Last week, the legislature approved the Missouri Dairy Revitalization Act, which, among other things, would provide up to 70 percent reimbursement  to dairy farmers who pay their federal Margin Protection Program insurance premiums. The total estimated cost to Missouri taxpayers is between $2 million and $5 million a year. That’s a lot of moolah.

Now, I have nothing against dairy products or dairy farmers, but I am wary awarding state subsidies to agriculture, even if it’s for insurance premiums. Why can’t the private sector provide insurance for dairy farmers? Why is the state supplementing this federal program? Are the premiums too high? If so, shouldn’t that be a warning sign that there is something wrong with the federal program itself? I am genuinely curious, but if we end up getting cheesy answers from proponents of this legislation, then it shouldn’t be enacted. Legislators have better things to do than cowtowing to agricultural special interests. Unfortunately, this bill already has passed the legislature, and by overwhelming margins. Currently, it’s awaiting the governor’s signature, so there is a decent chance this bill will soon become law.

I want Missouri to have a thriving dairy industry, but surely there are butter ways to spend taxpayer money. I know this might sound tired, but a whey better option would be across-the-board tax cuts for businesses. If everybody, including dairy farmers, were allowed to keep more of their money, things like dairy insurance would be more affordable and the government wouldn’t be giving special handouts to favored industries.

The post Sending Out Subsidies Until the Cows Come Home appeared first on Show-Me Institute.

Fast forward to today. One might think that due to the drought, farm incomes would be seriously hurt. However, that is not what happened. According to a recent survey (hat tip: St. Louis Post-Dispatch) that the St. Louis Federal Reserve released, farm income for the last quarter of 2012 was either on pace to match that of the previous year or even increase. A Kansas City Federal Reserve report had similar findings. The reason incomes did not fall: “Many bankers cited the effect of crop insurance in alleviating the expected negative impact of the drought.”

So, these farmers did not really need all that extra help last year. Their insurance was enough to cover their losses. I am glad that was the case. However, if many farmers are making more money after the drought than before it hit, couldn’t they afford to pay a bit more for their insurance premiums? Currently, taxpayers heavily subsidize crop insurance premiums.

I am not advocating eliminating crop insurance. However, cutting back on public support for crop insurance is a good idea. According to one Government Accountability Office report, a 10 percent reduction in government subsidies would have saved the taxpayers $1.2 billion in 2011. Buying insurance is meant to help prevent catastrophic losses, it is not meant to make you money. The government should reduce its commitment to paying for insurance subsidies; it seems the farmers can afford it.

The post No Need To Throw Taxpayer Money Down The Well appeared first on Show-Me Institute.

In response to this emergency, Missouri Gov. Jay Nixon issued Executive Order 12-08, which will:

” . . . authorize the State Soil and Water Districts Commission to implement an emergency cost share program for water source development and/or water distribution practices to assist landowners engaged in livestock or crop production adversely impacted by the current drought.”

I am no fan of government handouts to agriculture. While this particular program does not strike me as an egregious waste of public money, I am still inclined to think that it is a bad idea. Droughts harm farmers by reducing their income, and harm consumers by reducing the available food, which increases prices. Farmers’ crops should be — and are — insured, however, with federally subsidized crop insurance (which has its own issues). Thus, losses suffered due to this drought can be mitigated. International free trade would allow providers worldwide to supply demanded goods to consumers at the lowest possible price. Government barriers need to be removed. Impediments to more effective water pricing should also be changed.

Water sources need to be developed and the governor’s order is an attempt to do so, but I have yet to see a reason why these sources cannot be developed privately. If there is a law preventing private water development, get rid of the law. If the private sector cannot do it economically, then why should non-farmer taxpayers subsidize a government project that cannot be justified economically?

The post Let’s Not Throw Taxpayer Money Down The Well appeared first on Show-Me Institute.

The state of Missouri, like most states in the Union, is faced with the difficult task of balancing the budget. The article gives some examples of reforms on the federal level, where the savings to taxpayers wouldn’t be “poultry.” However, I will focus on one particular reform mentioned in the article because it has relevance to state spending. The reform in question is to shuck subsidies for ethanol.

The state also has a long list of its own ethanol incentives and the budget impact of these ethanol incentives is not insubstantial. In fact, ethanol subsidies account for 37% (click on HB 6-Department of Agriculture, page 81) of the fiscal year 2011 Missouri Department of Agriculture budget. In the not-too-distant past (FY 2010), it has amounted to 58% (pages 43 and 55) of the Department of Agriculture budget. Considering the dollar amounts involved and the percentage of the Department of Agriculture’s budget that state ethanol subsidies take up, it would be prudent to ask whether the state is serving the taxpayers well by investing in ethanol subsidies.

The Show-Me Institute has researched the effects of ethanol on Missouri and I would encourage everybody to give the case study a gander. Considering the other negative consequences the Show-Me Institute mentioned in its case study, it would seem that ethanol subsidies should be a ripe target for the budget cutter’s scythe. Before making the really difficult decisions on where to cut the budget (like deciding between laying off teachers or closing down mental health centers), wouldn’t it be great if the state could go after the low-hanging fruit? Just some food for thought.

The post Red Harvest appeared first on Show-Me Institute.

Newly tabulated information from the Environmental Working Group, which is critical of U.S. farm policy, shows that absentee landowners and investors receive subsidies that, in the public’s mind, go to struggling family farms. The U.S. Department of Agriculture last year sent nearly $100 million to cities with more than 500,000 residents.

Not very farmy communities in this area got in on the action. In Kansas City, Missouri, 1,611 recipients collected nearly $5 million in 2010. The city’s boundaries reach into four counties, so it stands to reason that the receivers include people who drive actual tractors and combines for a living. But zip code searches indicate that the subsidies are also being mailed to downtown addresses and people who live around the Plaza.

A little back of the envelope math tells us that each Kansas City recipient received just more than $3,100 on average. As The Pitch notes, many checks are probably supporting genuine family farmers, given the expansiveness of KC’s municipal boundaries. But on the Plaza? Not likely. Pick the right high-rise apartment and telescope, and maybe urban farmers can see their fields being tilled from afar. Is that the kind of situation legislators contemplated when they crafted the law that created the subsidies?

Naturally, agricultural tax breaks aren’t the only ones subject to the ingenuity of recipients, and the malleability of tax credit language can often make for easy (and profitable) contortions of a law’s intended purpose. Case in point: Saint Louis’ blighting of Del Taco. Fellow policy analyst Audrey Spalding has an indispensable post about how cities “blight” property to award tax subsidies. A sampling (emphasis added):

Colin Gordon, author of Mapping Decline: St. Louis and the Fate of the American City highlights one of my favorite examples of a contorted blight finding: Officials blighted a thriving shopping mall because it didn’t have a Nordstrom’s.

Because every mall needs an eBar.

And, just because I can:

The post Green Acres, We Are (Not) There! appeared first on Show-Me Institute.

Together with the United States, Brazil produces nearly 88 percent of the world’s ethanol supply. However, Brazil uses sugar cane as a preferred alternative to corn in its ethanol production.

With an annual yield of nearly 370 million bushels of corn, many Missourians are deeply connected to the corn-based ethanol industry. If the industry were to dry up, thousands stand to suffer in the short run. Even so, could there be a sweeter alternative?

Well, quite literally, yes. The Brazilian sugar cane industry is said to be seven times more efficient than that of the United States, and less expensive, too — nearly 30 percent cheaper, in fact. Regardless, it appears that the federal government has little interest in the more viable Brazilian blend.

In order to offset a federal tax credit targeted to ethanol blending companies, the United States has levied a tariff on Brazil’s ethanol, perhaps as a way to keep the international market out while spurring on its own domestic product.

Current and past administrations have vowed to reduce foreign oil imports, claiming that we have become too dependent on them. So, why a virtual ban on Brazilian imports? If ethanol is federally promoted as a solution to the so-called national security issue of dependence on Middle Eastern oil, why wouldn’t cheap, clean-burning ethanol from friendly Brazil be satisfactory? If officials are serious in addressing this as a national security issue, they would invest in other forms of energy — namely, those which are not harmful to our country’s environment and well-being.

Thankfully, it appears that lawmakers might be making a move in a better direction. Last week, Sen. Tom Coburn (R-Okla.) fathered an amendment that would slash government subsidies of the corn industry while also lifting the tariff. Unfortunately, Coburn’s amendments may never become actual laws. Nonetheless, the Senate has shown an ever-increasing readiness to bring ethanol subsidies to the curb.

So, is investing in the precarious, ever-expanding corn-based ethanol industry worth the higher food prices, loss of necessary agricultural groundwater, and increased pollution that result? Well, some would argue that the aforementioned are a small price to pay to support an industry. I contend the contrary. Surrounding Missouri’s ethanol industry, we have corn farmers benefiting from subsidies, cattle farmers suffering from feed shortages, and mandates that often require we burn at least 10 percent less-fuel-efficient ethanol in our cars.

When subsidies are involved, benefits for some lead to costs for others. So, who’s right? You be the judge.

The post Do You Take Sugar With Your Ethanol? appeared first on Show-Me Institute.

Gov. Jay Nixon is travelling to Taiwan later this month, and a gaggle of subsidized special interests is tagging along. From a news release from the governor’s office:

Joining Gov. Nixon on the trade mission will be First Lady Georganne Nixon; David Kerr, director of the Missouri Department of Economic Development; Jon Hagler, director of the Missouri Department of Agriculture; and senior leaders from the Missouri Chamber of Commerce and Industry; Missouri Soybean Association; Missouri Corn Growers Association; Missouri Rice Council; Missouri Energy Development Association; Missouri Biotechnology Association; Boeing Corporation; Pfizer; Advantage Capital Partners; and other major industry associations and businesses.

All else being equal, increasing the exportation of subsidized Missouri goods will have the negative effect of forcing Missouri taxpayers to subsidize the consumption of their trading partners.

How does this work? Let’s say that the price of a particular good on a store shelf is $5. Let’s also say that that the production of that good received $2 in government subsidy. (The production of agricultural and technological products is subsidized at the federal, state, and local levels.) That means that the total price of the product to the domestic consumer is $7. When the foreign consumer purchases this same good, he pays the $5, but because he does not contribute tax monies to subsidize the production of the good, domestic taxpayers still pay the $2 in subsidy.

Missourians would be able to achieve higher overall levels of productivity and consumption if they focused on profitable non-subsidized economic activity and then engaged in voluntary trade with others. Eliminating agricultural subsidies would have positive consequences because taxpayers would be able to keep more of their earnings. This is because they would not be forced to continue to prop up agricultural industries so that they produce at a level that’s higher than optimal, nor would they be forced to subsidize the consumption of foreign consumers.

If public officials are serious about promoting economic growth in Missouri, they should avoid public policies that remove wealth from the regional economy.

The post Governor’s New Trade Policy Will Lead to Subsidization of Foreign Consumption appeared first on Show-Me Institute.

Really, all I want to do here is let you — our beloved readers — know of this excellent database from the Environmental Working Group. Have some fun with it. Check out your own zip code. Put in the names of politicians or former spouses. There is no end to the potential enjoyment! (Finally, I assure you that the David Stokes from Missouri in the database is a different David Stokes.)

The post New Farm Subsidy Database appeared first on Show-Me Institute.

Missouri’s Department of Health and Human Services  has estimated that more than one in five Missourians is obese, and that the more than $1.6 billion is spent in Missouri annually on obesity-related expenditures. According to the department, “Obesity is one of the most serious health issues facing society today.”

For people, I guess. For cows, Missouri’s policy is to encourage the bigger-is-better mentality.

The state has a tax credit for Missouri beef producers who raise Missouri-born cows that weigh at least 200 pounds more than the average weight of cows sold during the past three years. Beef producers are awarded $0.10 per pound of the extra weight, up to $3,000.

Regardless of the reason that the Missouri legislature created this tax credit, it is encouraging larger and larger cows by design. If growing larger cows were a more efficient means of beef production, then no tax credit would be needed. But if it’s more difficult to grow cows that weigh at least 200 pounds more than average, why on earth are are we subsidizing this wasteful activity?

I’m sure the cows would appreciate losing the extra baggage.

The post … And What Have You Got? Fat Cows appeared first on Show-Me Institute.

The author of the study says that the rising rate is largely attributable to the fact that snack foods and soda are priced lower than healthier foods. He proposes that:

[…] there is more that federal, state and local governments can do to reduce obesity, including taxing sugary drinks, providing incentives to grocery stores that locate in underserved areas and requiring restaurants to clearly label nutritional information on their menus.

Neither the article nor the author of the study discusses the fact that the federal government heavily subsidizes the production of corn, which significantly reduces the market price of starchy and sugary foods to consumers.

Instead of subsidizing the production of a good, and then taxing the consumption of the ensuing unhealthy products, it would be more efficient for the federal government to remove the subsidies entirely. This would cause the price of sugary and starchy foods to increase relative to other foods. Consumers would face a greater natural incentive to eat healthier substitutes like fruits and vegetables because they would be relatively less expensive. This would benefit low-income people in particular, because they pay a greater percentage of their income for food, so eliminating corn subsidies could help to reduce the difference in the rates of obesity across income levels.

As contributors to this blog have argued previously, an individual’s waistline is the responsibility of the individual, not of the government.

The post Reduce Agricultural Subsidies to Reduce Waistlines appeared first on Show-Me Institute.

When the government promotes one business over another, it chooses economic winners and losers — something that government officials have no special skill for doing well. Some argue, though, that this governmental expenditure hardly rivals the ones for conventional farming:

Bruce Babcock, an economist and director of the Center for Agricultural and Rural Development at Iowa State University, said it was “ironic” that [Sen. Pat] Roberts and others objected to the USDA spending $65 million on Know Your Farmer.

Babcock pointed out that commodity producers received $5 billion over the last two years, and the crop insurance industry received $7 billion.

Just because one group gets a subsidy does not mean that another group should get a subsidy as well. In fact, I would argue, consumers and taxpayers are better off if neither get subsidies.

Agriculture, like all businesses, is best left to the marketplace. Subsidies lower the cost of producing politically favored products; this distorts the market by shifting the supply curve. In the case of agriculture, subsidies have led to an overabundance in the production of certain commodities, like corn and soy, which drives down their prices relative to other products, making them less expensive to purchase and use as ingredients in other foods.

Agricultural subsidies have decreased the price of — and, thus, increased the demand for — products like high fructose corn syrup and corn feed for livestock. Some researchers have suggested that such subsidies have led to poor health outcomes and higher rates of obesity. Some disagree with this claim, although still and other researchers, including the American Medical Association, maintain that the subsidies have led to an increase in unhealthy foods in the United States. At any rate, more corn is being grown and subsequently incorporated into people’s diets than would otherwise happen. The subsidies have also lead to an increase in corn-based ethanol production, which costs taxpayers and may well result in marginal increases in environmental harm.

In real terms, subsidies don’t make food less expensive. Rather, they divert taxpayer funds from the market price of food to the production stages of farming. This influences farmers to grow more of the subsidized crops than people would otherwise demand, and so taxpayers end up paying more for their food than they would in an otherwise free market.

Some may argue that the promotional program discussed by the Star helps organic farmers to gain an advantage similar to that of conventional farmers. If people are interested in organic foods, though, they will purchase organic foods. Indeed, films like Food, Inc. and books like The Omnivore’s Dilemma have convinced many that they should vote with their wallets for organic foods. It’s unnecessary for the government to create an educational program to support organic farming.

Although $65 million is a small expenditure in comparison to the overall budget for agriculture, it still represents a substantial amount of taxpayer funds. Whether it be subsidies or educational programs, the government oversteps its role when it encourages one business over another, or one form of agriculture over another. If government officials truly want people to consume healthier food, the best strategy would be to level the playing field by eliminating subsidies and promotional programs, instead letting market forces work.

The post To-may-tohs or To-mah-toes, the Government Should Leave Them Alone appeared first on Show-Me Institute.

Most obviously, ethanol costs more than gasoline, so consumers have to pay more for energy to run their vehicles. However, because ethanol diverts foods like corn from their more traditional use as energy for humans and farm animals, food prices are driven up by greater ethanol use. Ethanol backers like to claim that such costs are justified by the environmental benefits of ethanol, but those benefits appear to be completely illusory. From the abstract of a 2008 study on biofuels:

Most prior studies have found that substituting biofuels for gasoline will reduce greenhouse gases because biofuels sequester carbon through the growth of the feedstock. These analyses have failed to count the carbon emissions that occur as farmers worldwide respond to higher prices and convert forest and grassland to new cropland to replace the grain (or cropland) diverted to biofuels. By using a worldwide agricultural model to estimate emissions from land-use change, we found that corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years.

Research has repeatedly confirmed that ethanol subsidies only drive price inflation for both energy and food without cutting greenhouse gas emissions, and it is long past time for politicians to admit that such programs are nothing more than a means for buying favor with voters in agricultural states.

The post Farm Subsidies Are Not an Energy Policy appeared first on Show-Me Institute.

“It’s really a conundrum,” says Sibella Kraus, president of nonprofit Sustainable Agriculture Education, or SAGE, which encourages sustainable local farming. “There is this demand for local, but we’re not really investing in local.” Ms. Kraus, known for her work planning the San Francisco Ferry Building market, says that while development is at a lull now due to the real-estate downturn, government at the state and local level hasn’t created enough incentives to prevent farmland loss when economic activity rebounds.

It’s worth noting that the advocates quoted here are not fighting for environmentally sound agriculture, or for forging relationships with farmers, or for supporting small farms. All those things could be done at a distance. They want the farming to take place at close geographical proximity; they think minimizing the physical space between grower and consumer is what matters. If what they really cared about were the environment or small farms, they would drop their demands for farmland in San Francisco — where it makes no sense economically — and instead support those practices where farmland is affordable. Which is more sustainable: farming in a rural area where land values are stable and crops pay for themselves, or farming next to a big city where the high price of land means the enterprise would fail without subsidies?

So, advocates should abandon the idea that “local” is a code word for “sustainable” or “better.” It isn’t. It just means “close by.” If you look around and see that the farmers near you are environmentally responsible, you can’t conclude that farmers everywhere are equally responsible. And those other farmers are local from the point of view of their neighbors. Every destructive, unsound farming practice is local to the people who live near it.

When cities or state grant subsidies to local agriculture — and in every policy I’ve seen proposed, “local” is defined in terms of a geographical area — they can’t be sure that those subsidies will go to the good local farmers and not the bad local farmers. Even if all the farmers who currently work in that region are all virtuous, there’s no guarantee that an unscrupulous farmer from somewhere else won’t move in to become local and claim the subsidy.

To those who argue for such subsidies in Missouri, I say: Not in my backyard!

The post When Advocates for Subsidies Say “Local,” They Mean “A Short Distance Away” appeared first on Show-Me Institute.

Agricultural subsidies are harmful, no doubt about it. But is there a way to mitigate them? Activists say yes. They contend that new laws would counter the subsidies’ damage. To open the agricultural sector to competition, activists suggest — among other ideas — enacting preferential food policies that require school districts to purchase a set percentage of their cafeteria food from local sources. This, it is argued, would take power away from the corporations and undo some of the subsidies’ bad effects.

As much as I oppose subsidizing corporate agriculture, I can’t support the local food mandates. Ordering schools to buy local food is a poor antidote to corporate subsidies, for these reasons:

• There’s nothing to stop corporations from farming near school districts and touting their produce as “local.” Remember, a farm doesn’t have to be small or unsubsidized to count as local; it only has to be nearby. Just as agricultural corporations have stepped up to claim a large share of direct payments and other kinds of farm aid, they’ll also be eager to sell local food — at a premium, because districts won’t have the option to walk away from the sale and buy from businesses located farther away instead.
• Preferential treatment for local farmers could cause as much environmental damage as traditional subsidies. It would lure farmers to grow food near school districts, whether or not the land is suitable for crops. A district’s closest farmer might not always be the most responsible with pesticides and fertilizers. Even if you look around and see that your local farmers are environmentally conscious today, the situation might change when new businesses move in to be near a school district and have a guaranteed customer.
• Local food mandates place an unfair burden on school districts. District administrators didn’t engineer the mess in the agricultural sector, and fixing it shouldn’t be their job, either. They should be free to focus on their main goal — educating children. Let’s not take money that could go toward teachers’ salaries or building repairs and instead use it to pay a higher price for local food, when healthy food is available at a lesser expense from somewhere else.

Local food mandates, by guaranteeing customers for some farmers through public school policy, are themselves a form of subsidy. Neither the market nor the environment will be well served by adding yet another subsidy to the already over-subsidized farming sector. The real solution is to end government aid for agriculture. When farmers are free to compete on their own merits rather than on their political influence, we may see the market change in favor of farmers who were previously overlooked — including, possibly, farmers near your home or school.

The post Two Subsidies Don’t Make a Free Market appeared first on Show-Me Institute.

The Rural Development Single Family Housing Program provided $578.2 million to individuals and families to buy homes or rehabilitate existing homes.

Let me just get this straight: They subsidized the purchase of homes where they are already cheapest, and at a time when there is already a glut in the nationwide housing market? What could go wrong?

The post The USDA: Sending Money Where People Aren’t appeared first on Show-Me Institute.

Michael Milam, an agronomy specialist with the Missouri Extension in Kennett, Mo., said that underscores the important role subsidies play in the survival of farmers.

“The subsidies have kept farmers in business,” Milam said. “The help from the government allows the farmers to compete on a level playing field with the rest of the world’s cotton producers. If the farmers that produced not only cotton but other crops dropped out because they didn’t receive the subsidies, I believe you’d see a domino effect of higher prices passed onto the consumer.”

The effect of ending the subsidies wouldn’t be as disastrous as this specialist imagines. Everyone could enjoy a lower tax burden if the government stopped paying Missouri farmers to grow crops that could be grown more cheaply someplace else. And there’s no reason to assume farmers who grow both cotton and more profitable crops would drop out of farming altogether. More likely, they would concentrate on raising crops that the market will pay for.

We shouldn’t try to level the playing field between Missouri and other places, because it’s a waste of money. We could pay farmers to grow oranges and level the playing field between us and Florida, but what would be the point? We can just ship in oranges with less trouble and expense. It’s the same for cotton and all the other crops that don’t bring in a profit when grown in Missouri.

The post A Country That Raises Corn and Cotton … With a Little Help From the Government appeared first on Show-Me Institute.