John Stossel: Do Government Farming Subsidies Hurt American Farmers?

Oct. 17, 2008— -- Every year, politicians promise that they are going to save the family farm. But government farm subsidies don't always mean good news for farmers.

This year, Congress passed another $300 billion farm bill. President Bush vetoed this farm bill -- twice. Sen. John McCain opposed it, calling it "bloated legislation that will do more harm than good." But Sen. Barack Obama supported it.

Obama wouldn't talk to "20/20" about the farm bill. Neither would 69 members of Congress who voted for it.

Finally, Randy Kuhl, R-N.Y., and Sheila Jackson Lee, D-Texas, agreed to speak.

Kuhl said farm subsidies help to keep rural communities alive, and without them people would move elsewhere and be forced to find different jobs. That's why he voted for the farm bill.

"The rural areas of this country are really being left behind, and I don't think we want anybody in this country to starve," he said.

Big Money, Small Towns

But farmers in Nebraska are doing pretty well. Home prices may be falling in most of America, but farmland prices are rising. In Nebraska: They've shot up 77 percent in four years. And it's not as if these subsidies are going to poor people: The average farmer makes twice what the average American earns.

Nebraska corn farmer Mike Korth has collected about $500,000 in subsidies in the last decade. He said he'll take the money, but he's against the farm bill.

"It's a bad bill," he said. "In the end, if you take a bunch of money, it's like they grab the treasure chest, they open the door on it and whoever can get the most out of it, you just run away with it."

But despite the billions spent on subsidies, farm towns are smaller than ever. In Randolph, Neb., Korth's hometown, store after store is boarded up.

"The school at one time had just short of 1,000 kids in it, and now there isn't 300," he said.

Actually, a government study found that the more farm aid a county got, the more likely it was to lose population.

Why would that be? Because subsides make it harder for smaller farmers to compete.

"Farm subsidies go to very, very wealthy farmers, not the ma and pa farm," economist George Mason University's Walter Williams said. "It's these huge agribusinesses that get the big subsidies."

The Rich Are Getting Richer

The subsidies go to farmers like Maurice Wilder. He's been America's single largest recipient of farm subsidies in recent years. Wilder is estimated to be worth $500 million. But he still gets your help making ends meet.

How do rich farmers get subsidies? The farm bill does have income limits -- such as no payments to farmers who make more than $1.25 million a year. But previous bills have also included income caps, and farmers have gotten around them by using creative accounting techniques.

No one knows exactly how rich farmers will get around this year's bill, but farmers like Korth said in a bill this large, 628 pages, you can bet there is a loophole in there somewhere for a wealthy farmer to crawl through.

The growers of most crops don't get subsidies. Apples, bananas, broccoli, cabbage, cantaloupe, carrots, cauliflower, grapes, lemons, limes, lettuce and many other crops get no subsidies. There's no cabbage crisis or pineapple panic.

And yet, because some big crops get subsidies, like rice and corn, food costs more. One reason prices are high is that farmers get paid for not farming.

Real estate agents even use farm payments to sell homes to nonfarmers. Agents didn't want to say that on television, so a "20/20" producer posed as a home buyer and brought along a video camera.

The three homes "20/20" visited that were for sale all got farm payments, even though nothing was farmed there. One of the homes hadn't been farmed in the last 20 years, but that hasn't stopped that homeowner from cashing in.

"This is just a crazy system," said David Boaz of the Libertarian Cato Institute. "It's left over from the 1930s, left over from the Depression. And it's a great example of how nothing is as permanent as a temporary government program."

Douglas Nelson, another Nebraska farmer, agreed.

"I think any time is a good time to pull the plug on subsidies of any industry," he said. "It's not a very efficient program."

Time to Pull Out?

Although Nelson depends on subsidies for farming, he's willing to risk going out of business if Congress ever decides to get rid of farm subsidies.

And without subsidies, some farms probably will go out of business. But "that's okay," Williams said. It's that kind of creative destruction that makes America strong.

"When there's progress, certain jobs are destroyed and certain jobs are created," he said. "The guy who used to deliver ice to my house no longer has that job. If we had tried to save his job, America would have been held back."

There is one country that abolished farm subsidies -- New Zealand. There were riots and protests when they did that. Farmers said they'd go bankrupt. People said they'd starve.

But it didn't happen.

In fact, farm productivity quintupled. After the politicians got out of the way, New Zealand farmers found ways to be more efficient and make more money.

Lee said farmers are grateful for the farm bill. She said they visit her office all the time, thanking her for allowing their family farm to survive.

But clothing and shelter are important, too. Why not subsidize them?

Lee's response? "You don't want to push us."