A Brief History of U.S. Farm Aid
This Wall Street Journal article goes over a brief history of U.S. farm aid from before the Great Depression to controversial farm policy under the Trump Administration. Sparked by a policy change from this summer extending up to $12 billion in emergency aid to American farmers hurt by trade tariffs, the article examines the impact of past government spending towards farm support on agricultural trends and the U.S. economy. To understand contemporary farm aid, it’s important to know how government spending on farms affected the country in the past. Sign into your Wall Street Journal account or read an excerpt here:
How Farm Aid Became a Fixture
Trump administration’s plan for $12 billion in help for farmers hit by tariffs builds on a history of agricultural support
By Jacob Bunge
The U.S. government has been spending directly on agricultural-support programs ever since the Great Depression.
This week the Trump administration said it would extend up to $12 billion in emergency aid to farmers hurt by trade tariffs. That comes on top of about $21.5 billion the government is already expected to spend this year on existing farm-support programs, according to the Congressional Budget Office. Those existing programs are meant to shield farmers from crop-price downdrafts, help young farmers get started and encourage conservation.
Most of these [programs] were put in place in the 1930s originally as temporary programs, said Joseph Glauber, a visiting fellow at the American Enterprise Institute and a former chief economist for the U.S. Department of Agriculture. Here we are, however many years later, and they’re ingrained.
Over the century following the country’s founding, the U.S. government supported agricultural production through steps such as public land sales and establishing the land-grant university system, which pursues regional crop research. Government spending also funded early irrigation and drainage projects that boosted agricultural output.
It worked in some cases, too well. American farmers expanding harvests helped pushed down crop prices in the years leading up to the Great Depression, prompting the government to look at national-level farm support programs. The 1933 Agricultural Adjustment Act, part of the Depression-era New Deal, introduced government price supports, paying farmers to leave grain and cotton fields idle and shrink hog herds. The government also purchased farm goods and subsidized export sales. Farm incomes improved, but the U.S. agricultural sector didn’t fully recover until World War II jump-started demand.
To help stave off a postwar recession, Congress extended farm-support programs, in the process making government support the norm in farm country. Subsequent wars and growing exports whittled down food surpluses, but also gave farmers in other countries an incentive to grow bigger crops. In the early 1980s, rising interest rates, President Jimmy Carter’s grain embargo against the Soviet Union, and bad weather combined to push a wave of farms into foreclosure, leading Congress in 1985 to set out a new loan-based price-support system.
The Farm Belt recovered, and by the mid-1990s Congress sought a way to wean the sector from government support. The 1996 Farm Act eliminated most controls on supply and devised a new system of fixed payments related to past production levels, meant to last five years. But soon, a string of bumper harvests and the 1998 Asian credit crisis pressured crop prices and posed a new threat to U.S. farmers' livelihoods, spurring the government to make periodic payments to mitigate losses. The 2002 Farm Act converted those payments into a program that paid farmers when commodity prices dipped below specified targets.
By 2014, growing criticism of direct payments to farmers by then averaging $6.6 billion annually, regardless of crop prices or farm incomes led Congress to replace these with a new insurance-based system. That system, currently in effect, includes broadened crop-insurance coverage, a supplemental program that compensates out-of-pocket losses not covered by insurance, and assistance when farmers’ revenue or crop prices fall below certain levels.