Farm Subsidy Reform Could Backfire

A Senate proposal to end direct federal payments to farmers and replace it with a new subsidy program gambles that crop prices will remain at historically high levels, a tactic that could backfire and double its cost, some experts say.

The proposed “shallow loss” program would pay farmers when decreasing yields or declining crop prices result in a farmer’s revenue falling below historic averages. The program would save about $2 billion annually compared with the current $5 billion direct payment system — but only if crop prices remain near their current levels. If prices dip, the saving could disappear and the cost could exceed the direct payment price tag, experts say.

“On balance, the policy shift is ill considered from a broader public policy perspective,” said Vincent Smith, an economics professor at Montana State University and a visiting scholar at the American Enterprise Institute, a conservative-leaning Washington think tank.

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