Farm subsidies, huh, yeah

What are they good for? Absolutely nothing.

A few thoughts on an editorial in Wednesday's USAToday (HT: CFG).

First of all, I don't like subsidies. I hate that Romney said he supported them and I like that McCain (I think) said he didn't. I think they distort the market for food, not only in the US but also throughout the world. We're essentially paying higher taxes (the subsidy money comes from somewhere, right?) for the right to pay less for our food (subsidies create incentives to stay on farms and produce more food than you would have otherwise, therefore increasing supply and decreasing prices). But these lower food prices (again, because of the increased supply) make competition from foreign farmers difficult to impossible because they aren't getting subsidies. This means that they now have to find some other means to make money and feed their families or just return to their abject poverty. All because we wanted to protect the jobs of a few farmers.

But, you say, food prices are skyrocketing. How can that be? Well, because the government is heavily subsidizing many of the green energy technologies, like ethanol, there is also high demand for crops such as corn. (In other words, in order to feed my son the corn on the cob he so loves, I'm competing with the ethanol producers to buy that "next" ear of corn. Our competition has the effect of bidding the price up.) In order to meet this significantly higher demand, government needs to further subsidize corn, which creates more incentives for farmers to continue to grow corn. Now we're making more corn that we would need in the absence of subsidies. But, we only have so much land that can actually grow these crops, so this competition for crop-friendly land pushes the prices of farmland higher, making the cost of being a farmer, whatever you decide to grow, more expensive. Further, because more people are growing corn to meet the increased demand for corn from ethanol producers, fewer people are growing wheat or barley or hay (or chickens, cows, and pigs). With fewer people producing these goods, supply goes down and pushes their prices up. Voila! We now have higher prices on every aisle at the grocery store.

But back to the article. The point of the article is to discourage subsidies, but I don't agree with a couple points.

1): "Government has a role in helping farmers through bad times, and it shouldn't base farm policy solely on today's prices, which could plummet down the road, as they have before."

As you can guess, I don't necessarily agree with this statement. First of all, if it feels it should help any farmer through rough times, why not help all farmers through rough times, regardless of who owns the farm and what crops they grow. This obviously isn't the case. (The article actually mentions this later.) Second, why just farmers? Why not expand it to accountants, telemarketers, and software developers? All of us are in careers that could easily lose out to competition?

2): "Almost two-thirds of those subsidy dollars go to the wealthiest 10% of farmers, including big agribusiness outfits that ought to be able to prosper without government handouts."

Even though the ends of this argument are laudable, I still don't like it. Again, why should it matter who owns it? Is the point of subsidies to protect our food supply or to protect the farmers (and our romance with working on a farm)? My guess the argument for subsidies is a little bit of both. The argument against doesn't care about either as they're both bogus. It distorts the reason subsidies are bad. The only advantages big, corporate farms have over small, family farms are economies of scale and diversity (they can invest in a more diverse selection of farm locations or crops than a smaller farmer). Should we reward the family farm because it isn't as productive or diverse as the corporate farm? At the end of the day, it takes people to work on a farm and it takes people to own a farm. If either the family farm or the corporate farm goes under, people will lose their jobs and people will lose their investments. Why should it matter who?

Political incentives

A post on Econlib got me thinking about why it is that I don't think the idea of heavy government involvement: it's because by involving politicians, you 1) introduce a lot of perverse incentives and 2) assume that, even with the best intentions, a group of decision-makers can possibly consider and properly weight every alternative, foresee every potential problem, and effectively and efficiently adapt to changing circumstances. Governments through the years have shown time and time again that their incapable of doing this. The best example, of course, is Soviet Russia, but Cuba today isn't so bad either. This is the whole point of F.A. Hayek's The Road to Serfdom.

Many believe the problem isn't bad government but bad people in government -- we're simple electing the wrong people. I can't remember where I read it right now (I think it was on The Library of Economics and Liberty, but I'll put up the link if I find it), but there's an idea that people always respond to incentives. No matter who it is that is elected, they will always respond to incentives. The framers knew this. That is why they established the many checks and balances among the three branches (among several other things, such as a bicameral legislature with different term lengths in each). Hopefully, the different incentives can play off one another in a way that produces an effective result. I'd say that for the most part it works, despite the clear examples of when it doesn't (earmarks, farm subsidies, campaign finance and lobbying problems, etc.).

I'd like to think that my candidate, Mitt Romney, who's gone anyway, wouldn't succumb to this. But, alas, he has and he will. He, like all pols, wants to get elected, so he designs his platform in a way that reflects his own views but also appeases to the most people, despite the intellectual honesty in doing so. An example. Do I believe that he actually changed his mind with respect to abortion? No, I don't. I believe he stated his position to help himself get elected. Effectively, he made a campaign promise and, as far as I can tell, was true to it. Does that make him dishonest? Weeeelllllllll, I don't know. As far as I can judge, for a conservative in, say, Massachusetts, to really have a chance to get elected and affect the government in any way, he or she would pretty much need to concede on a few issues. I think this is what he did. The result is that to a New Englander he is still very conservative, but more easily digestible; to a southerner, he's a wicked moderate/liberal. Therefore, in order to appease the southern conservatives, he needed to effectively rescind his campaign promise to Massachusetts and reissue another to the country, one that will find him more to the right of where he needed to be up north.

So, does that make him a "bad person"? Not necessarily; he's simply playing politics. But, it does show that he responded to incentives and fashioned his message to fit the audience.

Its good to hear honesty

From a Reuters blog on Tuesday:

"John McCain has a curious recipe for success in Ohio: tell voters their jobs aren’t coming back, and embrace the free trade pacts that are despised here. It’s an approach that led to defeat last month in Michigan, another Rust Belt state that has seen manufacturing jobs disappear. Now that the Republican nomination is all but assured, McCain hasn’t changed his tune."

One of my biggest problems with Romney was that I felt he indulged in some protectionist rhetoric with some of the stuff he said to Michigan. He became known for saying that he'd "fight for every job." I don't even know what that means exactly. To me, he was saying that he would do things to keep the jobs from leaving. I wish he'd have said something closer to what McCain said/is saying. Instead of telling them we'll work to prevent their jobs from leaving, we should encourage them to find other jobs and/or get more education and more skills. That isn't an easy or comforting way to address the problem, but that is what needs to happen.

Ridicule the global warming out of you

An interesting commentary in Monday's WSJ about the arguments surrounding global warming:

"You'd think this would be a rich time for debate on the issue of climate change. But it's precisely as sweeping change on climate policy is becoming likely that many people have decided the time for debate is over. One writer puts climate change skeptics "in a similar moral category to Holocaust denial," another envisions "war crimes trials" for the deniers. And during the tour for his film "An Inconvenient Truth," Al Gore himself belittled "global warming deniers" as unworthy of any attention...

Global warming is too important a subject not to debate, and we in the U.S. may rue the day we rushed pell-mell into expensive and shortsighted solutions when much more rational and cost-effective ones were readily available."

I for one do not believe global warming should be treated like a fix-it-at-all-costs type of problem. Very few, if any, problems should be treated like that. (In fact, I can't think of any off the top of my head.) For example, I don't know the number of traffic fatalities that occur each year, though I know its significant, but I'm sure we could cut it by 99% if we strictly enforced a 15 mph speed limit (I can't recall where I recently heard that argument). We could also nearly guarantee that we never see another terrorist attack using airplanes if we quadrupled the security, backgrounds checks and random searches of passengers. The reason we don't go to these extremes is because we don't like the tradeoffs they impose, especially when we don't know the odds of their occurence.

I think the same goes for global warming. The odds of the worse case scenarios are still small. And going out 20-50 years requires you to make some serious extrapolations. I don't pretend to be an expert, but put me in the skeptical camp. The thing I don't like is that its almost turning into an argument that says that the fact you disagree with me gives me all the evidence I need to conclude that you're an idiot/stooge and not worthy to debate the issue.

My new favorite band

As my wife will attest, my new favorite band is The White Stripes. I can't seem to get enough of them. Her best friend from high school sent us a cd last winter and I was hooked. To my credit, though, I actually was "this close" to buying their cd back in 2002; a couple weeks ago I found a list of cd's I wanted to buy that I'd written down before Robyn and I got married and we laughed when we saw The White Stripes.

Anyway, I found out that I can embed songs into the blog, so the first song I added is "Jolene". It's a cover of a Dolly Parton song, so when you hear the lyrics, you'll understand. The reason I decided to start with this song, besides the fact that I love it, is because of my 2.5 yr old son, Jacob. Yesterday morning, as he was eating breakfast, I sang the first little bit of the chorus. He finished it for me (apparently I sing this song a lot) by singing "please don't take my man." It was too funny.

I hope you enjoy it. I'll post some other songs later.

(If the widget at the top doesn't work or the song has changed by the time you read this, you can listen to it at imeem.com here. You might have to sign up, but its free.)

Obama and trade

From Reuters: "Obama targets NAFTA but says supports free trade"

"Asked how other countries should interpret his position, Obama responded that he supported free trade but wanted it to be fair."

I don't buy the "fair trade" argument. Usually it means that we want it to be fair for our own local workers, producers, etc or it means that we want it to be fair to the workers in their countries by requiring labor standards and the like. Translated, it means we don't want the other countries to import products at such a low price that it puts local companies out of business, so we'll do whatever we can to raise the price of inports or to prevent them from coming in the first place. The way we'll do that is we'll include anti-dumping rules (a bad idea that sounds like a good one) and we'll strong arm them into minimum wage laws, worker safety laws, and the like (another bad idea that sounds good). The effect is that we as consumers pay more than we need to for the products we buy, leaving less money in our pockets to buy other things. More later as to why these things are bad.

Here is another bit about Obama's position on Nafta and free trade (HT: The Club for Growth)

The pain of being a protectionist

You'll soon see how much I dislike all attempts by government to restrict competition. It only serves a select few by providing them with favors and penalizes the rest of us through higher prices and fewer purchasing options. Over the long term, it prevents capital flows, restricting economic grow.

Lets look back 100 years to a time when our economy was about half agriculture. What if we'd decided that the threat from competitor nations was too great and decided to give massive subsidies to farms and and tariffed the heck out of any food that crossed our borders? All those people who worked on those farms would have stayed there because the government was paying them to stay there, having the effect of keeping the world's supply of food unnaturally high. High supply drives the price of a given item down. Not only would the farmers we're subsidizing receive less money for the food they sell (requiring the government to give them even more subsidies), but farmers in other countries would also get let money for the food they sell. Unfortunately, they don't receive subsidies from their government to help make ends meet, so they have to stop farming, driving them further into poverty.

Not only that, but because these people stay on the farm (again, why would they leave if the government is paying them to stay there), they aren't free to do other more productive things. Who would've developed computers and the internet, for example, if we needed 50% of our workforce on the farm? When we free people from less economically productive jobs, we put them to work on more economically productive jobs. That doesn't mean there won't be a (sometimes painful) transition, but we're much better off nowadays because we moved people off farms and into, for example, technology.

But are these other countries, the ones who get these less productive jobs, actually better off? Of course. More than likely, those countries are poorer than we are. We give them the opportunity to take a jobs that pay better than the ones they currently have, which probably don't pay anything at all, and begin to pull themselves out of poverty. They grow, which is a good thing. Here is an example.

From Friday's WSJ:

"The current business cycle will go down in the history books as one which confirmed that leadership in the global economy is now shifting from the old industrial countries to the emerging market countries. During 2007, the developing countries produced over 52% of global growth, compared to 37% during the late 1990s. China alone produced 17.8% of global GDP growth last year, compared to 14.6% for the U.S. economy. The developing countries' share of total world output has risen to 29% this year from 18% in 1995. The World Bank is forecasting that the economies of developing countries will grow 7.4% this year, compared to 2.2% in the old industrial nations."

The fact that emerging market economies are growing is a very good thing. The greater share of world growth and GDP they assume, the better. Why? Why not? Why does economic prosperity have to depend on a geographic border?

But aside from the feel-good argument that these people are becoming more and more free, they also become consumers. Also from the WSJ article:

"In the decade before 2005, American consumers were the growth engine for the world economy, accounting for more than half of global consumer spending. The balance of power is now shifting.

In 2000, the consumer spending of the world's 17 largest emerging-market countries was equal to 48% of U.S. consumer spending; last year it was equal to 65%. At current growth rates, the developing countries could exceed U.S. consumer spending by 2015."

I don't like to use this argument because it appeals to the old mercantilist idea that we need to be exporting to be growing as an economy, which isn't true. We just need to be trading, however we're trading. And by doing so, we're all better off.

The great divide

The important line in an Opinion/Commentary in today's WSJ, the author:

"That's the great divide in modern America, whether or not you had a functioning family, and she [Michelle Obama] apparently came from the privileged part of that divide."

I think this is a very important insight, putting the politics of the rest of the article aside. (Its good, by the way.) When we have families that function the way the Lord intended, with a father and mother who actively love and support each other and together actively love, support, discipline, and teach their children, we are privileged. That doesn't mean that without one of these things, a functioning family can't exist, in fact I think we all know plenty of examples to the contrary. It is that with a functioning family, however it actually functions, you will find your chances of success increases exponentially.

Nothing better to do?

I'm actually asking Congress; not you.

Apparently they're holding another hearing about steroids. (HT: Dan Shanoff)

I've seen an argument that this is actually a good thing. If they're spending their time sticking their noses in something as inconsequential as professional sports, that's less time to pass regulations, spend my money, and generally continue to foul things up.

For example, from the NYTimes (via The Economist):

"Prodded in part by some of the nation’s biggest banks, the Bush administration and Congress are considering costly new proposals for the government to rescue hundreds of thousands of homeowners whose mortgages are higher than the value of their houses."

They're talking about negative equity. I have a hard time with this. People know that home buying can be risky, but they do it because they need a place to live.

First of all, the people who would even have negative equity either 1) just bought their homes or 2) have been in the home for awhile and refinanced to cash out on the equity. Further, the only people who really care that they have negative equity are those who see their homes as a short-term investment (they are planning on selling over the short term rather than the long term).

This is why I have a problem with the government doing anything to help out those with negative equity in their homes. If they just bought the home and are now concerned because they can't sell it for enough to pay off the note, that means they are (probably) investors who planned on trying to flip it for a quik profit. Why should we bail them out of a ill-timed investment decision? If they have been in the house for a few years and refinanced to cash out, they borrowed against paper equity to fund consumer expenses (vacations, cars, etc). Why should we bail them out to subsidize their spending habits? If someone doesn't fall into either of these categories and they have negative equity, they will most likely just keep paying their mortgage until the value of the house goes back up and they've built more equity through their monthly payments.

But the funny thing about the story is that officials are adamently against "any taxpayer bailout for either people who borrowed more than they could afford or banks that made foolish loans." How will they determine that? I think that will be a somewhat arbitrary measure that will require someone making the decision that because you only borrowed, say, 3 times yours income you deserve help while someone else who borrowed 3.1 times their income doesn't. It's just asking for trouble.

Where I stand

Politically.

I consider myself a social conservative and a fiscal libertarian. As for the defense leg of the famed Reagan coalition? I support spending on defense, but not as much as we've seen of late. (For example, included in Pres. Bush's recent budget was a large increase in military spending. The argument was made that it was in line with history as far as spending as a percentage of GDP. I see what their saying, that in relative terms it isn't that much. But, does it need to be somehow tied to the strength and growth of our economy? I don't necessarily believe it does. This explains it well.)

Anyway, recently I've felt very attached to the customary Republican position of limited government, ie lower spending, lower interference, lower taxes, etc, especially when it comes to the economy. This is my major issue with Pres. Bush. As a Republican, I want my Republican president to do three things: lower taxes (check), lower spending (____), and to get out of people's way (__eck).

He did lower taxes in 2001 (actually, that was a rebate, so I don't think it should really count) and in 2003. The 2003 cuts were especially important because they were the kind of tax cuts, besides marginal rates, that are most likely to spur growth. There is debate as to whether they had as much of a direct impact on the recovery as Republicans claim (more on my thoughts on how much Bush, or any president past or future, really has on the economy later), but they helped. While I don't buy all the arguments for the Laffer Curve, I do think taxes impact behavior, particularly investment, often with negative economic consequences.

He did not lower spending, in any way, shape, or form. He tried to reform Social Security entitlements, but that fell flat. I do think, though, that he could have done a lot more to reduce regular discretionary spending. He kept the veto pen in his pocket while his friends down the street wrote checks to themselves (to their districts). It's only been recently that he has shown even a little backbone. Also, for what its worth, Congress is finally starting to show a degree of restraint with respect to earmarks, which is long overdue. The only thing about that is I think its more of a minority party trying to regain control than a true return to fiscal conservatism. Time will tell.

As far as staying out of things, he's done OK. I didn't like the steel tariffs from 2001 (neither did a lot of others, which is why they were rescinded not long after they were passed), nor am I a fan of No Child Left Behind. Tariffs, quotas, subsidies and the like are a bad idea. So is more top-down regulation on an already messed up education system. (I support more school choice; more on that later.) I also don't like the emphasis on a weak-dollar policy in an effort to boost exports. He has helped push through some important free trade agreements recently and championed some others that would be important; although these agreements aren't perfect, they're a start. He has largely stood aside with respect to outsourcing and offshoring, refraining from adding to the protectionist rhetoric. He also tried to come up with a reasonable solution on immigration that didn't involve cracking down on a business owner who wanted to hire someone who wanted to work and he wanted to pay to do that work. (I'll get more into my beef with the Republican Party's stance on immigration later. For now, I'll just say that is my major point of divergence from the GOP.)

Who did I support in the Primaries? Romney. But he was far from my perfect candidate. If I could have cherry-picked the policies/qualifications of Romney, Paul, and McCain, I'd be fairly content. And I will be voting for McCain in November because a vote for a flawed conservative candidate is better than one for a perfect liberal candidate.

Mormons and the Republican Party

What was it that convinced me I needed a blog? It was this article in The Economist. From the article:

"Now that the Mormon former governor of Massachusetts has abandoned the race and endorsed John McCain, will the Church of Jesus Christ of Latter Day Saints—an important voting-group in several states—follow his lead?...

Mormons took a beating during Mr Romney's run. In a Pew poll from December, a quarter of Americans and 36% of white evangelicals expressed reservations about voting for one. A study from Vanderbilt University concluded that conservative Christians cited unrelated concerns about Mr Romney to mask their discomfort with his faith...

Much depends on the Democratic nominee. Hillary Clinton is reviled; Mr Obama is not. Much also depends on Mr McCain's eventual running-mate. Many Mormons believe Mr Huckabee used Mr Romney's faith against him, as when the former Baptist minister asked a reporter “Don't Mormons believe that Jesus and the devil are brothers?” If Mr Huckabee is on the Republican ticket, there could be a latter-day revolt."

I've fully understood why it was that Mormons (such as myself) always identified so stringently with the Republican Party. The only thing I could think of was for the sake of social conservative issues (abortion, etc). Now, I can't help but wonder if the "Mormon coalition" might show some signs of fracture.

A few weeks ago, my wife showed me a blog post by another LDS blogger who, after watching a Democratic debate, agreed with her father, also making the decision at the same time, that if Romney didn't get the nomination, she'd vote Obama. I was appalled, after reading DOZENS of her comments, that many of her LDS readers felt the same way. My guess is that this is the case for one or two reasons.

1 - People sailed their boats too close to the Sirens and got drawn in. Really, Obama is a terribly gifted public speaker who promises a lot of feel-good change. (I admit that once, out of frustration with Mr. Huckabee, I offhandedly said to Robyn that if he got the nomination, I'd vote for Obama. The song was pleasant, my friends, but I stayed tied to the mast.)

2 - People confuse the Savior's commandment to feed the poor, etc. with a mandate to force a lot of richer people than themselves to feed the poor.

The reason so many Latter-day Saints sway toward Obama nowadays is likely a mixture between 1 and 2. But what will be very interesting is how far that sway actually leans in November. If you combine 1 and 2 with a general conservative distrust of McCain and some skepticism, documented above, of church members toward the Republican Party, you have the beginnings of some surprises on election day. Like the author of the article, I don't suspect that Obama will take Utah, but I do think he'll make a stronger-than-historical showing there. Further, a solid showing by a Democrat in Utah might give some closet Utah liberals the confidence to finally admit the party with which they identify, which could precipitate a much larger political and idealogical shift in the state.

Now, do I still hold Barack in such high esteem? As an orator and inspirer? No doubt about it. As a politician? Not so much. Besides, he sits left of Hillary. I don't see how a conservative could vote for him in good conscience.

I won't. But I'll get into that later.