Farm Bill Ends Direct Payment Subsidies

After nearly three years of working to create a 5-year Farm Bill that will reform agriculture policy, end unnecessary subsidies, save billions of taxpayer dollars, and help create American agriculture jobs, Members of Congress in the Senate and House have an agreement on a final bipartisan Farm Bill. Members of both parties have been trying to end direct payment subsidies for decades—and with the 2014 Farm Bill, the era of direct payments will finally come to an end.

2014 Farm Bill Finally Ends Needless Subsidies

Despite years of criticism and bipartisan demand that Congress end the wasteful direct payment subsidy program, they have continued to live on – at the expense of taxpayers. The 2014 Farm Bill ends these subsidies once and for all.

By ending direct payment and other unnecessary subsidies, which pay farmers even in good times when there is no actual need for assistance, the Farm Bill cuts farm subsidy spending by billions of dollars and creates more accountability in agriculture programs. This effort represents a landmark shift in federal agriculture policy:

“If signed into law, the subsidy cuts would mark one of the biggest changes to farm policy in years.” – The Wall Street Journal, 6/7/12

The Farm Bill is “genuinely a landmark shift … away from direct cash payments to farmers – a much-criticized system begun in the mid-90s – and toward a more market-oriented approach keyed to crop insurance ... The stakes are big: a bipartisan bill promising real savings and impacting an important part of the economy.” – Politico, 6/12/12

Ending direct payments “represents one of the biggest policy changes in generations.” – Bloomberg, 4/26/2012

Farm Bill Transitions from Subsidies to Risk Management

Direct payment subsidies are paid to farmers every year whether they need it or not. Bipartisan Senate and House negotiators have ended these payments in the final 2014 Farm Bill. Instead, the Farm Bill creates a commonsense risk management approach that provides support for farmers only when they are hit with weather disasters or market volatility. The new Farm Bill strengthens crop insurance, which is more cost-effective than traditional farm subsidies because it requires farmers to have skin in the game by purchasing insurance policies to help ensure they aren’t wiped out by disasters.

Because the cost of insuring entire farming operations is so great, the federal government helps farmers pay a portion of their crop insurance premiums. Transitioning from direct payment subsidies to crop insurance means farmers get a bill for their premium rather than a check every year.  It means farmers are not paid in good times but are protected in the case of disaster, and that also means there is less need for Congress to pass ad hoc disaster relief after disasters strike. It also means consumers are protected from spikes in food prices that widespread farmer bankruptcy could create.

The importance of crop insurance was underscored during the historic droughts of 2012 which parched more than 80% of the country – devastating crops everywhere. Because most farmers have crop insurance policies, family businesses didn’t go under and farmers had the tools they needed to pick up the pieces and move forward. Taxpayers were not asked to foot the bill for a disaster relief bill as in past disasters, because farmers had purchased insurance policies. 

2014 Farm Bill Consolidates and Streamlines Programs

Senate and House negotiators have also eliminated or consolidated nearly 100 programs or authorizations, and streamlined the remaining programs to get better results with fewer taxpayer dollars. Over the years, successive Farm Bills have created new programs and authorizations, sometimes with overlapping functions and duplicative objectives. The new Farm Bill combs through USDA’s programs and eliminates duplication and unnecessary efforts, to further save taxpayer money and make agriculture programs more accountable and efficient.