The U.S. Department of Agriculture (USDA) is coming to the rescue of the nation’s farmers, much to the chagrin of the soybean planters and the decimated orange producers who would prefer trade, not aid.
Sonny Perdue, the U.S. Secretary of Agriculture, recently outlined the White House’s three-part, $12 billion compensation package for American farmers impacted by the “unfair retaliatory tariffs.” The bailout plan will begin with $4.7 billion payments to farmers – dairy, corn, soybean, wheat, and hog – starting September 4, which will be based on production per farmer, not an industry average. Soybean farmers are expected to receive a bulk of the money: $3.7 billion.
The second part will consist of $200 million to develop foreign markets for U.S. agricultural products.
But the third aspect of the initiative is reminiscent of the federal government’s previous repeated meddling in the sector since the Great Depression. As part of the bailout, Washington will purchase up to $1.2 billion in “commodities unfairly targeted by unjustified retaliation.” This includes $560 million in pork products, $93 million in apples, $55.6 million in oranges, and $85 million in dairy; products that will be transferred to state-run nutrition programs – knowing government, there is always a chance that the food will end up in a factory, rotting away.
Is this something farmers are demanding? Not in the slightest.
Despite spouting official government talk, Perdue revealed to CNBC that U.S. farmers would much prefer to have international trade, not government aid.
“There’s not a farmer in America that would rather not have a good crop and a fair price than a government check,” the former governor said. “That’s what they do. That’s what they put their equity on the line every year for.”
You can’t blame farmers since this is a problem created by the government with s trade spats. Not only is the government taxing Americans with tariffs, politicians are levying Americans to bailout farmers who do not even want the assistance.
Agriculture Interventions – A National Pastime
All over the world, agriculture is the most protected industry in the global market. Canada shields farmers from competition through supply management, while the European Union (EU) protects farmers from foreign supplies through the Common Agricultural Policy (CAP).
The U.S. has not been immune to the interventionist bug, meddling in agriculture for 70 years.
Employing a series of Keynesian economic tools, President Franklin Delano Roosevelt instituted price supports, production controls, regulatory licensing, and even the slaughtering of pigs to boost prices, despite a nation enduring one of the severest economic contractions in its history.
This did not end.
Thirty years later, then-President Richard Nixon – as part of the Nixon Shock – introduced an economic nostrum that he thought would reverse the trend of rising prices: Price controls on nearly two-dozen food items, ranging from milk to wheat flour to eggs. Nixon may have experienced short-term success, but, as Daniel Yergin and Joseph Stanislaw wrote in The Commanding Heights: The Battle for the World Economy: “Ranchers stopped shipping their cattle to the market, farmers drowned their chickens, and consumers emptied the shelves of supermarkets.”
Since then, the state has meddled in agriculture through generous taxpayer-funded subsides.
It is estimated that U.S. farmer subsidies from the pockets of Americans total $20 billion, a policy that the government cannot even afford. Most of the money is allocated to massive, corporate-controlled farms that produce staple commodities, such as soybeans and corn. Of course, rather than allowing the nation’s farmers to prosper or perish in a free market, politicians step in with vote-buying schemes.
The Economist summarized it nicely in February 2015:
“Few politicians are inclined to vote against farm subsidies: though farmers make up only a small number of voters, even in agricultural states, they are loud and organised enough to punish lawmakers who vote against a farm bill. Opposition to spending is muted; few voters realise how much of their money is given to farmers and even fewer would change their vote because of it.”
Senator Ron Johnson (R-WI) wasn’t some old man yelling at the sky when he likened the White House’s proposal to “a Soviet-style economy.” Here’s one more “Old Man Yells at Cloud” argument: Aren’t Republicans supposed to be opposed to welfare?
The Milking Taxpayers Panacea
Every administration – Republican or Democrat – typically needs to find a common cause to not only rally the troops, but to show the country that it’s doing something. This is true of other governments worldwide because the population always expects politicians to justify their existence.
Right now, for the incumbent administration, it is global trading partners “ripping off” the U.S. The economic data suggests that heightened international trade has benefited the average American with a higher purchasing power, a greater net investment surplus, and more goods for less. Foreign governments are subsidizing industry, but that is the problem of the taxpayers in those nations, not Americans. The current trade situation is a win-win for the U.S., not win-lose.
For many of the victories President Donald Trump has achieved over the last 18 months, he is putting the nation’s agriculture sector needlessly in harm’s way, and taxpayers are suffering, too, as a result. Milking Americans with double taxation is not an economic panacea, it’s a destructive endeavor.
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