Erin Miller

For the Course: P8548 Public Health Law

Tackling Obesity through Agricultural Policy: Could changing Agricultural Subsidies in the United States Decrease the Growing Rates of Obesity?

Introduction
Obesity is an epidemic in the United States. The primary driver of obesity rates is an increase in the number of calories consumed daily by the average American. The average American is consuming 300 additional calories each day since 1985.[1] Many proposed legislative solutions to the problem of obesity focus on improving the food choices of Americans. The majority of these proposals focus on influencing the behavior of the consumer (i.e. the demand side). These proposals include: increased public education campaigns, disclosure of nutrition and calorie information, restricting the advertisement of unhealthy foods to children and taxing unhealthy foods.[2],[3] It is also possible to influence food choices by acting on the supply side of the American food chain. This paper will address one legislative solution to the problem of obesity that seeks to influence the supply side of food products, through the adjustment of agricultural subsidies. The first section of the paper will provide background information on the problem of obesity in the United States and agricultural subsidy policy. The next section will address the possible effectiveness of changing agricultural subsidy policies. The following section will discuss the relative benefits of taxing unhealthy foods versus changing agricultural subsidy policy. A discussion of the policy implications of this research will follow. The concluding section will summarize the arguments of this paper.

Background
Obesity is a serious and growing problem in the United States. Two thirds of American adults are now overweight or obese. The rates of obesity in adults have doubled since 1980, and the rates of overweight in children have nearly tripled in the same time.[4] Obesity is associated with several health problems, including coronary heart disease, type 2 diabetes, certain cancers, hypertension, and stroke.[5] A report by the Surgeon General in 2000 estimated that the total direct and indirect costs of obesity in the United States in 2000 were $117 billion per year. Taxpayers pay half of the health-related expenses of obesity and overweight through Medicare and Medicaid expenditures.[6] Obesity is now the second leading cause of preventable death in the United States.[7]

Adjusting agricultural subsidies is one legislative solution to improving the food choices made by Americans, in an effort to encourage the consumption of fewer calories daily, and thereby limit the growth of obesity rates. United States policies relating to agricultural subsidies are complex. Farm subsidy policies include hundreds of provisions for specific commodities and include both farm bill programs and trade barriers that raise U.S. farm prices and incomes. Additional policies such as acreage set-asides have increased the cost of certain commodities. Farm subsidies have resulted in lower prices of food grains and feed grains, but higher prices of beet sugar and cane sugar, because the import of beets and sugar cane is restricted through trade barriers. Studies have estimated that the effect of eliminating all food subsidy programs would cause the price of certain foods, such as wheat and corn increase, and the cost of other foods, such as soybeans, sugar canes and beets, fruits and vegetables, and beef to decrease.[8]

Possible Effectiveness of Changing Agricultural Subsidies
The argument supporting changing agricultural subsidies to decrease obesity rates is relatively straightforward. Subsidies drive down the costs of certain agricultural products, notably wheat and corn, which decreases the cost of certain foods, notably bread, cereal, livestock products such as dairy and meat foods, and a caloric sweetener derived from corn (high-fructose corn syrup). Therefore, decreasing or eliminating these subsidies would increase the costs of these foods and decrease their consumption, while increasing the production and consumption of fruits and vegetables. A decreased consumption of calorically-dense foods and an increased consumption of fruits and vegetables would lead to less obesity.[9]

Four arguments are made against the proposal that decreasing agricultural subsidies would decrease food consumption and thereby obesity rates.[10] The first argument is that subsidies do not make only fattening foods more abundant and cheaper. Agricultural subsidies have a mixed effect on the prices of various food items. Subsidies increase the cost of cane and beet sugar, orange juice and dairy products through import restrictions. Additionally, acreage set-asides have minimized the cost reduction in wheat and corn and even reversed it in soybeans. If all agricultural subsidies were eliminated, the cost of wheat would increase 1.52 percent, and the price of corn would increase only .26 percent, while the cost of cane and beets (and therefore sugar) would decrease by 15.3 percent, thereby actually lowering the price of caloric sweeteners.[11] The second argument is that impacts on commodity prices would have little effect on food costs at retail and even less on those prices passed on to consumers. The cost of farm commodities as ingredients represents only a small share, on average about 20 percent, of the retail price of food. Farm commodities constitute even less of the cost of soda and food produced away from home that is commonly implicated in the obesity epidemic.[12] The third argument is that food consumption is relatively unresponsive to changes in market prices. The fourth argument is that food consumption has not previously changed markedly in response to policy-induced adjustments in relative prices.[13]

I assert that all four of these arguments are flawed. The first argument, that the elimination of all agricultural subsidies would increase the cost of wheat and corn only slightly and decrease the cost of sugar substantially, is flawed because changing agricultural subsidies would not necessarily indicate their complete eradication. Policymakers could decrease subsidies on wheat and corn without raising the import restrictions on cane and beet, leading to an overall increase in the cost of caloric sweeteners. (This increase is cost would have to be balanced against the possible dangers of non-caloric sweeteners, which may possibly lead to other health complications, but would still likely decrease obesity.) Additionally, eliminating all agricultural subsidies would decrease the cost of fruits and vegetables by 5.16 percent,[14] which provide a healthy, low-calorie alternative to other snack foods.

The second argument, that increase in the cost of food commodities would have only a small effect on the price faced by consumers and therefore a small impact on consumption, is also flawed. The extremely low costs of fats and sweeteners (in the form of high-fructose corn syrup) have effects beyond the final price of food faced by consumers. Their low cost encourages their use in all types of foods, encourages greater food processing, and encourages increased portion sizes in order to maintain revenues. According to Marion Nestle, “the cheapest way to make foods takes good…is to add sugar and fat,” which means that subsidized high-fructose corn syrup, hydrogenated fats, and corn-fed meats end up in a variety of pre-packaged foods.[15] The low cost of these agricultural commodities also encourages the processing of food, in an effort to add value to the inexpensive raw materials, allowing the companies to charge more for the final product. Additionally, despite the low cost of the raw commodities, food vendors do not lower their prices, because it would lead to a decrease in revenue. Instead, vendors compete for customers by increasing portion sizes.[16] If subsidy policy was adjusted so that the raw commodities were more expensive, it is possible that fewer vendors would choose to compete based on portion sizes.

The argument that the food consumption is unresponsive to price is unsubstantiated. In the general population, consumers make food choices based on taste, costs, convenience, health, and variety. However, in low-income populations and among the unemployed, taste and cost are the primary drivers of consumption. Families attempting to maintain food as a fixed percentage of their budgets during a period of decreasing income (as many families are experiencing in the current recession) will be driven towards energy-dense foods with a higher proportion of grains, sugars and fats.[17]

The fourth argument, that food consumption has not changed markedly in response to food policy changes, also seems flawed. In the 1970s food prices rose, leading to public demand for a policy intervention. There was a corresponding shift in policy from limiting the supply of grain on the U.S. market (in order to maintain prices and prevent the disastrous circumstances of the Great Depression) to encouraging farmers to produce more grain. New Deal agricultural policies were designed to give farmers loans to keep their product off the market in times of low prices, so that they would wait for better prices before selling, thereby limiting the supply of grain. However, food prices rose substantially in the 1970s, leading to public outcry and a shift in subsidy policy. Since the 1970s, the subsidies have taken the form of direct payments, so that farmers put their commodities on the market regardless of the market price. The increased supply further reduces the price. This policy change occurred in the 1970s, and obesity rates started increasing dramatically in the 1980s. [18] Therefore, it is possible that consumption patterns changed in response to policy initiatives.

Fat tax versus Changing Agricultural Policies
The most recent hot-topic in public health legislation to address obesity is a “fat tax” on unhealthy foods. This proposal seeks to increase the costs of food paid by consumers. However, the fat tax has several ideological problems that can be overcome by instead adjusting agricultural subsidies. The first ideological problem with the fat tax is that it violates horizontal equity. The proposal would tax prepackaged junk foods, but not equally unhealthy foods (such as brie cheese) consumed by groups in higher income brackets. Secondly, the policy is regressive and violates vertical equity, which holds that taxes should be based on ability to pay. Because junk food is consumed more predominately by lower economic groups, those groups with the least money would bare the brunt of the increased tax.[19] Lastly, the fat tax is paternalistic; it seeks to protect able-minded adults from their own free choices, which is the most controversial form of public health regulation.[20]

Changing subsidy policy is another method of changing the price of foods faced by consumers, but would avoid many of the ideological challenges of the fat tax. By affecting the supply side of the American food chain, changing agricultural subsidies would change food production patterns, and therefore food costs, while avoiding some of the ideological challenges imposed by adding a tax to certain foods. Taxing unhealthy foods provides a revenue source. However, decreasing spending on agricultural subsidies would also provide savings for the government.

Policy Implications
It is likely that decreasing subsidies on wheat and corn could reduce the production of those products, increase their costs, and lead to a decrease in their use in processed foods, food vendors offering smaller portions, and a general decrease in the consumption of those products. Decreasing those subsidies alone would likely lead to an increase in production in fruits and vegetables and a decrease in their price.[21] A further decrease in the price of fruits and vegetables could be achieved by creating additional subsidies for the production of those foods. It has historically been too difficult for congress to overcome the lobbying power of food organizations to reduce food subsidies. The rurally focused nature of the senate, due to an equal number of senators being from states with both small and large populations, compounds this problem. If existing subsidies cannot be decreased, adding subsidies to healthier foods, such as fruits and vegetables, remains a worthy policy goal, and would be more politically palatable.

Examining the possible unintended consequences of policy change remains important in the arena of agricultural subsidy policy. While working to encourage the production of fruits and vegetables, policymakers must take care to encourage the production of a variety of fruits and vegetables, and not only a greater production of potatoes, which is the most consumed vegetable in the United States. However, because Americans consume 60 percent of potatoes as French fries or chips, there may be health risks associated with an increased consumption of potatoes.[22]

Conclusion
Obesity negatively affects the health and welfare of a growing number of Americans. The diseases related to obesity lead to a lack of productivity and create a substantial cost-burden for the American public. The primary driver of the recent increase in obesity rates is an increase in the number of calories consumed by Americans each day. There are several public health proposals that hope to decrease the number of calories consumed by Americans. This paper discusses the advantages of changing agricultural policy to improve the health of Americans. Changing agricultural subsidies could decrease the production and supply of unhealthy foods, thereby increasing their cost and decreasing their consumption both in general and in processed foods. A decrease in the consumption of calorically-dense foods would lead to a decrease in the obesity rate.

Changing agricultural subsidy policy has advantages over the implementation of a fat tax. Changing agricultural subsidy policy acts on the supply-side of the American food chain, avoiding some of the ideological challenges of adding a tax to certain foods. The Obama administration may be willing to address some of the issues surrounding agricultural subsidies. His budget proposes a general decrease in agricultural subsidies,[23] and the first act of the new Secretary of the USDA was to continue 3.2 million dollars in grant funding for fruit and vegetable farmers that had been rescinded in the last days of the Bush administration.[24] As policymakers work to improve the food choices of Americans, they must ensure that policies encourage the production of a variety of fruits and vegetables, rather than simply increasing the consumption of calorically-dense potatoes.

Footnotes

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Works Cited

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