effect of subsidy and taxes on agricultural production
Agricultural subsidy Government intervention, through agricultural subsidies, interferes with the price mechanism which would normally determine commodity prices, often creating crop overproduction and market discrimination. Subsidies are also an inefficient use of taxpayerâ€™s money. For instance, in 2006, the Department of Agriculture estimated that the average farm household income was $77,654 or about 17% higher than the average US household income.[58] From a public economics perspective, subsidies of any kind work to create a socially and politically acceptable equilibrium that is not necessarily Pareto efficient.[59]
Agricultural policy of the United States In 1933, with many farmers losing money because of the Great Depression, President Franklin D. Roosevelt signed the Agricultural Adjustment Act, which created the Agricultural Adjustment Administration (AAA).[citation needed] The AAA began to regulate agricultural production by destroying crops and artificially reducing supplies. It also offered subsidies to farmers to encourage them to willingly limit their production of crops.[citation needed] The Supreme Court later struck down the AAA as unconstitutional, so in 1938 the Soil Conservation and Domestic Allotment Act was passed, which essentially created a similar organization for distributing farmer subsidies.[1]