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NTU Supports Efforts to Limit Farm Subsidies

February 15, 2005

The Honorable Charles E. Grassley
United States Senate
135 Hart Senate Office Building
Washington, DC 20510

Dear Senator Grassley:

On behalf of the 350,000 members of the National Taxpayers Union (NTU), I write to offer our support for your legislative efforts to limit the amount of money American taxpayers are forced to pay to each farmer. This sort of common-sense approach is exactly what President Bush called for when he outlined his desire to pass "a lean budget that sets priorities."

NTU has long called for significant economic liberalization of the agriculture sector, and we recognize that passage of these modest payment limits would have a relatively small effect on total direct payments to farmers. In fact, since passage of the 2002 farm bill, these payments have soared to more than $20 billion per year, up from an average of $9 billion per year in the early 1990s. Although more aggressive cuts are necessary, your legislation would save taxpayers at least $430 million annually for the life of the current farm bill (which expires in 2007).

There is little in the way of economic justification to support our current farm policies, but one of the leading political arguments is that massive direct payments to farmers by taxpayers are somehow preserving "family farms." Of course, in part due to the nearly unlimited subsidy payment amounts available under current law, the top 10 percent of recipients receive nearly two-thirds of all subsidies while the bottom 80 percent -- which includes virtually all of the family farmers the subsidy programs were established to help -- claim just 19 percent of all subsidies. This disparity actually harms family farmers by spurring rural land price inflation.

Yet another reason to abandon the status quo is that by reducing payments, Congress would be reducing incentives to overproduce commodities (such as cotton) that have been found to violate our obligations under the World Trade Organization. Although taxpayers will support any move to reduce payments, there are several arguments for even more significant reforms. First and foremost, Washington policymakers should carefully study the examples of Australia and New Zealand -- two nations that largely eliminated direct payments to farmers during the 1980s yet are highly successful in the international agriculture marketplace.

NTU appreciates your willingness to take the lead in addressing one of the most egregious aspects of our current farm policies. For the good of taxpayers and a majority of farmers alike, it is our hope that you will consider making further reforms in the near future.


Paul J. Gessing
Director of Government Affairs