The history of federal peanut policy illustrates why Congress could never competently manage a lemonade stand. The feds sabotage farmer productivity, screw consumers, and sow chaos around the world – all for campaign contributions. Federal spending for peanut subsidies has increased eightfold since 2015 – reaching almost a billion dollars and approaching the total value of the peanut harvest.
For half a century, peanuts offered one of the worst examples of federal feudalism. In 1949, to curtail subsidy outlays, Congress made it a federal crime to grow peanuts for fellow Americans without a federal license. The feds closed off the peanut industry, distributing licenses to existing farmers and prohibiting anyone else from entering the business.
The federal government maintained draconian controls to prevent any unlicensed peanuts from entering Americans’ stomachs. The Washington Post noted in 1993, “USDA [Department of Agriculture] employees study aerial photographs to help identify farmers who are planting more than their allotted amount of peanuts. Violators are heavily fined. USDA also issues each farmer a card imbedded with a computer chip that lists his quota. The farmer must present that card before he can sell his peanuts at a buying point.”
The federal program destroyed peanut farmers’ productivity, exhausting the soil and driving down peanut yields in many places. The program effectively prohibited crop rotation. Farmers responded by using more fertilizer – often harming the environment in the process. Land with peanut allotments was more expensive, thereby driving up farmers’ cost of production.
Strict controls on farmers were complemented by draconian import restrictions. Americans were long permitted to buy only 1.7 million pounds of foreign peanuts annually — roughly two foreign peanuts per year for each American citizen. That quota ended thanks to a 1990s-era trade agreement. Unfortunately, the Clinton administration placated U.S. peanut growers by slapping a 155 percent tariff on peanut butter imports – thereby shafting farmers in Argentina and Africa.
Peanut are one of the cheapest relatively foods American can buy. For generations, peanut butter has been the bedrock of many freelance writers’ diets (not that I’m bitter). But, after decades of peanut interventions, Americans’ peanut consumption was falling sharply by the mid-1990s. The General Accounting Office estimated that the program cost consumers more than half a billion dollars a year in higher prices.
The peanut program was created supposedly to help save family farms. But the number of peanut farmers plunged by more than 75 percent after the licensing scheme began. Many farmers sold their licenses to investors. The program sharply inflated the cost of production because most farmers had to rent the license to raise their crops.
Congress ended the peanut licensing scheme in 2002 with a $4 billion buyout that provided a windfall to license holders such as the John Hancock Insurance Company, which collected $2 million. There was no excuse for “bailing out” peanut-license holders but members of Congress pocketed plenty of “contributions” as a result.
Congress replaced the feudal program with a new program that was far more generous than other crop-subsidy programs. Peanut farmers can collect twice as much in federal subsidies as other farmers ($250,000 per year). In 2014, Congress passed a farm bill that guaranteed peanut farmers prices that were much higher than have prevailed for most of this century. Farmers responded by sharply boosting peanut production and USDA expects to spend nearly $50 million a year to store surplus peanuts.
USDA is anxious to hide the evidence of its failing policy. The solution? Dumping more than a million pounds of surplus peanuts on Haiti. Sixty organizations signed a letter to USDA warning that the donation “could potentially set off a series of devastating consequences” for Haiti’s 150,000 peanut farmers. The peanut industry is “a huge source of livelihood” for nearly 500,000 people, Claire Gilbert of Grassroots International, told NPR, “especially women, if you include the supply chains that process the peanuts.” One of the leaders of Haiti’s largest rural organization, the Peasant Movement of Papaye, denounced the peanut donation as “a plan of death” for the country’s farmers. Raymond Offenheiser, the president of Oxfam America, complained that “USDA has not done any market analysis in Haiti to ensure that this project does not interfere with local markets and does not reduce the opportunities for Haitian peanut farmers to sell their crop.”
Peanut policy has long sacrificed consumers and freedom to an endless series of desperate political schemes to drive up crop prices. This epitomizes how the feds have mismanaged agriculture since the 1930s. There is no reason to expect Congress to suddenly start caring about the havoc it sows. The only way to successfully reform farm subsidies is to abolish them.
James Bovard, a policy advisor to the Future of Freedom Foundation, is the author of Public Policy Hooligan, Attention Deficit Democracy, The Bush Betrayal, Terrorism and Tyranny, and other books. More info at www.jimbovard.com; on Twitter @jimbovard