Corn prices are surging to records, and farmers are slaughtering their animals earlier than usual to save on feeding them. Clearly this is a problem that calls for a government solution!
Now the government is already exacerbating corn prices with its un-environmental ethanol mandate, and there were rumors that Obama might actually suspend those requirements. After all, Bush started that one, so Obama could have blamed Bush and reduced the government’s intervention in agriculture in one fell swoop. But that would require admitting the government caused this problem in the first place, and as we all know, the only policies from the Bush administration that Obama likes are all the ones that have to do with government intervention. (See warrantless wiretapping. And indefinite detention. And that light bulb law.)
I guess an ethanol freeze was too much to hope for. This week the Obama administration came up with something far more clever. The Department of Agriculture announced it’s buying $170 million worth of food from farmers. It’s being touted by the Obama administration as a “win-win…. Farmers and ranchers will have an opportunity to sell more of their products at this critical time and taxpayers will get a better price on food that would have been purchased later.”
This is the sort of arbitrary government intervention that gets my libertarian outrage going. It’s being advertised as a clever way to help everyone, but I can’t help wondering which farmers aren’t connected enough to get the government to buy from them. It seems like a pander for Iowa voters in an election year. It feels like another case of Obama having the arrogance to meddle in the market whenever he thinks he knows what’s best. And the whole thing is just a feeble attempt to fix a problem caused by another government attempt to fix a different problem!
Besides, this year’s drought has been bad, but it’s still not nearly as bad as droughts of the 1950′s and 1930′s. I’m not sure the drought is crushing farmers, either, as most of them have insurance that is already subsidized by the government. Then again, history reveals Obama doesn’t need the pretext of a generational drought to intervene with millions of dollars of meat:
In 2011, the U.S. Department of Agriculture announced plans to buy as much as $40 million of chicken products for federal nutrition programs to help “bring supply in line with demand,” Vilsack said at the time. In 2009, the government said it would spend about $105 million in supplemental pork purchases, according to the Pork Producers Council, partly to help hog producers suffering from a slump in prices caused by outbreaks of the H1N1 virus, known as swine flu.
Fear not, America, whenever food starts to get too cheap, the government steps in and buys stuff to prop it back up again!
Am I being too cynical? Let’s step back for a moment. Even if the Obama administration is engaging in unprecedented, technocratic, makret-distorting cronyism, could it really be a “win-win” situation?
The government buys food from farmers all the time for food programs, to feed the military, etc. Here they’re just buying some extra food while prices are lower so they won’t have to buy it later when prices are higher. But if this is saving taxpayers money, doesn’t that mean farmers are getting less money than they would otherwise?
Or is this purchase supposed to save the government money while driving up the price so farmers make more money from the price difference on everyone else than they’re losing by not selling higher prices to the government later (Sounds like a match made in Corporate Welfare Heaven)? And I suppose the government has calculated its purchasing impact on present prices, and these future prices, with such certainty that it can calculate the cost of temporarily storing all this extra food and know that it will come out ahead?
I could be missing something in the economic arguments or the historical precedence, but to me it just sounds like the Obama administration is speculating on commodities, buying things they don’t need yet because they think the price will go up later.
Maybe these purchases won’t move the price much at all. “Economists say the purchase isn’t much more than a drop in the bucket for the livestock industry… ‘This is one day’s meat consumption’…” If that’s true, it might not do any good, but it might not be worth getting outraged about, either, except to mourn its contribution to the general trend of arbitrary government interventions.
Apparently Obama “wants to do for other industries what he did for General Motors” (though I can’t find a direct quote on that), which to me looks like socializing the losses of any business with enough political clout. Funny how we just learned the GM bailout will cost a few billion dollars more than expected…
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