Subsidizing the Subsidies

This 2002 piece from Ron Bailey has a timeless example:

One thousand Arkansas rice farmers have just about pumped away all their ground water. Naturally, they are looking to taxpayers for relief.

Specifically, they are clamoring for the U.S. Army Corps of Engineers, the federal agency responsible for America's waterways, to spend $200 million on a new system of reservoirs, canals, and pumping stations to divert water to their farms from the nearby White River. The state is supposed to toss in an additional $119 million, for a total taxpayer gift of $300,000 per farmer. This is on top of the considerable crop subsidies the farmers already receive: They sell their rice for $3.10 per bushel even though the market price is only $1.40.

...Resource economist Delworth Gardiner, a professor emeritus at the Brigham Young University, has calculated that the total cost to society of a typical federal irrigation project is $400 per acre-foot of water (an acre-foot is the amount of water it takes to cover one acre to a depth of one foot). The market value of the water ranges from $50 to $100 per acre-foot, but farmers usually pay the Bureau of Reclamation about $20 to $30. If such irrigation projects were evaluated on a true cost-benefit basis, says Gardiner, "there would be no new federal water projects at all."

He also discusses my favorite idea, recognizing farmers' rights to water and then making them pay if they use more or allowing them to profit if they use less, i.e.,

In the case of federal water projects, farmers would receive their initial allocation of water at, say, $20 per acre-foot. If they needed more, they'd pay $100 per acre-foot. If they saved water, they could sell it to city dwellers for $100 per acre-foot. In fact, it might be more profitable for some farmers to stop farming and sell all their water to other users. Such a system would not be perfect, but it would be better than the mess we find ourselves in now.

You bet.

Bottom Line: Excellent examples and ideas. Why aren't they implemented? Because politicians like to give subsidies to farmers campaign donors, and markets for water would make those subsidies too obvious grotesque to ignore. Time for some transparency.