AEI report questions $28 billion bailout for farmers hit by Trump trade war

President Donald Trump's grant to American farmers of $28 billion over the past two years is a costly mistake, according to a November 2019 report by think tank American Enterprise Institute.

AEI asked whether the farmers were being overpaid for damages, noting studies suggest soybean payments should be around 50 percent less than under the current payment formula.

Farmers have borne a heavy burden as Trump has launched trade wars between the U.S. and its trading partners. American soybean crops have been left to rot, for example, due to tariffs by China on soybeans.

In response to “unjustified retaliatory tariffs and decades of non-tariff trade disruptions” the U.S. Department of Agriculture announced an additional $16 billion package of subsidies for farmers in July. In 2018, a $12 billion package was approved.

Within the 2019 package, the Market Facilitation Program made up most of the federal government’s direct subsidies to farms last year and followed up on the prior year’s version of the same program, according to the report by AEI. In total, farm subsidies reached $28 billion over the course of 2018 and 2019, it found.

Top states benefiting from the Market Facilitation Program as of September were in soybean country, and soybean farmers received 75 percent of subsidies in 2018. The AEI estimates that Iowa is the largest beneficiary of the program, with $1.528 billion in 2018 and 2019, followed by Illinois with $1.476 billion and Texas with $1.297 billion. Over the same period, states like Massachusetts, Connecticut and Hawaii are estimated to receive subsidy payouts of less than $1 million.

The report was authored by former USDA Chief Economist Joseph Glauber, a visiting scholar at the AEI and senior research fellow at the International Food Policy Research Institute, and he told NPR he found the lack of attention being paid to the crisis surprising.

Glauber noted the sums being used to bail out farmers exceed the total cost of bailing out the automotive industry after the 2008 financial crisis (about $10.2 billion, according to Politico). He said that the payouts deserved more public scrutiny and attention.                

The Market Facilitation Program did not pass through Congress. Trump drew the funds from the Treasury via the USDA financing institution the Commodity Credit Corp.

Rep. Marcia Fudge (D-Ohio) told NPR the move by Trump was “unfair” and an obvious bid to buy off his supporters.

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