One of the things holding productivity back and, along with it, compensation, is rent-seeking. When governments dispense privileges to particular firms, entrepreneurs spend their time asking politicians for those privileges instead of devising new ways to create value for customers. Economists call this activity rent-seeking, and research suggests that it depresses productivity growth.
While the bailouts of hundreds of firms in 2008 are, for many, the most prominent example of cronyism in modern American history, they are only the tip of the iceberg. Bailouts are but one example in a long list of privileges that governments give to particular businesses and industries.
Four out of every five dollars in the currently debated bill—roughly $80 billion per year—will be spent on groceries bought with food stamps for one in every seven Americans. An estimated 45 million Americans received food stamps in 2011 at a cost of $78 billion. That’s a two-fold increase from just five years ago, when 26 million people received benefits at a cost of $33 billion.
Nearly 90 percent of the 1705 loans guaranteed by the federal government since 2009 went to subsidize lower-risk power plants, which in many cases were backed by big companies with vast resources. It’s hard to imagine that these big companies wouldn’t have access to capital if the project were in such high demand.
The farm bill comes up for renewal every five years, and its specific provisions determine whether major farm programs administered by the U.S. Department of Agriculture (USDA) will continue. As Congress considers reauthorization of the farm bill this year, it is important to put the history of farm bill spending in proper context.