Farmers Enjoy Record Income…Time for More Subsidies?

Thursday, September 6th, 2012 and is filed under Blog, Economy

When Congress returns from the August recess next week, one prominent bill on the agenda will be the bailout for farmers who knew they would not be covered by government subsidies this year.  The government-subsidized insurance program for cattle farmers expired a year ago, and like most prudent businessmen, they should have prepared to mitigate their risks and play like everyone else in the market.  But they likely suspected that the politicians in Washington would bail them out anyway.  As such, they did nothing to prepare for a potential drought (which is always a threat).

The Senate will likely vote on the $383 million bailout package (H.R. 6233), which retroactively covers cattle farmers…along with many other special interests that were not hit by the drought.  The House already passed the bill immediately preceding the August break.

Through the entire debate over the bailout package, and the underlying farm/food stamp bill, which costs $957 billion, you will never read this headline: Farmers Expecting Record Incomes!  Here is the latest report from the USDA Economic Research Service:

In current dollars (ignoring the effects of inflation), U.S. net farm income is forecast to exceed $122 billion in 2012 and net cash income is expected to exceed $139 billion, both record nominal values. The expected increase in income reflects large price-led gains in corn and soybean receipts, as well as large increases in crop insurance indemnities. Crop farm gains should be more than enough to offset livestock farmers’ higher feed expenses and a decline in sales of wholesale milk. Extreme hot and dry conditions in the Plains and Corn Belt are drastically cutting projected corn and soybean yields. With corn and soybean supplies for the 2012 marketing year expected to be the lowest in 9 years, prices are increasing dramatically, resulting in higher than expected 2012 calendar-year receipts for many crops. This chart is from the Farm Sector Income & Finances topic page on the ERS website, updated August 28, 2012.

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Amtrak Promoting Homosexual Agenda on Taxpayer Dime

Thursday, August 9th, 2012 and is filed under Blog, Family Values

As we’ve seen from the Chick-Fil-A imbroglio, every private company should be entitled to promote whatever values it chooses, irrespective of the prudence of their decision.  Companies are free to promote American conservative values, and liberals (private citizens, not government) are entitled to boycott them.  Likewise, companies are free to promote unAmerican liberal values, and conservatives are free to boycott them.  The same cannot be said for a corporation that is almost entirely sustained by the federal government.

Proponents of Amtrak like to claim that it is a private corporation, but the reality is that the federal government owns virtually all its stock, and its board members are appointed by the president.  Due to its poor service and inefficient business model, Amtrak has never turned a profit.  They have sustained off of $40 billion in taxpayer subsidies over the past few decades.  The Heritage Foundation estimates that Amtrak receives a subsidy rate of $237.53 per 1,000 passenger-miles.

One would expect that an open pocketbook from taxpayers would engender a closed mouth from the executives of Amtrak, especially as it relates to their views of morality, or lack thereof.  But like good liberal dependents, they want to have their cake and eat it too.  This, from The Hill:

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The Finance Committee’s Special Interest Tax Extenders

Tuesday, August 7th, 2012 and is filed under Blog, Taxes

Last week, with the help of Senator Orrin Hatch, the Senate Finance Committee voted to extend dozens of special interest tax preferences for green energy – preferences that are nothing more than subsidies and market distorters.  Included in the $205 billion package is the Production Tax Credit, which subsidizes up to 80% of wind energy production.  Score one for Big Wind!

Other special interest handouts include the following:

  • A credit for energy efficient upgrades to homes.  It covers 10% of the costs of qualified home efficiency upgrades.
  • A credit to cover 30% of the costs for installing refueling stations for alternative-fuel vehicles at a home or business.
  • A cellulosic biofuel producer credit of $1.01 per gallon, which would be expanded to include fuel produced from cultivated algae, cyanobacteria or lemna.  Yes, this is Obama’s algae energy pipe dream.  There’s also a special depreciation allowance for cellulosic biofuel plants, which would be extended through the end of next year.   As we’ve noted before, cellulosic biofuels are non-existent on the commercial market, yet these subsidies will help strengthen the mandate to use this phantom fuel.  Oil and gas companies that decline to blend in this phantom fuel must incur penalties.
  • A credit of $1 per gallon for biodiesel, which would be extended through 2013, retroactive to the end of last year.
  • A credit for construction of new energy-efficient homes that provides contractors $1,000 to $2,000 per home. The credit would be extended through 2013, retroactive to the end of last year.  Talk about distorting the housing market.
  • Energy-efficient appliance credits that range from $25 to $250 per appliance for the production of energy-efficient clothes washers, dishwashers and refrigerators.
  • A 50-cent per gallon credit for alternative fuel mixtures, which apply to liquefied petroleum gas, compressed or liquefied natural gas, and coal-to-liquids fuels.
  • An individual income tax credit for plug-in motorcycles.

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Orrin Hatch’s Election Promise Gone With the Wind

Thursday, August 2nd, 2012 and is filed under Blog, Taxes

Whew!  It’s good the Utah primary is over.  Now Senator Hatch can relapse into his natural modus operandi.

As we’ve noted before, at the end of every calendar year, Congress passes a ‘tax extenders’ bill to temporarily reauthorize specific tax breaks that have not been permanently written into law.  Some of these extenders include universal tax cuts such as, the AMT patch, the R&D business credits, and universal deductions for depreciation, as well as state and local taxes.  However, they also include sundry green energy credits that are nothing more than refundable subsidies for special interest groups.

Today, the Senate Finance Committee, led by Max Baucus and Orrin Hatch, is marking up a bipartisan draft bill on tax extenders that is loaded up with green energy handouts.  In fact, it contains every green energy wet dream under the sun and wind, including credits for green energy cars, homes, and biofuels. Most notably, Hatch gave in to the aggressive and officious Big Wind lobby and added in the Production Tax Credit extension.  We’ve sounded the alarm against this venture socialism for over a year, but David Kreutzer of the Heritage Foundation says it best:

So far this year, the wholesale prices of electricity in the different U.S. markets average from less than three cents per kilowatt hour (kW-h) to about 4.5 cents per kW-h. The PTC provides a subsidy of 2.2 cents per kW-h to wind energy producers. So this PTC subsidy is equivalent to 50 percent to 70 percent of the wholesale price of electricity. (Note: It is the wholesale market into which the wind producers are selling their energy.) That’s a big subsidy.

Though you would not know it from wailing and gnashing of teeth over the expiration of the PTC, many states also have renewable energy standards that force ratepayers to buy wind, solar, and biomass produced electricity regardless of how much it costs. These renewable standards are separate from—and, for wind-power producers, in addition to—the PTC.

So not only will they enjoy a 50-70% subsidy of their production, they will continue to reap the benefits of state governments that use their power to force electricity providers to purchase their product.  The Heritage Foundation also estimates that if the oil industry received a commensurate subsidy, they would get a $30 dollar check for every barrel produced.

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Mitt Romney Fans the Flames of Free Market Energy Policy

Tuesday, July 31st, 2012 and is filed under Blog, Taxes

Mitt Romney actually stood for bold colors yesterday.  For conservatives, it should be the biggest story of the week.

Conservatives are rightfully focused on the impending tax cliff that is facing American taxpayers at the end of the year.  But we must not forget the subsidy cliff either.  Dozens of special interest tax preferences, known as tax extenders, are slated to expire at the end of the year.  Those extenders related to green energy are nothing more than handouts ensconced in the tax code.  We must be vigilant of any effort to slip in these extenders as part of a final agreement on the broader tax issue

At the end of every calendar year, Congress passes a ‘tax extenders’ bill to temporarily reauthorize specific tax breaks that have not been permanently written into law.  These bills have traditionally dealt with issues like the AMT patch, the R&D business credits, and universal deductions for depreciation, as well as state and local taxes.

In recent years, tax extenders have been magnets for non-universal carve-outs for green energy.  Some of those carve-outs, such as the 30% Investment Tax Credit (ITC) and the 45-cent per gallon Volumetric Ethanol Excise Tax Credit, have already expired.  Other handouts, like the lobbyist-driven 2.2 cent/per kilowatt-hour Production Tax Credit (PTC) for wind, is slated to expire this December 31.  In both cases, there is still time to reauthorize the tax credits because they are backward-looking and do not affect withholdings.

We must kill them now.

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Cato: Corporate Welfare Tops $100 Billion Annually

Friday, July 27th, 2012 and is filed under Blog, Economy

No matter who wins control of all branches of government, it will be an arduous task to wean the American people off of 80 years’ worth of welfare and entitlements.  However, the least we can do is tackle the “lower hanging fruit.”  That would be corporate welfare, of course.

The Cato Institute just released a research paper detailing all of the federal subsidies that are given to businesses and industries.  The total cost of these subsidies is $100 billion per year!  Remember that these subsidies not only cost the taxpayer $100 billion in additional taxes or debt, they also distort the market in a way that tilts the playing field towards specific industries, companies, and products.  The cascading effect of extras costs to consumers in incalculable.

Here are some important takeaways from the Cato study:

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The Ethanol Chickens Come Home to Roost

Thursday, July 26th, 2012 and is filed under Blog

After a year full of victories for big government legislation in Congress, the forces of statism seemed to have met their Waterloo with the farm/food stamp bill.  The more people learned of the profligate food stamp spending and the market distorting, risk-inducing agriculture programs contained in the bill, the more they spoke out against this monstrosity.  Speaker Boehner has refused to bring the bill to the floor so far.

Seeing their political stock rapidly diminish, the bipartisan coalition of government-run agriculture took a page out of Rahm Emanuel’s playbook and decided not to let the crisis of the summer drought go to waste.  They are using evocative imagery of dead crops and the fear of higher food prices to shove this $957 billion behemoth through Congress.  Amazingly enough, the Washington Post of all news outlets has injected some much-needed clarity into this narrative:

But keep the potential hardship to producers and consumers in perspective. “U.S. farmers face this drought in their strongest financial position in history, buoyed by less debt, record-high grain and land prices, plus greater production and exports,” reported Christine Stebbins of Reuters, after a thorough canvassing of industry and government experts. Farm losses should be far smaller than those suffered in the last big drought 24 years ago.

In fact, the Agriculture Department estimates that government-subsidized crop insurance covers more than 80 percent of farmland planted with major field crops — at least two of which, wheat and cotton, appear pretty much unaffected by the dry weather anyway. Dairy farms are the least likely to be in drought-ravaged areas, the USDA reports. And many of them enjoy federally subsidized insurance against rising feed costs. […]

And before Congress rushes through the farm bill, it’s worth reflecting on all the ways existing policies worsen the drought’s impact. More corn would be available for animals if not for federal ethanol mandates. One reason for drought- and flood-related crop losses is that federally subsidized crop insurance encourages farmers to cultivate marginal land and engage in other risky practices, knowing that taxpayers will, in effect, bail them out. Both the House and Senate versions of the farm bill would increase subsidized crop insurance, thus accentuating this moral hazard.

I’m not sure whether the Washington Post is only supportive of urban welfare or whether they stumbled upon a random appreciation for market forces.  Either way, they are 100% correct.

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The Simple Lesson of John Sullivan’s Defeat in OK-1

Wednesday, June 27th, 2012 and is filed under Blog, Elections

In what was supposed to be a snoozer election night, a little known conservative candidate, Jim Bridenstine, came out of nowhere to unseat 10-year veteran John Sullivan in conservative Oklahoma District 1.  He did so by a 7-point margin, even though he was outspent 4-1 and nobody gave him any hope of succeeding.

Even among many politicos who woke up to read about this astonishing sleeper upset, there were murmurs of “John Who?”  Well, there is a poignant lesson in John Sullivan’s loss that will go unnoticed in the media and political commentariat.

Last week, as part of a revolutionary project of the Madison Project, I helped develop the Madison Performance Index.  We wanted to shed light on just how many members of solid Republican districts are supporters of big government.  The biggest criticism we received went something like this:

“Yes, many of these members might represent strong Republican districts, but do you think their constituents really oppose their efforts to secure subsidies for rural special interests?  These guys are actually good fits for their districts.”

The answer is very simple.  Of course, any constituency that is acclimated to the allure of government subsidies for decades will not voice strong opposition to the pork chops they receive.  But that cuts to the core of our problem with the Republican Party.  We will never elect limited government conservatives from blue urban America.  If we are going to co-opt the rural red districts – districts that are naturally suspicious of the federal government – with special interest dependency favors, we will never elect limited government conservativeanywhere.  The reality is that we need members to speak honestly to these constituencies – that we will not over-tax and overregulate you, but we will not subsidize you either.

That is exactly what Jim Bridenstine did in Oklahoma District 1 (R-16) this year. Read More

Tax Cuts for the Rich – Bad; Subsidies – Good

Wednesday, June 20th, 2012 and is filed under Blog, Economy, Taxes

Barack Obama and the Democrats have promised to make this election a turning point in the fight to make the rich “pay their fair share” of taxes.  They are using biblical innuendo to suggest that it is immoral for the top 1% of earners (who happen to make 17% of nation AGI) to only pay 36.7% of the federal income taxes.  This is their hill to die on.

Accordingly, one would expect Democrats to be the first ones to issue garrulous protestations against farm handouts for the rich.  At present, more than 3/4 of farmers who earn upwards of $250,000 a year receive subsidies from at least one farm program.  Farm subsidies and crop insurance programs help promote income inequality in farming by offering larger subsidies to those who already have larger farms.  These farmers can enjoy multimillion dollar insurance policies that are subsidized in order to guarantee their multimillion dollar investments that would otherwise not be supported by the free market.  Also, federal guarantees of bankers’ loans to rich farmers have further increased their borrowing capacity, thereby driving up the cost of land acquisition.  This, in turn, has shut out small farmers from the business, making it nearly impossible for them to compete.

It’s no surprise that the number of individual farms has dramatically decreased since the inception of government-run agriculture.  According to the Heritage Foundation, the number of farms has declined from 6.8 million to 2.2 million since the Great Depression, despite the fact that the total acreage of farmland has only declined by 13%.  The advent of mechanized farm tools has undoubtedly fueled the increase in large farms, but the government has put the nail in the coffin of the small family farm.

If there’s one sphere of public policy in which there is inequality and redistribution to the rich, it is in agriculture.  One would expect the progressives to trip over themselves to eliminate these giveaways for the rich, right?

Wrong.

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Let Farmers Buy the Farm, Not Taxpayers

Monday, June 4th, 2012 and is filed under Blog, Taxes

There is perhaps nothing as destructive to the free market as the federal government’s stranglehold over the agriculture sector.  There is also nothing as detrimental to the GOP’s ability to draw a bold contrast on free markets, dependency, spending, and crony capitalism, as their willingness to support 5-year farm bills.

Current farm policy creates inveterate dependency in some of the most conservative corners of the country, upending our contrast to the dependency policies of blue state America.  Worse, it creates a perverse reality in which we can no longer elect pure free-market conservatives in some of our most conservative districts, due to the adversity from local special interests that are emboldened by rural welfare.  We must chart a course to jettison government’s involvement in agriculture from the fabric of our economy.  A good place to start is the current 5-year farm bill, which expires later this year.

Last month, the Senate Agriculture Committee passed a 5-year farm bill (S 3240) with full bipartisan support.  Even the senators that opposed the bill only did so because the southern crops would not receive enough insurance subsidies under this proposal.   The alarm bells in your mind should already begin ringing.  In order to make the bill palatable to the public, members of the committee – working in tandem with the Big Ag lobby – employed a rope-a-dope policy on farm subsidies in order to expand government’s tendentious and distorting role in farming.  They agreed to terminate the $5 billion annual direct subsidy program created in 1996 in exchange for an expansion of the crop insurance program – one that might ultimately leave taxpayers on the hook for even more money.

The federal government has been supporting and intervening in agriculture since the New Deal programs of the 1930s.  The government has pumped billions into direct subsidies, crop insurance, conservation subsidies, marketing loans, disaster aid, trade barriers, commodity price supports, and production controls.  The total cost tops $220 billion over 10 years. The distorting effect on the market has been nothing short of disastrous.

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