CAGW Issues Weekly Spending Cut Alert: Peanut Subsidies | Citizens Against Government Waste

CAGW Issues Weekly Spending Cut Alert: Peanut Subsidies

Press Release

For Immediate Release
June 2, 2011


Contact:  Leslie K. Paige 202-467-5334 Luke Gelber 202-467-5318

CAGW Issues Weekly Spending Cut Alert: Peanut Subsidies

Today, Citizens Against Government Waste (CAGW) issued its weekly spending cut alert aimed at the federal government’s peanut subsidy. According to the Congressional Budget Office (CBO), commodity programs such peanut subsidies, are expected to cost taxpayers $51 billion over the next ten years. Eliminating peanut subsidies, which is among the recommendations advocated in CAGW’s Prime Cuts database, would save taxpayers $55 million in one year and $275 million over five years. Peanut subsidies garnered 52 percent of the vote in this week’s poll of CAGW’s Facebook followers, besting three other spending cuts for the top spot.

Programs designed to support the peanut industry have existed in some form since the early 1900s. Originally, peanuts were subsidized with a production quota; only those who owned or leased production quotas from the government were allowed to grow peanuts commercially. These quotas drove the cost of peanuts to nearly twice the world price, and the quotas themselves became very valuable. The 2002 Farm Bill eliminated production quotas, but members of Congress chose to compensate farmers for removing this sought-after “resource,” so they implemented direct payments, which cost taxpayers $1.3 billion over five years.

The new peanut subsidy is marginally less egregious, but that’s not saying much. The new direct payments and counter-cyclical payments are available to “historic peanut producers,” or those who grew peanuts from 1998-2001. Farmers so designated receive payments whether or not they currently produce peanuts. These programs still significantly distort the U.S. peanut market. Rep. Paul Ryan’s (R-Wis.) “Path to Prosperity” budget proposal stated, “With crop prices – and deficits – hitting new highs, it is time to adjust support to this industry to reflect economic realities…reduce the fixed payments that go to farmers irrespective of price levels, to reflect that soaring commodity prices are reducing the need for high levels of farm-income support.”

CAGW President Tom Schatz said, “Agricultural products should be grown and sold according to free market forces, not government intervention. Enforcement of quotas, import controls, and marketing restrictions distort markets and increase the cost of food to taxpayers and consumers. In the case of peanuts, a safety net for small farmers might be a worthy goal, but the existing convoluted mess of subsidies is not a safety net because it pays out in good times and bad, and disproportionately benefits wealthy farmers. In addition, the total paid by U.S. consumers and taxpayers in direct and indirect costs is higher than the benefits received by farmers. Only when Congress restructures existing U.S. agriculture subsidies or abolishes them altogether will taxpayer dollars cease to be squandered.”

Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.

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