How Our Government Incentivizes the Overproduction of Junk Food

By Roosevelt Institute |

Americans need their tax dollars spent on providing food that will make us healthy, not food that’s tied to the obesity epidemic.

While Michelle Obama has been working hard to reduce childhood obesity through her “Let’s Move” campaign, she has done little to advocate for change in the Farm Bill, which is set to expire on September 30th. This is the main piece of agricultural legislation, and some believe it is the root cause of the obesity problem. Our country spends far too much of taxpayer money subsidizing the very foods that may be making us unhealthy.

Over the past five years, the Farm Bill has distributed $42 billion of our tax dollars to farmers, mainly in the form of direct payments or subsidized crop insurance. Those that qualify for these payments are mostly big commodity firms that grow such crops as corn, wheat, soy, and cotton, and they are paid regardless of crop prices. A majority of these firms are large enough that with the recent rise in commodity prices and without a regulatory limit on how much they can produce, much of the government subsidy gets banked as extra profits. The subsidies not only add to the national debt, but incentivize the overproduction of crops that are the major ingredients in unhealthy foods.

The Environmental Working Group reported that from 1995 to 2010, 75 percent of farm subsidies went to firms with incomes in the top 10 percent. Such payments are also further concentrated in the states that grow the largest amounts of corn and soy. In the same period, $167.3 billion was spent on commodity crops, of which $77.1 billion went to corn subsidies, with $14.2 billion spent in Iowa alone. All 50 states engage in some sort of agriculture, yet 8.5 percent of subsidies are concentrated in Iowa, spent mostly on corn that is inedible to humans. This corn is either fed to animals, used as fuel in the form of ethanol, or undergoes heavy processing to become an ingredient in sodas, candy, and other food.

And these food items have been linked to high rates of obesity. The real cost of foods containing unhealthy, commodity-related ingredients has consistently declined since 1985, while the consumption of such unhealthy foods has gone up correspondingly. From 1986 to 2000, the prevalence of obesity quadrupled from one in 200 Americans to one in 50.

Why did our government initially subsidize these commodity crops? Subsidies were a way to manage surplus food resulting from increased production needed to fuel WWII and to feed Europe, whose agricultural land had been destroyed. They offset and controlled the overproduction of these crops so as to prevent them from flooding the market. The government began paying farmers not to grow commodities, and they purchased surpluses to be placed in large government stores. By controlling production, they helped keep commodity prices stable. In the 1980s and 1990s, big food processers lobbied to get rid of these regulatory subsidies to maximize the amount of crops produced. Increased production was believed to promote economic growth through expansion into foreign markets. The overproduction caused prices to fall dramatically, yet farmers continued to produce more and more to try to make up for their losses.

Instead of trying to fix this issue through regulating commodity production, the 1996 farm bill, otherwise known as the “Freedom to Farm” bill, got rid of all subsidy programs that incentivized farmers to control their production and let the market provide payment to farmers. However, farmers became incredibly vulnerable to market fluctuation and many went bankrupt. To avoid an all-out disaster, the government enacted emergency subsidy payments to farmers, which were then made permanent by congress in 2002. This toxic combination of deregulation and perpetual subsidy has led to the overproduction and overuse of crops that we find in junk food.

But some of these payments may change in the near future. In a rush to impact the deficit, the “super committee” attempted to slash the Farm Bill by $23 billion over the next 10 years. A majority of these cuts, about $15 billion, will come from these direct payments to commodity farmers. But $6.5 billion will come from conservation programs and $4 billion from food stamps. While the commodity cuts look big, structurally the bill remains the same, with incentives still in place for farmers to grow large quantities of commodity crops. Programs that tend to promote healthier food under conservation, such as converting conventional farms to organics and capital for new farmers, will likely be cut. During the final hearings, some senators did voice concern over crop diversity, opportunities for new farmers, and conserving soil and water resources. However, there was no comprehensive proposal offered to address these issues, meaning they will likely be forgotten.

While some researchers deny the relation between subsides and obesity, there is no question that there are more cheap junk foods on supermarket shelves than ever before and that obesity rates are at a record high. It is also hard to ignore that the main ingredients in these cheap, unhealthy foods are the subsidized commodity crops that have flourished due to policies enacted during the ‘80s and ‘90s. While some subsidies for commodity crops are likely to be cut, the government needs to once again play a regulatory role in agricultural markets. Because of the unpredictability of agricultural production, farmers will continue to lean on the side of planting more as they take advantage of high commodity prices. Until there is regulation of such crops and incentives for the production of healthier options, the cheap price of unhealthy foods will continue to win out over healthier options that are less appealing to some both in taste and in price. We need our tax dollars or our debt invested in food that we actually eat, that will keep us healthy, and that is accessible to Americans of all income levels. 

Lauren Servin is a Roosevelt Institute | Pipeline Fellow focusing on agriculture policy and food security.

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