On January 2, President Barack Obama signed a bill designed to
avert the fiscal cliff. At the same time, to slightly less fanfare,
he averted the “milk cliff.” By extending the 2008 farm bill
another nine months, he prevented the automatic revival of a 1949
law requiring the federal government to buy dairy products under
certain circumstances, effectively setting a floor for the price of
milk. While the actual fate of milk prices was far from clear, the
milk cliff provided cover to continue the practices of subsidizing
wealthy farmers, to the detriment of just about everyone else.
In 2012, the Department of Agriculture (USDA) spent $22 billion
on subsidy programs for farmers. Introduced in the 1930s to help
struggling small family farms, the subsidies now routinely draw
condemnation from both left and right as wasteful corporate
welfare. While the number of farms is down 70 percent since the
1930s—only 2 percent of Americans are directly engaged in
farming—farmers aren’t necessarily struggling anymore. In 2010, the
average farm household earned $84,400, up 9.4 percent from 2009 and
about 25 percent more than the average household income
What’s more, a handful of farmers reap most of the benefits from
the subsidies: Wheat, corn, soybeans, rice, and cotton have always
taken the lion’s share of the feds’ largesse. The Environmental
Working Group (EWG) reports that “since 1995, just 10 percent of
subsidized farms—the largest and wealthiest operations—have raked
in 74 percent of all subsidy payments. 62 percent of farms in the
United States did not collect subsidy payments.”
The good news is that our fiscal problems have made these
subsidies politically unsustainable. As a result, the farm bill
currently under consideration by Congress is set to terminate them.
But attempts to wean farmers from the federal teat have proved
disastrous in the past. ;
Take the $4.1 billion the federal government spent on direct
payments in 2011. Created in 1996 as a way to get farmers off their
addiction to price guarantee programs, these supposedly temporary
direct payments are still around. In 2013, a new farm bill, even
with the elimination of direct payments, would be a similarly
hollow victory. Lawmakers would compensate farmers by expanding
another unjustifiable farm subsidy program: crop insurance.
Like most businesses, farms buy insurance policies to protect
from potential losses, such as poor yields or declining prices.
Unlike most businesses, they can count on the government to pay
about two thirds of the premiums, at a cost of $7 billion annually.
The proposed “shallow-loss program” would send money to farmers in
the event of small drops of revenue that are not typically covered
by crop insurance.
Senate Agriculture Committee Chairwoman Debbie Stabenow
(D-Mich.) claims that the extension would save taxpayers money,
swapping $3 billion in new payments in exchange for eliminating $4
billion in direct payments. But the crop insurance scheme is likely
to cost twice as much as estimated, according to a 2012 American
Enterprise Institute study by the economists Vincent H. Smith,
Barry K. Goodwin, and Bruce A Babcock. History tells us that it
won’t be long before the program resembles the direct payments it
was supposed to replace. That’s because, if implemented, these
subsidies will kick in at relative low level of losses. Given that
prices will surely come down from their current record levels, most
farmers will wind up receiving a payment every year.
Direct payments and crop insurance are not the only farm
programs in need of termination. Price support programs such as
marketing loans are a serious waste of taxpayer money, as are the
conservation subsidies that pay farmers not to farm on their land.
So are export subsidies, which aid farmers in foreign sales, and
countercyclical payments, which compensate for drops in crops’
In addition to the direct cost to taxpayers, these subsidies
cause enormous economic distortions. Consider the domestic sugar
industry. The USDA protects its producers against foreign
competitors by imposing U.S. import quotas, and against low prices
with a no-recourse loan program that serves as an effective price
floor. As a result, the University of Michigan economist Mark Perry
reports, Americans have had to pay an average of twice the world
price of sugar since 1982. ;
That’s just one of many government interventions that have hurt
the poorest Americans by increasing the price of food. The food
stamp program—an $80 billion initiative designed to help poor
Americans offset the high price of buying food—is embedded in the
very farm bill that keeps those prices so high.
Farm subsidies also hurt young farmers through their impact on
land values. Almost half of the country’s farmland is operated by
someone other than its owner. Those renters—especially young
farmers who generally have higher borrowing costs to start
with—face increases in both the price of renting and the cost of
buying. On the other hand, farmers near retirement age, who own
land through inheritance or length of tenure, reap the benefits of
higher land values induced by the subsidies. In 2010 some 90,000
direct payments went to wealthy investors and absentee land owners
in more than 350 American cities, according to an EWG report.
“It’s no accident that the average age of farmers is nearing 60
years old,” a friend who runs a farm wrote in a recent email to me.
“We’ve drastically increased barriers to entry through subsidy
programs, at huge social and economic costs. If I’m a 30-year-old
farmer, as my sons-in-law are, I should mightily resent the fact
that the landowner whose land I need receives government subsidies
while I’m forced to compete against those subsidies to secure
enough land to have a viable farm business.”
Farm subsidies benefit the rich and hurt the poor. They are
massively expensive and hugely wasteful. They must end. ; …
On January 2, President Barack Obama signed a bill designed to
Oz the Great and Powerful
is not the most expensive movie ever made, but with a
reported production and marketing cost of $325 million, it is
an unusually expensive film, even compared with other similarly
In order to help finance the picture, the studio resorted to a
now-common practice: moving the production to a state with lavish
film subsidies. In this case, that state was Michigan, which has
one of the most generous
film subsidies programs in the nation. The filmmakers got
almost $40 million to shoot in the state. As Michigan Capitol
Confidential, a site run by the Mackinac Center for Public Policy,
a free-market think tank based in the state, notes, that works out
to a little more the price of one movie ticket for each of the
Michigan has ;4.5
million ;individual taxpayers, and the state gave the film
studio $39.7 million to shoot the movie in Pontiac. That works out
to a subsidy of $8.82 per taxpayer while average ticket prices
nationwide are ;$7.96.
The subsidy was granted in 2010 when the program refunded up to
42 percent of Michigan expenses to film makers — essentially a
check from the treasury to Hollywood studios. The program expired,
but the Legislature, dominated by Republicans, ;overwhelmingly
decided to keep it around.
There’s another wrinkle, too. As part of the financing process,
the filmmakers wanted to borrow about about $18 million in
municipal bonds. In order order to do that, they needed a backer.
So the state stepped in, and agreed to use its state worker pension
funds as a guarantee. “If the investors failed to pay,” the New
reported ;in a piece on the deal last December, “the
retirees would be on the hook.” ;
Lo and behold, the investors didn’t come through. But now the
state is. Another report from Capitol Confidential
Michigan Motion Pictures Studios, which is being celebrated in
the local media for having made the movie, “Oz: The Great and
Powerful,” ;in Pontiac,
has missed its last three payments on $18 million in bond
obligations. The ;movie ;opens across the
a deal ;made in 2010 by then-Gov. Jennifer Granholm, the
State of Michigan Retirement Systems is on the hook for those
missing payments. ;Michigan Motion Pictures Studios was
formerly known as Raleigh Studios.
According to state officials, the state retirement
system ;has made three payments since February of last year
totaling ;$1.68 million. Michigan Motion Pictures Studio didn’t
respond to requests for comment.
about film subsidies in Reason’s December 2012 issue.
Kurt Loder reviewed Oz the Great and Powerful for Reason
reviewed the movie for The Washington Times. ; …
Kerry’s arrival in Cairo on March 2 has been greeted with streetriots in several of the country’s cities, which saw one personkilled and dozens injured. The country’s opposition leader, HamdeenSabahi, and his ally, Mohamed ElBaradei, have turned downinvitations to meet with the new US Secretary of the State, due toAmerica’s backing of the Muslim Brotherhood.The aim of Kerry’s visit is to persuade Egypt to pass a set ofunpopular reforms in order to qualify for a $4.8 billionInternational Monetary Fund loan package, with the US alsopromising to provide $450 million of financial help of their own toMohamed Morsi’s government because of its promises of economic andpolitical reforms.Geopolitical analyst and author of “Myths, lies and oil wars”, F.William Engdahl, believes the US is wrong to cooperate with thecurrent Egyptian authorities as the Muslim Brotherhood has a“dictatorial authoritarian” agenda, with no intention to makedemocratic changes in Egypt.RT: Why have Kerry’s calls for a politicalconsensus in Egypt been greeted with protest? Is it not ineveryone’s interest to end the turmoil and unrest?F. William Engdahl: Kerry is going to Egypt with an emptybag. He’s demanding Egypt’s Morsi government sign on to the IMFconditions, which means huge subsidy cuts and also big taxincreases that are going to worsen the economic situation – notimprove it. Furthermore, the entire Muslim Brotherhood project,which the Obama administration has backed since the kick-off of theArab Spring that toppled [former Egypt’s president Hosni] Mubarakis spinning out of control. It has no popular base within Egyptiansociety other than the 12 per cent or so of hardcore members of theBrotherhood. And most Egyptians want some kind of a democraticsociety and this is why the opposition has boycotted meeting withKerry on this trip. Washington has a very poor hand of cards toplay in Egypt right now and that what’s being reflected in thisreception, I think. RT: Why is America appearing to side with what theopposition are calling a hardline authoritarian Muslim Government,after its vocal support for democratic change in theregion?FWE: Well, It’s very good question. I think there’s adouble-faced policy in Washington. The backing of the Muslimbrotherhood goes back to the CIA’s role in Egypt back in the 1950swhen they saw the Muslim Brotherhood as a potentially useful toolto put in their bag of organizations that they manipulate aroundthe world. Then they brought the Brotherhood into Saudi Arabia inthe 50s when it was banned in Egypt. And from there the Brotherhoodhas expanded out. Now they’re playing a key role in all thecountries with the Arab Spring. I think some people aroundpresident Obama have the delusion that they could control what’sbasically a political Islamo-fascist movement. It’s not a movementfor democracy by any stretch of the imagination. And that’s whatthis Brotherhood is – it’s a secret society. They have a publicagenda that sounds lovely, and they have a private agenda thatwe’re seeing unfold in Egypt now, with the dictatorialauthoritarian measures that Morsi and Co are advocating. So, Ithink at this point Morsi is in a life and death struggle becausethe popular support is not there for this coup. And Washington isbeginning to get a little bit wobbly on its support for Morsi forthat reason. They are beginning to rethink and that’s one of thereasons for the change between [former Secretary of the State]Hillary Clinton and John Kerry – to bring in a new cast of peopleand see what kind of options there are in Egypt at thispoint. RT: Kind of going down the rabbit hole a little bit here.How does the alleged US support for the Muslim Brotherhood in Egyptmatch up with years of alliance with Israel?FWE: Well, this is a rabbit hole. I think, some people inIsrael, probably, think that they can control elements of theMuslim Brotherhood, although I think increasingly Israel isbecoming very leery of this whole Brotherhood option and feel morecomfortable with a military dictatorship, such as we had underMubarak, maybe with a civilian face. I think that this is what isgradually going to evolve in the region for better or worse. Butthe victims of this, of course, are going to be the Egyptian peopleand the people in the entire region. …
It’s not quite “let them eat cake” to the “too
big to fail” banks, but Senator Elizabeth Warren (D-Mass.), the
newest member of the Senate Banking Committee, put the press to Ben
Bernanke on the Federal Reserve’s implicit guarantee of a bailout
to “too big to fail banks” at committee hearings this week. Warren
pointed to a
recent piece from Bloomberg that valued the discount big banks
get to borrow at $83 billion a year. Asks Bloomberg:
So what if we told you that, by our calculations, the
largest U.S. banks aren’t really profitable at all? What if the
billions of dollars they allegedly earn for their shareholders were
almost entirely a gift from U.S. taxpayers?
Granted, it’s a hard concept to swallow. It’s also crucial to
understanding why the big banks present such a threat to the global
Let’s start with a bit of background. Banks have a powerful
incentive to get big and unwieldy. The larger they are, the more
disastrous their failure would be and the more certain they can be
of a government bailout in an emergency. The result is an implicit
subsidy: The banks that are potentially the most dangerous can
borrow at lower rates, because creditors perceive them as too big
Warren asked Bernanke why banks shouldn’t pay for this implicit
subsidy, to which the Federal Reserve chairman responded “I think
we should get rid of it.” He didn’t clarify, naturally.
When it comes to sports and taxes, I’m like most Americans. I like downing a beer and watching a good game every now and again, and I’m fine with paying my fair share of taxes for genuine societal necessities. What I’m not OK with is paying a skyrocketing Sports Tax at a time of burgeoning deficits, reduced household income and serious cutbacks to social safety net programs.
That term – Sports Tax – is not hyperbolic. In a week that saw Louisiana fork over $5 million to the NFL for the privilege of helping that league make big Super Bowl money, Sports Tax is the most accurate catch-all label for the four sets of levies the public is being made to shell out.
The first Sports Tax comes from the higher taxes we all pay in order to fund direct handouts. Just as NFL owners convinced Louisiana politicians to give them that $5 million taxpayer subsidy, similar collusions between team owners and lawmakers have been forcing taxpayers everywhere to do much the same. In all, Bloomberg Businessweek reports that “taxpayers have committed $18.6 billion since 1992 to subsidies for the NFL’s 32 teams, counting the expense of building stadiums, forgone real estate taxes, land and infrastructure improvements, and interest costs on public bonds.” That’s almost $1 billion every year – and that’s just for football, meaning the figure isn’t even counting similar handouts for other leagues.
In a wide-ranging and sometimes defiant letter to staff announcing his resignation on Friday, Energy Secretary Steven Chu, while highlighting his agency’s achievements over the last four years, blasted critics of the administration’s investment in the renewable energy market, suggesting that opponents were living in the “Stone Age.”
“In the last two years, the private sector, including Warren Buffett, Bank of America, Wells Fargo and Google, have announced major investments in clean energy,” Chu wrote. “Originally skeptical lenders and investors now see that renewable energy will [be] profitable. These investors are voting where it counts the most — with their wallet.”
The department’s support of solar power in particular has been at the the heart of Republican attacks on Chu’s tenure as energy secretary — particularly his oversight of clean-energy incentive and subsidy programs created or expanded under President Barack Obama’s 2009 stimulus package, which counted among their beneficiaries the failed solar firm Solyndra.
In Louisiana, it is illegal to
sell milk for too much.
It’s also illegal to sell milk for too little. It’s all a bit
complicated, so producers are eligible for a milk subsidy.Last week, state regulators cracked down on a grocery store that
was engaging in a “disruptive trade practice,” selling milk at a
price that could “injure,
reduce, prevent, or destroy competition.”From
State Agriculture and Forestry Commissioner Mike Strain said
Fresh Market violated state regulations by selling milk below cost
as part of a promotion.
The supermarket routinely sells a gallon of skim, 1 percent, 2
percent or whole milk for $2.99 on Tuesdays, limiting the quantity
to four per customer.
State law requires retailers’ markups to be no less than 6
percent of the invoice cost after adding freight charges.
The Dairy Stabilization Board oversees milk prices in Louisiana.
The board was established after Schwegmann, a New Orleans-area
grocery chain, launched a legal battle in the 1970s with the
Louisiana Milk Commission to buy milk from out-of-state suppliers
because it was cheaper.
…“They can sell it 6 percent over cost all day long. It’s when
they sell it below cost that it becomes a problem,” Strain
…Strain said his office dispatched an auditor to the Fresh
Market in Mandeville after receiving a complaint about the Tuesday
promotion. His press office declined to identify the
…Strain said the regulations exist to keep the price of milk as
low as possible.
Allowing a supermarket to sell milk below cost could drive
competitors out of business, allowing the store to then increase
the price of milk, he said.
It’s hard to see how a once-a-week sale on milk could drive
other grocery stores to bankruptcy. But perhaps that’s best left to
the Dairy Stabilization Board, which since 1974 has protected
consumers from “disruptive trade practices,” “excessive prices,”
and “inadequate supply.”Click
here for Reason coverage of federal price controls
that inflate the price of milk.H/T Radley Balko
by way of the
Daily Caller. …