Tag Archives: Farm subsidies

A harvest of disgrace: Congress at its worst

Such was the title and subtitle of an article in the May 24th 2008 edition of The Economist.  The author lambasted the recent passage of the 2007 farm bill sent to George Bush’s desk.  “Through a complicated and overlapping system of government-sponsored insurance, counter-cyclical assistance, disater aid and legacy payments tied to nothing, the five-year, $307 billion bill lavishes cash on wealthy farm households…”

The bill also linked future subsidies to current commodity prices which are at record highs.  This means that “if and when prices dip again,” the government will be coughing up billion of dollars to farmers.

The article continues, “Most legislators probably know the farm bill is a disgrace, but they voted for it overwhelmingly anyway, revealing the cynical genius of the farm lobby.”  Thankfully, it was vetoed by George Bush, but the projection is that there are enough votes in Congress (both Democrats and Republicans alike) to override the veto.  The Economist makes note that John McCain voted against the bill; Obama did not.

Senator Obama, if this is what you mean when you say that John McCain would continue for four more years Bush’s economic policies, then I’m thankful McCain is in the running.  I suspect, however, that your assertion is not so much a precise and nuanced commentary as a vague attack that employs the current strong anti-Bush sentiment.  But that’s okay.  That’s how politics works, right?

I will grant that my perspective on economic policy is greatly influenced by the editors of The Economist.  However, at a visceral level, I agree with the atrocity of the farm bill.  Using simple logic, why should today’s record-high prices for foodstuffs be guaranteed to farmers in the future at the taxpayer’s expense?

On the political level, why are there farm subsidies anyway?  I can understand their use when farming was a small, generally family-owned venture, and small-farmers could easily be wiped out by a poor harvest.  But given the massive power and influence of today’s farmers, one would think that part of the industry of farming is learning to deal with some good years, some poor years.  Nobody forces a person to become a farmer. 

At an economic level, how can subsidies be good?  By guaranteeing future prices and subsidies to farmers, the government is in effect raising the price of food for everyone.  The common taxpayer will be supplementing the income of farmers on a bad year, whereas the farmers will make a killing on a good year.  This is akin to taxpayers’ taking on the risk when a private financial institution (like Northern Rock) collapses and is bailed out by the government.  Private investors (or farmers) benefiit when things go well, but the taxpayer BearS the burden when things sour.

Futhermore, subsidies are like throwing a handful of nuts and bolts into a well-greased machine.  What used to operate smoothly and efficiently now gets choked up and distorted.  I hate to say it, but this is the beauty of rising oil prices.  People feel the pinch, and it changes behaviors.  (See accompanying chart from The Economist showing the sales of light trucks this year compared to a year ago.  This warms my heart.)  Money is a wonderful motivator, but if the government began subsidizing oil and offered rebates for truck-buyers, this would amputate the invisible hand, so to speak.  Nobody wants a creepy, severed hand unless it grants wishes.  Even then, it’s probably not a good idea.  But I digress.

This leads to the final perspective: the moral one.  Rising food prices are obviously related to non-free-market policies endorsed by the United States government and clung to by farmers.  They are paid extra to grow corn for ethanol, which takes a lot of water to produce and distorts the price of corn.  My readers will know I’m not a bleeding heart liberal when I say that I’m frankly not as worried about poor Americans.  To cope with rising food prices, many have several options:

  1. Stop eating at McDonalds
  2. Make food at home
  3. Cancel the cable television and cell-phone subscription services
  4. Stop going to the movies; rent a video instead

In reality, I’m suggesting that we all may just have to adjust to a slightly lower standard of living.  Ouch.  But mainly I’m worried about the billion people or so who live on $1.25 per day.  A thirty percent increase in food prices doesn’t mean fewer Happy Meals and fewer “anytime minutes”; it mean more malnutrition, disease, and death.  By doing away with farm subsidies, we can save lives.

For these reasons, come November I may prefer another four years of George Bush’s economic policies to change.  I welcome comments that challenge me, or ones that help me to see the broader benefit that farm subsidies offer.

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Filed under Economics, The Economist