Common Sense & An Open Mind

Advocating freedom of thought

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    "You must lay aside all prejudice on both sides, and neither believe nor reject anything, because any other persons, or description of persons, have rejected or believed it. Your own reason is the only oracle given you by heaven, and you are answerable, not for the rightness, but uprightness of the decision." T. Jefferson

Archive for August, 2010

Why Do Bad Government Policies Persist?

Posted by Free to Think on August 20, 2010

In recent blogs I used farm subsidies to illustrate the incompetency of government programs. Aid often ends up in the hands of well-off corporate farmers or suburban non-farmers rather than farmers in need. Crop prices fluctuate no more with government intervention than without. Studies have even shown that subsidies contribute to the increase of land prices, making it more difficult for farmers to start or expand a business. Meanwhile taxpayers continue to vainly invest billions of dollars.

So why do verifiably ineffective, wasteful government programs such as this persist?

Well, many of the issues discussed in this blog are complex problems that are difficult to solve. Often the hard questions I put forth don’t have simple answers.

But the question above is not one of them.

As the Heritage Foundation explains, “The most logical explanation for the persistence of farm subsidies is simple politics. Eliminating a government program is nearly impossible because recipients form interest groups that relentlessly defend their handouts. The public paying the costs is too busy going about their lives to challenge each wasteful program.”

This idea is nothing new. Milton Friedman taught us many years ago that invasive government grows because those who receive government favors have a huge incentive to fight for their preservation. But the cost of those favors is spread among the rest of society in small amounts, giving taxpayers less incentive to fight against them.

Whether the beneficiaries of government programs are corporations, unions, farmers, the unemployed or anyone other group, recipients form powerful lobby groups to advocate for their continuation. Politicians want to keep these vocal and impassioned groups satisfied.

It’s not in the best interest of politicians to cut special programs, even if it’s the appropriate thing to do legally or sensibly. Generally, a lawmaker would be more likely to lose more votes from the proponents of these programs than gain popularity because he cut aid to any particular group. And getting reelected is the name of the game.

This really isn’t a condemnation of politicians, it’s just an explanation of how the system ends up working. There haven’t been influential lobby organizations out there saying, “Hey, the money/ favors/ special privileges you’re doling out to these specific groups aren’t serving the purpose you intended/ are detrimental to the rest of society/ haven’t made a difference in the plight of these people/ are not in your jurisdiction to grant anyway.” You and I may grumble, but traditionally we haven’t headed to the street with picket signs demanding we slash federal aid to (fill in the blank).

Until now, that is. Government spending has spiraled out of control, causing a staggering national debt. Our nation has dug itself into holes so deep that extracting ourselves will be a formidable task. Intrusive government policies challenge our ability to live and work freely. People of all political persuasions are angry and are finally asking for accountability.

In April I wrote about how many days a year Americans had to work just to pay their income and property taxes. But how many days did it take for us to pay all costs imposed by the U.S. government this year, assessed to us in incremental bits through fees, licenses, permits, sales tax, etc.? An average of 231. So congratulations, after this week you’re finally free to earn money towards feeding and supporting your family.

“Cost of Government Day” fell on June 29th in 2000, but this year we don’t reach that milestone until August 19th. That’s 63.4% of national income. Does that sound reasonable to you?

Nothing will change until a meaningful part of the general population throws it’s emotional and financial support behind watchdog organizations such as Downsize DC, Reason, the Center for Fiscal Accountability, and the Cato Institute, that demand limited, transparent and Constitutional government.

“Tea Party” organizations may be controversial, but one thing they’ve accomplished well is bringing these issues to the forefront. Most of America is on the dole in one form or another, so scaling back is going to be a hard sell. Cries of discrimination will be inevitable when assistance is curtailed to any organizations or groups of individuals. But the future of our nation depends upon it.

Posted in Detrimental policies, Intrusive government, Politics | Tagged: , , | Leave a Comment »

Why Does America Need Farm Subsidies?

Posted by Free to Think on August 16, 2010

Why are my posts so long?

I’ve gotten the “your articles are so long” remark from a number of people. Yes, I realize that my lengthy pieces don’t conform to typical brief blog articles. And I understand that life is busy. People want their ideas fed to them quickly.

We’ve become accustomed to listening to sound bites these days. We’re willing to dole out but a minute or two of our attention to complex issues. We nod our heads as our party’s candidates make resolute statements and offer simple, neat solutions that sound so right. Yet does this give us enough information to understand the big picture? Our favorite commentators make accusations or come to conclusions which we take at face value without any documenting facts or details. A statistic out of context can sound bold and telling. But have you really gathered enough facts to make your own informed decision?

A comment I’ve received more than once is that it’s “really hard to argue” with my positions. One reader told me, in what seemed to be almost a disappointed tone, that with all the supporting evidence in my articles, it was tough to find holes in my arguments. Sorry about that, but feel free to keep looking for them. I welcome and encourage opposing views.

Are we thinking on our own? Sure, I want to persuade you to agree with me. But more importantly, I hope to encourage people to think for themselves and reach their own informed conclusions, rather than be fed opinions from me, Democrats, Libertarians, or anyone else. As history shows, the public can be easily won over by enthusiastic mob judgment or a magnetic leader. When our lives are overflowing with commitments and responsibilities, it’s easy to settle on forming quasi-informed political opinions based upon a captivating headline or a clip from a political speech. But we must remain cognizant that deriving viewpoints on complex, multi-faceted ideas should be a thoughtful process.

I believe that the complicated issues I’ve addressed in the past year have necessitated more background than your standard blog post, especially because it may be coming from a position you haven’t heard before. My posts take many days to write. It should take readers about five minutes to read. I understand that five minutes is a valuable amount of time in a hectic life, and I appreciate you using that time to consider my perspective. Hopefully you’re also taking the opportunity to reflect and weigh the merit of these posts versus other opinions.

However, as the anniversary of this blog approaches, my goal will be to spend less time composing, and to post more frequently without compromising content. With a cast on my hand and a torn tendon in my index finger, it seems like a good time to rein in the depth and breadth of my articles. Though I’m getting more adept at typing with 9 fingers, I’d also like to spend some extra time marketing my ideas instead of just researching and writing.

So, here is my brief(er) thought for today:

Last time I wrote about the detrimental policies of the farm subsidies. One may argue that farmers can’t subsist without government help. The effects of things such as fickle weather and disease wreak havoc on their profitability.

However, compare the “assistance” of today’s policies to the creation of farms by government incentive through the 1862 Homestead Act. Back then, applicants could obtain title to up to 160 acres of undeveloped federal land by simply completing three steps: filing an application, improving the land, and filing for deed.

Fledgling farmers toiled on their new land with no further help from the government, and though only 40% of applicants were able to complete the process, 1.6 million homesteads were successfully granted.

The U.S. government did not attempt to micromanage what was being produced. It wasn’t concerned with shoring up every business that was started, nor did it take responsibility for failures. Homesteaders who did not succeed went on to support themselves by other means because, of course, there was no other choice.

Today’s government feels that they need to be at the helm of our food distribution. Ironically, only as far as certain commodities are concerned however. They need to control the amount of corn that’s produced, but not, say, tomatoes or chickens. The government has paid more than $1 billion to those who let their farmland lie fallow, while at the same time pays billions to others who can’t afford to buy food.

Restaurants too, are fickle businesses. Restaurant owners invest huge amounts of time and money to new eateries, but many factors beyond their control affect their success. Even by the most conservative estimates, 60% of new restaurants will be out of business within a few years.

Car washes, ski resorts and theme parks are just a few of the other businesses that, like farming, are dependent on capricious weather conditions. Yikes, should the government step in and protect these people too?  Is the person who feeds their family through their car wash business less important than Joe Farmer?

Even if the answer was somehow ‘yes’, is the average family farmer better off than the owners of the businesses mentioned above because they have government support? Despite billions in taxpayer subsidies, actually, no. According to the Heritage Foundation, the majority of subsidies today go to commercial farms that have an average net worth of nearly $2 million. Subsidies often end up financing the consolidation of family farms, and cause land values to rise to levels that prevent young people from entering farming.

Some argue that food prices would fluctuate wildly without farm subsidies. However, two-thirds of produce is unsubsidized, and there’s been little difference in the stability of subsidized verses unsubsidized crop prices. Paying people not to grow food has also proved ineffective in controlling supply.

A more efficient way to help farmers in dire straits? Private organizations such as Farm Aid, that don’t allow precious funds be wasted on people who don’t need their help.

If these government programs are useless at best, detrimental at worst, why have they perpetuated for so many years? More on that next time.

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Posted in Detrimental policies, Intrusive government, Politics | Tagged: , , | Leave a Comment »

Common Sense Governing

Posted by Free to Think on August 2, 2010

My last post cited just a few examples of some of our government’s overreaching laws and the heavy-handed enforcement that has trampled the rights and freedoms of people such as babysitters in Michigan, and medicinal marijuana users in California and hairbraiders across the U.S.

None of these may affect you personally. But these are illustrations of a much larger issue. It seems that modern lawmakers respond to all societal ills the same way: with a bloated bill that typically

  • contains hundreds and sometimes thousands of pages of complex and  convoluted regulations
  • is rushed to a vote amid strong emotions before Congress has a chance to read the entire bill, analyze its potential impact, or get the reactions of their constituents
  • adds layers of bureaucracy and expense to our government
  • affects Americans in unpredictable ways.

Neither political party is solely to blame. It’s hard to dispute the failures of bipartisan-supported programs such as No Child Left Behind or the Patriot Act, and the growth of government scope, cost and power, these have instituted. Despite the “good intentions” of improving our children’s education and making us all safer, Children were indeed Left Behind when school systems buckled under the cost of oppressively expensive testing and red tape, and the government was given free reign to wiretap us all in the name of Patriotism.

Abuse and unintended consequences are the hallmark of many massive government programs, from Aid to Families with Dependent Children to TARP. Federal Farm Subsidies, was a program originally conceived to help farms make it through the Great Depression and keep food on our tables. Who could argue against helping poor farmers during an extremely difficult period? But the result has become learned dependency for the American farmer every since.

Many of us may think of Democrats and inner cities when it comes to a multi-generational culture of dependency, but 80 years of institutionalized bailouts can be found in rural Middle America in the heart of Republican country.

Farmers are paid, good crops or bad, high yields or low, or for the promise of not growing at all. Agriculture policy makers say the aid programs have become so big and are often at cross-purposes, so it is unclear exactly what purpose these handouts serve.

Instead of being rewarded for efficiency and productivity, farmers earn the most by learning to milk the federal subsidy system. Farmer dependence on federal money is even higher now in percentage terms than it was at the depth of the Great Depression.

According to The Environmental Working Group, many farmers actually do not benefit from federal farm subsidy programs. Small farmers qualify for a mere pittance, while producers of meat, fruits, and vegetables are almost completely left out of subsidies. Twenty fairly arbitrary agricultural commodities are supported which supposedly “ensures consumers an abundant supply of reasonably priced food” though the list includes cotton which, obviously, is not a food.

As EWG explains, the increasingly complex layering of subsidy programs begun in the 1930s has been altered haphazardly ever since. For example, Direct Payments are based on a formula involving the historic production of a parcel of land and goes to the current landowner or farm operator every year, regardless of success of the crop. These payments are usually included in land value estimate, driving up land prices and rents and making it harder for small farmers to expand and new farmers to enter the business. Counter-Cyclical Payments compensate farmers for drops in market prices. However, farmers generally produce as much as they can in order to maximize their sales. The consequence of a successful harvest is often is an oversupply on the market, which drives down prices. A farmer who sells a huge bumper-crop at a price lower that the “mandated target price” is eligible for his CCP on top of his profit.

CCPs are at the heart of the farm safety net, but its perverse incentives don’t often achieve the intended purpose. The “Disaster Payments” that people often think of when it comes to farm subsidies are, in fact, just a small portion of the program.

In 2009, Congress paid out $15 billion in farm subsidies. According to The Institute for Food & Development Policy, the vast majority of those dollars went to the large farming corporations. Many of these large firms have used these funds to buy out small farms, contributing to the end of the era of small, family-owned operations.

$1.3 billion go to people who don’t farm at all, such as Donald R. Matthews. An asphalt contractor who purchased an 18-acre lot to build his sprawling new residence, he receives about $1,300 in annual “direct payments,” for not growing rice on the former farm.

Are more laws the answer? A 1996 farm bill purported to wean food producers off government aid ended up doing just the opposite. Direct payments to farmers tripled in just four years. In the year 2000, government assistance had made up 100 percent of overall farm income for eight states.

So why do we continue paying billions in corporate welfare to farming corporations? Because no one wants be responsible for pulling the plug on a vast industry that has grown dependent on federal aid. Republicans are reluctant to criticize outdated farm aid programs because they rely on the votes of farm workers in these traditionally Republican states. Democrats count on crucial swing states such as Iowa, Missouri and Illinois, also among the biggest farm bailout recipients. In addition, it’d be bad form for Dems to advocate for inner city aid while proposing cuts in assistance to farmers.

Subsidizing farmers eliminates incentives to produce according to the demands of the market. According to free market economics, production based on profit and loss, supply and demand, is the key to maintaining market fairness.

It’s the role of government to ensure a fair playing field for all businesses, prevent unfair business practices, fraud, scams and swindlers, and encourage entrepreneurship. It’s the role of government to make sure consumers receive what they are promised, and that businesses do all they’ve agreed to do. Our Constitution allows for no other government meddling in private industry.

It’s naive to think that big government prevents the abuses of big business. When the government has the ability to create artificial rules, it is corporate lobbyists, not the free markets, who tend to be in control.

Will we never learn? Last week the “Finance Reform” Bill was passed, all 2,319 pages of it. Like the heathcare system, most people agree that the financial industry needs reform. But in what form? What will the repercussions of this massive law be? Will it prevent future crises, or precipitate new ones?

Diane Swonk at Mesirow Financial warned that, “With a bill so large and undefined, we are likely to get more unintended than intended consequences.”

House Republican leader John Boehner said recently the law should be repealed and replaced with “common sense things that we should do to plug the holes in the regulatory system.”

Has the federal government intervention helped our the finance industry in the past? The Federal Reserve was created in 1913 to ensure stability in our financial system. The Federal Reserve Act has been amended by some 200 subsequent laws. Interest rates are perpetually and artificially tweaked. Yet the Federal Reserves’ actions did not prevent the great crash of 1929, the recession in the 1970’s, the stock market plummet of 1987, or the problems of today. Quite the contrary, the Fed’s regulations, laws and perpetual meddling is believed by many experts to have increased the frequency and severity of boom-bust economic cycles.

Not a single government agent or “expert” saw the coming housing bubble that burst in 2008. Even in the midst of the subprime mortgage collapse, just weeks before Lehman Brothers crumbled, Federal Reserve Chairman Ben Bernanke told us, “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

Lawmakers are not typically financial experts- can we trust them to gauge the implications of what they’re doing? Real financial experts themselves don’t even know what to make of the new Finance Reform bill. Liberals and conservatives alike are already voicing concern over the law’s potential to negatively impact on small banks. Yet Wall Street Giants Citigroup and Goldman Sachs (two firms that received bailout funds) are big proponents of this bill. As one Goldman lobbyist said, “We’re not against regulation. We partner with regulators.” As long, of course, as somewhere in the myriad of copious rules things are rigged in their favor.

Solutions? How about fewer knee-jerk reactions from lawmakers from all parties? How about staying within Constitutional barriers, and having a commitment to only passing laws that have been read in full by all voting members?

Posted in Intrusive government, Politics | Leave a Comment »