Sunday, November 13, 2011

Big Farm's Crony Capitalism and Corporate Welfare

What do Christmas tree growers have in common with producers of beef, blueberries, cotton, milk, eggs, avocados, honey, lamb, mangoes, mushrooms, peanuts, popcorn, pork, potatoes, soybeans, and watermelons?  They are all well-organized, agricultural special interest groups that have lobbied the Department of Agriculture to impose taxes or fees on their products (and raise prices to consumers) to fund the marketing and promotion of their products to the public.   

The Christmas tree growers’ efforts to use the federal government’s coercive power of taxation to benefit their industry had to be postponed last week due to public pushback about higher taxes and the display of blatant crony capitalism.  Maybe it’s time for some public outrage (OWS protestors?) over the corporate welfare bestowed on "Big Farm" for producing blueberries, avocados, peanuts, etc. 

See related: 1) WSJ editorial "About That 'Christmas Tree Tax': The real story is a case of business and government collusion," and 2) Heritage Foundation post "Agricultural Marketing Fees: Not Just for Christmas Trees"  (HT: Matt B.). 
 

5 Comments:

At 11/14/2011 4:33 AM, Blogger Hydra said...

Someone explain this argument to me please. AG subsidies are maldistributed, with the vast majority going to the largest and best organized. In my county of 2000 "farms" 20 get almost all the subsidies. One of them will be happy to explain how profitable farming is and how good it is for the county. He hires mainly Latinos, and his profit depends on the $80,000 he gets in subsidies. He votes Republican. He pays into several markketing checkoff programs.

What is your sales pitch to him as to how reducing these practices will help him?

Since the smaller farms are self subsidizing ( off farm work) reducing subsidies only increases completion amongst the big guys, some of whomever will fail. This will increase food costs for everyone, and it will increase the cost of being in the agricultural business, as the infrastructure contracts, which affects non farm businesses also.

Ideally, all those maldistributed resources would be put to better use, but that will require, among other things, massive zoning changes to allow other uses.

What I see here is a policy that will piss off wealthy AG interests, and wont improve conditions for poor ones. While it might, with enough other changes, create more opportunity, in the short term it is nothing but trouble.

How do you sell this?

 
At 11/14/2011 8:50 AM, OpenID thefarmerslife said...

I've been reading a lot about this on the last week, and as a farmer myself I'm a bit surprised about these taxes. I had ignorantly assumed most check off programs were fully funded by member payments. Apparently not so. I hope we see some good changes in the new farm bill. I believe we'll do just fine without things like direct payments.

Even if ag spending is a small amount compared to the deficit and entitlement spending, it seems to be painting more and more of a bad perception of the industry.

 
At 11/15/2011 4:57 AM, Blogger Ron H. said...

"Since the smaller farms are self subsidizing ( off farm work) reducing subsidies only increases completion amongst the big guys, some of whomever will fail. This will increase food costs for everyone, and it will increase the cost of being in the agricultural business, as the infrastructure contracts, which affects non farm businesses also."

What a mess. First of all, "everyone" is already paying the food cost either in the price of the farm products or through their taxes. Eliminating subsidies would, if nothing else changed, charge consumers for what they buy, rather than taxpayers, who may not pay proportionally to their use of farm products.

Then, the cost of being in the agriculture business wouldn't increase, only the source of farm income would change from taxpayer to consumer, where it belongs. Those who use things, should pay for them, not "everyone" through taxes.

Competition among the "big guys" would almost certainly be on price, and those that succeeded in reducing their costs of doing business would prosper, and those who didn't, would fail. This is all good.

What do you mean by "infrastructure contracts"? Do you think failed farms would just vanish? Don't you believe successful businesses would buy up the assets of failed ones?

If there is a demand for farm products - and of course there is - it will be met by those who can do so and make a profit.

Subsidies actually encourage behavior that maximizes the subsidy, rather than behavior that reduces costs and prices through competition.

 
At 11/18/2011 1:51 PM, Blogger Hydra said...

"What a mess. First of all, "everyone" is already paying the food cost either in the price of the farm products or through their taxes."

Agreed. But it is not clear that the present cost of food + taxes would be reduced by eliminating the subsidies, in the long term. In theory it would, but there are other issues at work here.

From the government point of view, it might be worth the present subsidies to keep the AG base going against some future time when it will be needed: same as for the mlitary industrial base.

Even in the short term, a relatively small subsidy to a few big farms keeps them in production and competing, the excess production and lower food prices may more than offset the cost of the subsidy.(I know, theoretically, that never happens, but theory and reality are often different.)


charge consumers for what they buy, rather than taxpayers, who may not pay proportionally to their use of farm products.

I think most people use food pretty proportionately. That leaves the issue of the fact that some peoplw pay a lot more taxes than others, and eat no more food than others. Those people also eat more filat mignon and less garbanzos. It is not perfect, but I don't find the argument that "I am not getting a fair return on MY tax money" to be very persuasive.

Once you pay the tax, it is not your money.

Then, the cost of being in the agriculture business wouldn't increase,

I think it would increase. Agriculture requires a certain critcal mass to keep the ag services businesses running, and without them, costs increase.

IF a handful of milk producers quit, then the dairy quits, then the cost of shipping goes up and allthe milk producers (in that area) quit. Milk has to be shipped farther and costs go up for everyone.

Remember, only a small piece of what you pay for a box of cereal goes to the farmer.

This is all good Theroretically youare correct, but what I see in the field is different.


Do you think failed farms would just vanish? Don't you believe successful businesses would buy up the assets of failed ones?

Yes. No. You have three farms and they stay in business because of the subsidies. Remove the subsidies and two of the farms go out of business. The remaining farm sells at a higher profit. He has no incentive to pick up the (excess) production of the other two farms and compete with himself.

Obviously, some farms do get acquired by others, but a lot more just fold, get developed, or go fallow.


and those that succeeded in reducing their costs of doing business would prosper,

I never heard of anyone in farming who succeeded by reducing his cost of doing business. The cost always goes up and you only hope that the cost per yield goes down. But if there are excess farms and farmland to begin with,there is no future in increasing your yield too much: you are just competing with yourself.

Subsidies actually encourage behavior that maximizes the subsidy, rather than behavior that reduces costs and prices through competition.

Not if the situation is such that without the subsidiy you don't get ANY behavior. Besides, you assume the subsidies ae unlimited, which is not true.

If I start growing corn today, it will be five years before I am eligible to apply for the subsidy. That just gets me in line. There are 2000 farms in my county and eight of them get 95% of the subsidy money available.

A couple of these guys are real dyed in the wool conservatives who will be happy to tell you hw profitable good hard honest farm work is. It is all BS, these guys are farm speculators as much as they are farmers.

 
At 11/18/2011 6:57 PM, Blogger Ron H. said...

"Agreed. But it is not clear that the present cost of food + taxes would be reduced by eliminating the subsidies, in the long term. In theory it would, but there are other issues at work here."

That isn't what I said. I said the cost of food would be born by those that use it, not taxpayers.

Every one of your arguments is faulty, and show that you don't understand basic economics. I don't have time to deal with each one, so I'll just present a few points:

- If you subsidize something you will get more of it. There is no reason to encourage the production of surplus food in this manner. The market price will determine how much of anything will be produced.

- "the government" doesn't have a point of view. Only people do. you seem to suggest that there's some reason to promote production of surplus food, that we may not understand, but should agree with, as government knows best.

"I think most people use food pretty proportionately. That leaves the issue of the fact that some peoplw pay a lot more taxes than others, and eat no more food than others. Those people also eat more filat mignon and less garbanzos. It is not perfect, but I don't find the argument that "I am not getting a fair return on MY tax money" to be very persuasive."

This is utter nonsense.

"Once you pay the tax, it is not your money."

If it is my money to start with, it's still my money after it's been stolen.

1. "Even in the short term, a relatively small subsidy to a few big farms keeps them in production and competing, the excess production and lower food prices may more than offset the cost of the subsidy."

2. "Remember, only a small piece of what you pay for a box of cereal goes to the farmer."

How do you reconcile these two statements? If #2 is true, why is #1 important?

"I never heard of anyone in farming who succeeded by reducing his cost of doing business. The cost always goes up and you only hope that the cost per yield goes down."

What do you suppose the cost of doing business means, if not cost/yield?

"There are 2000 farms in my county and eight of them get 95% of the subsidy money available.

A couple of these guys are real dyed in the wool conservatives who will be happy to tell you hw profitable good hard honest farm work is. It is all BS, these guys are farm speculators as much as they are farmers.
"

Thank you. You make my argument for eliminating farm subsidies for me.

You seem unaware of the role of price and incentives in a market. Learn some economics.

 

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