Abstract
The objective of this study was to specify the linkage between the federal government and the farm sector in the U.S. economy. The farm sector is the recipient of federal monies under legislated price and income support programs. Direct government payments accrue to farmers in the form of deficiency, diversion, disaster and reserve storage payments of major commodities specified under the farm legislation. In addition to these direct payments, indirect expenditures are incurred for the Commodity Credit Corporation and Farmer Owned Reserve loan programs. Funds associated with the loans extended under these programs must be obtained by the federal government through tax revenues or through the sale of bonds in the nation's money market. If the funds are obtained through the issuance of bonds, then the interest costs associated with obtaining these funds must also be accounted for when assessing the total costs of federal farm policy. The flow of funds from the farm sector back to the federal government in the form of income taxes paid by farmers is frequently overlooked when evaluating the net expenditures on farm programs. Government payments are included in gross farm income and therefore add to taxable income. This study specified equations which accounted for the movements of funds between the two sectors associated with different farm policy instruments for six major crops: wheat, corn, oats, barley, sorghum, and soybeans. The equations account for the movement of grain in to and out of the government sponsored storage and loan programs, as well as accounting for the participation of farmers in government programs. The incorporation of these equations into a fully simultaneous macroeconomic model which emphasizes agriculture (COMGEM) allows for the analysis of the impact of changes in farm policy on the farm sector and the macroeconomy. The incorporation of this linkage between the government and the farm sector allows for this study to analyze the impact of a reduction in target prices and loan rates on net federal expenditures on farm programs and on the federal budget deficit and interest rates in the U.S. economy.
Adair, Ann Laing (1987). The linkage between the government and farm sectors : an analysis of the effect of farm policy on the U.S. economy. Texas A&M University. Texas A&M University. Libraries. Available electronically from
https : / /hdl .handle .net /1969 .1 /DISSERTATIONS -26310.