Mixed economics killing the US economy...again.
My in-laws stopped by over the weekend on their way home from visiting some distant relatives in Kansas. Those distant relatives have been living quite well as of late and when my mother-in-law asked how, they explained that, as farmers, the government was helping them out. Curious, she did some research on the USDA's website and found that her relatives were pulling in more than $250K per annum in agricultural subsidies. For any non-Midwesterners reading this, agricultural subsidies are paid by the federal government to farmers for not growing their crops. By letting their fields lie fallow, overall supply of agricultural products drops, resulting in higher market prices and higher income for farmers. Turns out those distant relatives have been using those subsidies to purchase more land which they then use to pull in more subsidies.
Today I got out of class and pulled up the day's financial news. The main headline starkly announced that wholesale inflation is rising at a rate not seen since the days of stagflation in the '70s. One section of this article in particular caught my eye:
Most economists tend to agree that rising feed prices are responsible for much of the increase in food prices over the past year, which in turn spurs on wholesale inflation. So, as the source above mentions, ethanol is in large part responsible for the recent rise in inflation. That's when it struck me: we're running out of room to grow corn feed (which is also the primary ingredient in most ethanol operations), yet my in-law's distant relatives are making a fortune from the government in exchange for not growing any crops."The whole ethanol craze is behind a lot of the food inflation in the sense that it's driven up corn prices and increased the demand for crop space because people want to grow crops to make ethanol," [chief economist at RBS Greenwich Capital] said."
That being said, one family could just be an anomaly. So I dug further. According to the USDA's 2006 budget report, nearly $3 billion was spent that year in direct price supports for corn feed. Thrown in other crops and that number increases to $8 billion. And, most disturbingly, another $200 million a year is being paid to non-farmer landowners for not growing crops on their land. All of those numbers will be higher in the 2008 report given the large increases in crop prices over the past two years. So here we are, stuck in a twisted cycle: the federal government artificially props up crop prices both in the form of direct price supports and direct payments for not farming, increasing inflation. At the same time, the federal government is spending billions to encourage ethanol production, forcing crop prices up even more. Ethanol producers are being paid to use more crops while farmers are being paid to produce fewer crops. In the end, the result is essentially a double tax on the American taxpayer. You have your standard income tax, the proceeds of which are being used to drive up crop prices, forcing American consumers to pay more for just about all of their goods.
Sadly, that's not the worst of it. If all of the subsidies were going to poor, down-on-their-luck farmers, at least we could right this off as another form of misguided welfare. According to the Washington Post, much of this funding is going to wealthy landowners. While the evidence here is anecdotal, my in-law's relatives report that wealthy Chinese and Arabian investors are attempting to purchase land in Kansas wholesale. So not only are we paying large farming corporations to not grow crops, we're paying foreign farming corporations for the same purpose.
Now, aren't you glad to see your tax dollars put to use?
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, but honestly I think that (like much of American welfare) the aid and manipulation goes to the wrong farms.
Originally Posted by Exarch
