“”Today, when you buy a Big Mac or a T-bone, a portion of the cost is a tax on beef, the proceeds from which the government hands over to a private trade group called the National Cattlemen’s Beef Association (NCBA),” Washington Monthly reported in 2014. “The NCBA in turn uses this public money to buy ads encouraging you to eat more beef.””
“The Biden administration, perhaps worried about the political toll that rising food prices could extract in next year’s midterms, announced plans earlier this month to offer up to $500 million in loan guarantees to beef producers. That’s on top of $500 million approved as part of the $1.9 trillion American Rescue Plan that was supposed to “expand processing capacity and increase competition in meat and poultry” industries, according to the U.S. Department of Agriculture.
The second prong of the White House’s plans seems to involve shaming meat-processing companies. “Just four large conglomerates control the majority of the market for each of these three products (beef, pork, and poultry), and the data show that these companies have been raising prices while generating record profits during the pandemic,” Brian Deese, director of the White House’s National Economic Council, said during a press briefing last Friday, the Detroit Free Press reports.
Taken together, the White House’s approach to high meat prices can be summarized as an argument for greater government subsidies based on the idea that stimulating more competition in the meat-packing industry will expand supply and reduce bottlenecks.
But, as David Frum details in The Atlantic today, there are some good reasons to be skeptical of this argument. For starters, it takes about $200 million (and several months, if not longer) to build a single new meat-processing plant. That means the Biden administration’s new loan programs will not purchase much additional capacity, and whatever gains are made will not happen immediately. Even if the plan is successful, smaller producers will likely need ongoing support beyond the initial loans—if there was a market for more, smaller meat processors, the private sector would be investing in them already.
“There’s a real risk,” writes Frum, “that the initial commitment of $500 million in aid and loan guarantees to small packers will expand into continuing intervention in the marketplace to keep smaller competitors in business in the face of the higher efficiency and lower prices of the big packers.””
“Offering $500 million in loan guarantees to anyone who wants to build a new meat-processing plant isn’t going to address the supply chain problems at the existing plants or end the Western drought.
Higher prices, while politically difficult for the Biden administration, will send signals up the supply chain that result in more workers being hired and more cows being raised.”