The U.S. government recently proposed to spend $12 billion to help farmers who have been impacted by President Donald Trump’s trade war with China and other trading partners. The Agriculture Department revealed key details of the plan, including direct assistance for farmers, establishing new export markets, and buying excess crops. Is it the 1930s all over again?
The multi-billion-dollar aid package, which does not require congressional approval and will likely go into motion in the coming days, will target producers of soybeans, cotton, dairy, corn, wheat, and live cattle.
Agriculture Secretary Sonny Perdue called the plan “a short-term solution” that allows the Trump administration ample time to create long-term trade pacts. President Trump, speaking in Kansas City to veterans, implored Americans to “be a little patient” with his strategy and ignore the fake news from the media and the agriculture lobby.
“Just be a little patient. Stick with us,” he said. “Don’t believe the crap you see from these people, the fake news. Just remember, what you’re seeing and what you’re reading is not what’s happening.”
He promised farmers that they “will be the biggest beneficiary” from his newly negotiated trade deals.
GOP Senator: Soviet-Style Economics
Some fellow Republicans are already expressing disapproval over the president’s plan.
Senator Ron Johnson (R-WI) likened the measure to a Soviet-style economy.
He told reporters on Capitol Hill:
“This is becoming more and more like a Soviet-type of economy here: Commissars deciding who’s going to be granted waivers, commissars in the administration figuring out how they’re going to sprinkle around benefits.
Time and time again I’ve heard from farmers that they want trade, not aid. Instead of throwing money at a problem we’ve helped create, the better option is to take action to make it easier for our farmers — and manufacturers — to sell their goods at fair prices to consumers around the world.”
It may seem like hyperbole on Senator Johnson’s part, but if you examine the policies of former President Franklin Delano Roosevelt and the Soviet Union, you can understand his concern.
As is typically the case in politics, we never seem to learn from history – or, perhaps, we don’t want to. It is much more politically expedient to be ignorant of past mistakes, or to somehow turn it around by saying the program was a success, like the New Deal.
Learning from FDR and the Soviet Union
Agriculture is one of the most protected industries in the world today. Farmers, whether they specialize in dairy or sugar, are granted privileges that other industries would only dream of having.
And this likely began 90 years ago.
During the Great Depression, the federal government intervened in the agriculture sector by employing unprecedented Keynesian measures. President Roosevelt introduced production controls, price supports, regulatory licensing, rewards for those who slashed output, and government slaughtering of hogs to raise prices.
FDR just fell short of full collectivism and the abolition of private property – he was close though, thanks to acreage allotment.
The Keynesian experiments did not succeed, no matter how many times Paul Krugman says they did. The economic misery persisted into the mid-1940s, consumers were struggling to put food on the table, and the era of big government commenced.
But you also need to look to the inspiration behind FDR’s policies: The Soviet Union.
Under communism in the 1920s and 1930s, it was believed that collectively-owned farming was far more beneficial to society than small- or middle-sized farming practices. The regime confiscated private land, allocated them to state farms, mandated peasants to work on these farms where they could share the produce and receive token money (based on worked man-days and not quality of individual output), and required the workers to meet massive quotas established by the state.
What were the results? Frightening to say the least:
- Crop productivity cratered.
- The harvest quality diminished.
- Cattle became ill and died.
- The most competent farmers were killed or held captive.
Russia’s agriculture sector never fully recovered until the fall of the Soviet Union.
The Decimation of US Agriculture
In recent months, domestic agriculture has been unable to weather the trade storm, getting hit the hardest as administration officials, such as Peter Navarro and Wilbur Ross, play Russian Roulette with Middle America’s livelihood.
Canada slapped tariffs on cucumbers, the European Union (EU) targeted the struggling orange sector, Mexico imposed a 20% levy on pork, and China has stopped buying soybeans, sending their business to Brazil. With the Trump administration vowing to amplify the tariffs, the odds of greater tit-for-tat retaliatory tariffs are high.
So, it can be difficult for farmers to be patient if they see their bottom lines crater, their livelihoods destroyed. It can also be hard for consumers to face double taxation – tariffs and subsidies. President Trump is pleading for more time from an immense component of his base, but it may not be enough come the mid-term elections. The only thing that may help Trump and the Republicans come November is that the Democrats are just engaging in neo-McCarthyism and screaming wolf every hour, not focusing on the real troubles of the day, like international trade
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