Milking taxpayers

THE father of Major Major, a character in Catch 22, a novel by Joseph Heller, makes a good living not growing alfalfa. “The more alfalfa he did not grow, the more money the government gave him, and he spent every penny he didn’t earn on new land to increase the amount of alfalfa he did not produce.” Each day, Mr Major “sprang out of bed at the crack of noon... just to make certain that the chores would not be done.”

To this day, to be treated as a farmer in America doesn’t necessarily require you to grow any crops. According to the Government Accountability Office, between 2007 and 2011 Uncle Sam paid some $3m in subsidies to 2,300 farms where no crop of any sort was grown. Between 2008 and 2012, $10.6m was paid to farmers who had been dead for over a year. Such payments explain why Tom Vilsack, the agriculture secretary, is promoting a rule to attempt to crack down on payments to non-farming folk. But with crop prices now falling, taxpayers are braced to be fleeced again.

American farm subsidies are egregiously expensive, harvesting $20 billion a year from taxpayers’ pockets. Most of the money goes to big, rich farmers producing staple commodities such as corn and soyabeans in states such as Iowa.

Few politicians are inclined to vote against farm subsidies: though farmers make up only a small number of voters, even in agricultural states, they are loud and organised enough to punish lawmakers who vote against a farm bill. Opposition to spending is muted; few voters realise how much of their money is given to farmers and even fewer would change their vote because of it.

The 2014 bill, which passed with 68 votes in the Senate and comfortably in the House, at least nodded to reform. Most importantly Congress abolished direct payments based on land ownership. Instead, farmers now get more subsidised insurance, and new payments which are linked to past crop prices and productivity. Those not “actively engaged” in farming are in theory banned from collecting subsidies—though Congress delegated the task of defining who is really a farmer to Mr Vilsack’s department.

This new system was meant to save around $23 billion over a decade—partly through cuts to food stamps for hard-up families, a welfare programme which, oddly, is administered by the US Department of Agriculture (USDA). But because payments are linked to commodity prices and output, the new system could cost much more, says Vincent Smith, an agricultural economist at Montana State University. It could also get America into trouble with the World Trade Organisation if payments exceed certain thresholds.

Ominously, on February 10th the USDA predicted that net farm income would decline by 32% between 2014 and 2015. Commodities such as corn (which in America is used to produce everything from biofuel to syrup) and soya have become less valuable of late thanks to soaring supply and weak demand. Falling prices reduce the cost of subsidised crop insurance to the taxpayer (since less valuable crops cost less to insure). But those gains will be wiped out and more by the cost of compensating farmers for their lower incomes.

Any new rules designed to stop non-farmers from getting payments will be unlikely to work, predicts Mr Smith. While it may be possible to stop some landowners from claiming payments, they will adapt: “You hire a good agricultural lawyer and redefine the structure of the farm.” Many landowners have already found their way around similar rules introduced in the farm bill of 2008, nominating young children as farmers, or claiming to be engaged in farming by providing management advice. Alfalfa non-growers still have bumper times ahead.