sometimes can’t maintain the supply. That can cause a goods shortage. The shortage can trigger even greater demand, which can result in price increases. See the vicious cycle?
Not counting U.S. Department of Agriculture loans and insurance payments, farmers received over $46 billion in government subsidies in 2020. That’s the largest direct-to-farm subsidy total ever.
The impact of the farm subsidy varies from one farm to another. “The payment to one farm could be a matter of life and death of that farm and for another farm maybe just makes it not quite as bad of a year as it was going to be,” says farmer Mike Paustian.
Some farmers would have difficulty making ends meet without federal aid.
But Rick Juchems tells a different story. He grows corn and soybeans and custom raises hogs. “At first [the money] did help,” Juchems says. “But then we kept getting payments, and I don’t know that those were warranted.”
How does the government finance subsidies? It doesn’t. Citizens do—in the form of taxes. Taxes provide funding to dole out to farming and other industries. Those relief checks everyone gets excited about? (See “Congress Votes on Relief Bill” at teen.wng.org/node/6569. ) They’re a form of subsidy that will come out of working citizens’ pockets.
Lawmakers and economists have argued about subsidies for centuries: Would you rather pay more for groceries . . . or pay the government to subsidize the farmer?