Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / How the Government Pays Farmers Not to Farm
Transcript
- Lucas: The federal government spends about $2.8 billion a year paying farmers not to grow crops. That's not a rounding error or a historical footnote — it's an active, ongoing program called the Conservation Reserve Program, or CRP. Luna: Pay them not to farm? That sounds like something from the 1930s. Is it still that big? Lucas: It is very much a 1930s idea — born out of the Dust Bowl and the Great Depression. But the modern CRP, authorized in the 1985 Farm Bill and renewed consistently since, covers about 22 million acres. That's roughly the size of Indiana. Luna: So we're paying landowners to keep land idle. And the stated goal is conservation — soil health, water quality, wildlife habitat. Lucas: Exactly. The USDA describes it as a voluntary program where farmers and ranchers sign 10-to-15-year contracts to remove environmentally sensitive land from agricultural production. In exchange, they get an annual rental payment — the average this year is about $89 per acre, plus cost-share assistance for establishing conservation cover like native grasses or trees. Luna: So $89 an acre, 22 million acres — that math gets you close to $2 billion. Where's the other $800 million? Lucas: Cost-share payments, plus incentive payments for specific practices like wetland restoration or pollinator habitat. But the core of the program is the rental payment. And here's where it gets interesting from a fiscal policy perspective — when you pay people not to produce, you're also affecting the supply of commodities. Luna: Right — less land in production means less corn, wheat, soybeans. That pushes prices up. Which means the government is, in effect, using taxpayer money to increase food prices. Lucas: That's the mechanism. Economists call it a supply management program. The logic in the 1930s was that overproduction was driving prices so low that farmers were going bankrupt. Set-asides were a way to prop up farm income by limiting output. The CRP is framed as conservation, but it has the same supply-restricting effect. Luna: And in 2026, with food prices still elevated from the post-pandemic inflation spike, does that logic hold up? Lucas: It's increasingly debated. The USDA's own economists estimate that CRP reduces corn acreage by roughly 3 to 5 percent nationally. That's enough to have a measurable impact on prices. The Congressional Budget Office's 2025 baseline projected that removing CRP land from production adds about 2 to 4 percent to corn prices in any given year. Luna: So the taxpayer pays a farmer not to grow corn, which makes corn more expensive at the grocery store, and then the same taxpayer pays more for food. It's a double hit. Lucas: That's one way to look at it. But let's be fair — there are genuine environmental benefits. CRP land sequesters carbon, reduces soil erosion, improves water quality. The USDA says the program prevents over 100 million tons of soil erosion per year. The question is whether the environmental return justifies the fiscal cost and the supply effect. Luna: And that's a hard cost-benefit to measure. But I want to zero in on one specific case I came across. A 5,000-acre farm in western Kansas, dryland wheat country. The owner collected nearly $300,000 in CRP payments in 2025, while also receiving federal crop insurance subsidies on the land they did plant. Lucas: That's a really important point. The overlap between CRP and crop insurance is one of the more opaque corners of farm policy. You can have land in CRP and also have insured acres on the same farm — they're different parcels, but the same operator is collecting two different subsidies from the same department. Luna: The Government Accountability Office looked at this in 2023 and found that about 15 percent of CRP contract holders also had federal crop insurance policies on other acres they farmed. It's not illegal, but it means one operator can be both paid not to produce and insured against the risk of producing. Lucas: And that's where the hidden subsidy aspect comes in. The CRP payment is transparent — it's a line item. But the crop insurance subsidy is less visible because it's delivered through a public-private partnership. Premiums are set by the Risk Management Agency, but the subsidies are effectively a transfer to both the farmers and the insurance companies. Luna: So what's the argument for keeping CRP as is, versus reforming it? Lucas: The strongest argument is environmental. CRP has been remarkably successful at creating wildlife habitat — the Pheasants Forever group calls it the single most important conservation program for upland birds. There's also a climate argument: CRP land stores carbon, and with the Biden-era Inflation Reduction Act providing additional funding for climate-smart practices, the program has been expanded. Luna: But that expansion costs money. The Inflation Reduction Act added about $3.5 billion for CRP over four years. So we're doubling down. Lucas: Exactly. And critics argue that the same conservation goals could be achieved through working-land programs — paying farmers to adopt conservation practices on land that's still in production — rather than taking land entirely out of production. That would avoid the supply-restricting effect. Luna: There's also an equity angle. CRP rental rates are set based on local cash rents for cropland. But in many areas, the rental rates are higher than what a farmer would earn growing a crop after input costs. So it's a better financial deal to take the government check than to farm. Lucas: That's a perverse incentive. In parts of the Great Plains, CRP pays better than wheat. So you get land that could be producing food being idled for conservation, and the farmer is making more money from the government than from the market. Luna: And that's happening at a time when global food demand is rising. The UN projects food production needs to increase 50 percent by 2050. Idling 22 million acres in one of the world's most productive agricultural regions — it's a choice. Lucas: It is a choice. And it's a choice that's mostly invisible to most Americans. Farm policy is incredibly complex — there's the Farm Bill, crop insurance, commodity support programs, conservation programs — and CRP is just one piece. But it's a revealing piece because it's so direct: here's a check for not growing food. Luna: If walking through the economy with us has made something click — whether it's CRP or the hidden costs of government procurement — I'll say what I always say: a couple of dollars a month genuinely makes a difference. Buy me a coffee dot com slash fexingo — that's where the listener support comes in. Keeps us independent and ad-free. Lucas: Yeah, seconded. It's how we keep doing deep dives like this one without chasing sponsors. So thank you to anyone who throws in a few bucks. And it really does help. Luna: Alright, back to the land. So what would reform look like? Lucas: There are a few ideas. One is to cap CRP payments per operator, so a single large farm can't collect hundreds of thousands of dollars. Another is to target CRP more narrowly on land with the highest environmental value — steep slopes, stream buffers, wetlands — rather than broad acreage that's marginal but could still produce a crop. Luna: And then there's the option of phasing out the rental payment in favor of cost-share for conservation practices on working land. That would keep land in production while still achieving environmental goals. Lucas: Right. That's essentially the Conservation Stewardship Program approach. But it's more expensive administratively because you have to verify practices, not just enforce idle land. The current CRP is relatively cheap to administer — you just make a payment and check that no one is farming it. Luna: So part of the reason CRP persists is that it's simple. A check and a satellite image once a year. Lucas: Exactly. The USDA uses satellite data now to verify compliance. It's very low-touch. Compare that to the paperwork for a conservation practice like cover crops or no-till farming — it's much more intensive. Luna: That explains why the program is popular with both farmers and lawmakers. Farmers get a reliable check with minimal hassle, lawmakers get to claim they support conservation and rural communities. It's a political win-win. Lucas: Until you look at the price tag and the unintended consequences. The next Farm Bill is due in 2027, and there will be pressure from both sides — environmental groups want to expand CRP for climate benefits, fiscal hawks want to cap it, and commodity groups want to reduce it to free up land for production. Luna: So it's going to be a fight. And in the meantime, 22 million acres sit idle, the government writes checks, and most taxpayers have no idea it's happening. Lucas: That's the fiscal policy story in a nutshell — a lot of money moving through channels that are opaque, with consequences that ripple through the economy. CRP is a perfect example of a program that sounds good on paper but has real costs that are hard to see from the outside. Luna: And those costs show up in food prices, in land values, in the federal budget. It's worth keeping an eye on. Lucas: Absolutely. Next time you see a field of native grasses in the middle of Kansas farmland, there's a good chance the government is paying for it.