How Government Policy Distorts American Diets
Farm Subsidies and the Ultra-Processed Food Crisis
This is a guest post by Joshua Pauze.
Summary/Abstract: America’s ultra-processed food crisis stems from government intervention favoring cheap, nutrient-poor ingredients. Three policy distortions drive this: protectionist trade barriers, commodity subsidies for corn/soy/wheat/cotton (ultra-processed food inputs), and regulatory burdens harming small farms. The recent reconciliation bill worsens this by increasing farm subsidies $65.6 billion. While the Make America Healthy Again movement is focused on imposing additional restrictions, meaningful reform requires dismantling subsidies, reducing trade barriers, and streamlining regulations to naturally incentivize healthier agriculture and empower local food systems.
Robert F. Kennedy Jr., Secretary of Health and Human Services under President Trump, has made ultra-processed foods a top political target. His Make America Healthy Again (MAHA) agenda promises to ban certain additives and pesticides, overhaul school lunch programs, reform SNAP to favor “healthier” options, and promote organic farming through USDA and EPA collaboration. The White House’s MAHA report highlights the role of poor diets and environmental toxins in America’s health problems, calling for a sweeping reassessment of ingredients, additives, and agricultural chemicals.
The concern is justified. The United States has the highest adult obesity rate in the developed world, 40.3 percent, and mortality rates for Americans aged 15 to 49 are more than twice those in comparable nations. Sixty percent of our daily calories come from ultra-processed foods, compared to as little as 14 percent in some European countries. The health consequences are real, and the public’s growing demand for change reflects an urgent problem.
But MAHA’s approach—bans, ingredient mandates, and public-pressure campaigns—is missing a beat, as America’s reliance on ultra-processed foods is not solely the result of consumer preference or corporate marketing. It is the product of decades of government intervention that have tilted the marketplace toward cheap, calorie-dense, nutrient-poor ingredients and away from fresher, more diverse food options.
The solution lies in dismantling the existing policy architecture that props up ultra-processed food and holds back healthier competition. Reigning in government intervention has the potential to empower local farms and communities leading to the healthier food options and better agricultural practices.
How Government Distorts American Diets
These interventions take three main forms, as I will explain below. First, protectionist trade policies, such as tariffs on agricultural imports, limit variety and keep prices high for consumers. Second, commodity subsidies, particularly in the Farm Bill, overwhelmingly favor corn, soy, wheat, cotton, and rice—the core inputs for ultra-processed food. These subsidies are expanded even further in the recently passed, One Big Beautiful Bill Act (OBBBA). Third, regulatory burdens such as the 2011 Food Safety Modernization Act impose compliance costs that small farms, urban agriculture projects, and home-based food producers can least afford. Local rules also make access to healthy food for lower-income people almost impossible. The result is a food system where government policy both subsidizes the raw materials of ultra-processed food and erects barriers to healthier, more localized alternatives.
The Price of Protectionism
About 85 percent of the food and beverages consumed in the United States are produced domestically. Tariffs on agricultural imports, specifically dairy and sugar, serve as protective barriers that shield domestic farms from foreign competition. These tariffs force our food industry to rely on domestic goods, which we then support through subsidies.
Take sugar, for example. The United States imposes tariff-rate quotas to limit imports on sugar, which result in domestic businesses and consumers paying over double for sugar compared to the average price of sugar around the world. This costs consumers an estimated $3–4 billion annually. We then subsidize sugar through the US Sugar Program, which stabilizes domestic supply by guaranteeing prices and controlling production despite high tariff-driven costs. These tariffs also encourage producers to use heavily subsidized corn syrup as a cheaper alternative.
The US also imposes tariff rate quotas to limit imports on dairy products, with an average tariff rate of 30 percent that raises to 135 percent when the quota is reached. These tariffs cause domestic dairy to be 20–50 percent more expensive than the rest of the world, with our milk prices sitting at over double the average price of milk around the world. US consumers are forced to pay a hefty cost to protect domestic manufacturers.
Trump’s newly imposed flat tariff of at least 10 percent, with even higher rates in some cases, will worsen this problem by adding even more layers to the equation and increasing our reliance on domestic goods. As these tariffs currently stand, the cost of food is expected to rise 2.5 percent in the long term, with fresh produce expected to rise by an average of 2.7 percent. The irony of these policies is striking: We spend tens of billions a year on subsidies that are justified by the need to lower the cost of crops and sugar. Agribusiness argues that farm subsidies keep food prices low and ensure food security. These outcomes could, however, be better and more surely achieved by simply removing these trade barriers.
Subsidizing Sickness
For decades, US farm policy has been sold to the public as a way to protect farmers, stabilize markets, and ensure affordable food. The benefits flow overwhelmingly to large agribusiness, not to the small farms these programs were supposedly designed to protect, and the crops most heavily subsidized are the backbone of America’s ultra-processed food supply.
The numbers tell the story. As of 2012, only 30.3 percent of small farms received any government subsidies, compared to 70–75 percent of medium and large farms. Subsidy dollars are also highly concentrated by crop: just four (corn, soybeans, wheat, and cotton) account for roughly 76 percent of all crop insurance payments from 1995 to 2024. These are not the crops that fill produce aisles. They are the building blocks of cheap, calorie-dense, nutrient-poor foods—high-fructose corn syrup, refined flour, hydrogenated oils, and animal feed.
This bias isn’t accidental; it’s embedded in decades of policy design. Our current policy framework under the 2018 Agricultural Improvement Act traces back to the Agriculture Adjustment Act of 1933, which created price supports for key commodities during the Great Depression. In the 1970s, the Agriculture and Consumer Protection Act expanded payments to stimulate production of these subsidized crops during a period of inflation and high demand. Then–Agriculture Secretary Earl Butz’s famous advice to farmers, “get big or get out,” captured the philosophy perfectly. Attempts to move toward a more market-oriented system, such as the FAIR Act of 1996, backfired, leading to overproduction, price crashes, and a wave of emergency aid. By 2002, Congress had restored and expanded the old subsidy framework, layering new payments on top of the “market oriented” reforms.
The result is a patchwork of entrenched entitlements that distort planting decisions, making it far more attractive to grow corn, soy, wheat, and cotton than fruits, vegetables, or other healthy alternatives. This artificial tilt ensures an abundant, low-cost supply of processed food ingredients, while produce and other unsubsidized goods remain relatively more expensive. By lowering the cost of unhealthy inputs relative to healthier ones, subsidies give ultra-processed food an enduring price advantage.
The incentives for large agribusiness to protect this system are enormous, and they act on them. The farm sector spends about twice as much on federal campaign contributions and lobbying as the average industry relative to its size. In the debate before the passage of the 2014 Farm Bill, members of Congress who voted in favor of it received nearly three times as much in political contributions from agricultural interests as those who voted against it. By 2023, lobbying expenditures by agricultural interest groups had reached $178 million in anticipation of the 2024 Farm Bill. This spending pays off.
One Big Beautiful Bailout
The most recent budget reconciliation bill is a study in how lobbying preserves and expands the subsidy structure. It increases farm subsidies by $65.6 billion from 2025 to 2034. It also
· Increases crop reference prices from 10–20 percent for corn, soy, wheat, cotton, and rice. These are the core commodity crops used heavily in ultra-processed foods: corn (high-fructose corn syrup, corn starch), soy (soy oil, soy protein), wheat (refined flour), and cottonseed oil. Raising the guaranteed “reference price” makes it more profitable to grow these crops over fruits, vegetables, or other healthier alternatives.
· Expands base acres eligible for subsidies by 30 million acres. This broadens the footprint of subsidized land, ensuring even more acreage is devoted to the same small set of heavily subsidized commodities. That tilts the market toward overproduction of ultra-processed food ingredients and away from diverse, fresh food production.
· Enhances certain benefits. Agricultural risk coverage and price loss coverage are safety-net programs that guarantee farm revenue for certain commodities, overwhelmingly the same ones feeding the ultra-processed food supply chain. “Enhancing” them further entrenches that bias.
· Redefines the qualified pass-through entity to include S-corps, LLCs, and joint ventures, allowing each owner/shareholder to receive separate payments. This change doesn’t just expand subsidy eligibility; it allows large agribusinesses to multiply payments. Those businesses are disproportionately the ones producing the raw ingredients for ultra-processed food.
· Increases the payment cap from $125,000 to $155,000. This provision raises the ceiling on how much any one entity (often large, industrial farms) can collect, again skewing benefits toward large-scale commodity crop production.
Each of these changes disproportionately benefits large-scale producers of commodity crops, locking in the supply of cheap inputs for processed food and further crowding out unsubsidized, healthier alternatives.
The structure of US farm subsidies isn’t just an agricultural policy quirk. It is a contributing factor for why ultra-processed food dominates our diets, why healthier foods are comparatively expensive, and why the largest farms, not the most innovative or sustainable ones, thrive in the marketplace. Any serious strategy to improve America’s diet must begin by dismantling the causes of these distortions.
Restrictions vs. Real Food
Legions of government restrictions hinder the availability of diverse food options and local food economies. In 2011 Congress passed the Food Safety Modernization Act (FSMA) in order to crack down on food borne illness. The FSMA is a complex food safety framework that applies preventative controls for food facilities and imposes cumbersome regulatory requirements and compliance costs. Doing so burdens small farms, cottage industries, and street food vendors who lack the resources to navigate all the red tape. On average, these rules consume half of the profits of small farms (under $250,000 in sales) and drive up the cost of food.
Since the FSMA’s enactment, annual foodborne illness rates have not changed, sparking complaints about its effectiveness. In 2022, FDA Commissioner Robert Califf called for an external review, acknowledging structural problems and systemic inefficiencies. Nevertheless, FDA has continued to expand these rules, imposing traceability and record-keeping requirements on small producers.
Contrast this situation with the less-intrusive approach of PulseNet, a national network coordinated by the CDC in partnership with the Association of Public Health Laboratories (APHL), which uses pathogen tracking and DNA fingerprinting to detect foodborne illness outbreaks. PulseNet has proven its effectiveness through measurable results while operating on a lean budget and imposing minimal constraints on producers. A 2016 study found that PulseNet prevents more than 275,000 cases of foodborne illness per year. This approach exemplifies how reactive, science-based systems can improve food safety without over-burdening producers.
While federal regulations like the FSMA impose burdens on small producers across the country, local and state policies further compound these challenges. State laws impose regulatory hurdles on cottage food producers including strict health codes, inspections, and licensing costs. Many states prohibit them from selling “hazardous foods,” such as dairy, meat, or other temperature-controlled foods, making it difficult for small scale producers to operate. At the local level, zoning laws segregate residential, commercial, and agricultural land, often preventing urban farming, farmers markets, and food vending in residential areas or near restaurants.
In lieu of these policies, Detroit passed an ordinance permitting urban farming in certain areas in 2013. This policy sparked the growth of more than 2,200 farms and gardens, involving 20,000 people. Detroit’s urban farming has expanded access to fresh produce, created job opportunities and contributed to better mental health outcomes for its participants. To build on this momentum, Detroit appointed its first director of urban agriculture in 2023 to create a policy framework that further empowers urban agriculture.
The Way Forward
The MAHA movement creates the appearance of a war on ultra-processed food, but their strategy fails to confront the policies that drive their prevalence. To achieve meaningful public health gains, we need to concentrate on removing the barriers that limit access to healthier food options and make room for private community-based solutions. This means reforming outdated zoning laws to allow agriculture and food vendors in residential areas, loosening restrictions on home cooks and reforming the FSMA and reallocating funds to PulseNet. To address market distortions that prop up ultra-processed food, we should phase out price supports for specific commodity crops and roll back the expansion of farm subsidies proposed in the OBBBA.
These changes would give communities the freedom to dictate their own diets, free from political manipulation. Large agribusiness would suffer a significant blow, but the benefits to consumers and small farms would be well worth it. Rather than imposing more restrictions to force change, a market-oriented solution would incentivize organic farming and biodiversity simply by leveling the playing field.
These changes won’t fix our health outcomes overnight, but they could realign the incentives guiding the farm industry, with the health goals of HHS. By incentivizing investment in healthier agricultural practices, we could finally see a shift in industry practices and consumer demand. Only by dismantling the policy scaffolding of the processed-food economy can we give communities the power to eat and farm on their own terms.
About the Contributor
Joshua Pauze is an undergraduate student in psychology at Indiana University, with interests in behavioral science and public policy. His work examines the influence of policy on individual behavior and institutional systems. During the summer of 2025, he served as an intern on the fiscal studies team at the Mercatus Center at George Mason University, where he researched this topic.