Behind Biden’s plan to bump up farm subsidies

“As part of a $33 billion funding request for Ukraine, the Biden administration last week proposed sending $500 million to American farmers with a goal of boosting production of wheat, soybeans, rice and other commodities, in order to make up for some of Ukraine’s food exports that have dried up since the Russian invasion.

But some agricultural economists say they’re unsure why the administration would move to boost subsidies for crops that are already fetching high prices, our Meredith Lee reports.

“I don’t think that this sort of intervention from the government makes any sense, other than to read it in a pure political sense, that this is something they feel like they need to do,” said Joe Glauber, former chief economist at USDA during Agriculture Secretary Tom Vilsack’s previous tenure during the Obama administration.

The funding request includes food aid programs that buy U.S. commodities and send them to countries in need, including many in Africa and the Middle East that relied on Ukraine and Russia for staples like wheat and sunflower oil and are now reeling from shortages and price spikes.

By the numbers: Under the Biden administration’s proposal, $100 million would go toward providing a $10-per-acre payment to farmers who plant a soybean crop after a winter wheat crop in 2023. Another $400 million would fund a two-year increase in loan rates for U.S. producers to encourage them to grow more select food commodities, including wheat, rice and oilseeds like soybeans, sunflowers and canola.

The Agriculture Department claims the proposal would help stabilize rising U.S. food prices and provide food for foreign countries in need, by helping American farmers grow 50 percent of the wheat normally exported by Ukraine, among other things. That plan, however, would probably also require the U.S. to step up funding for federal aid programs that buy and ship U.S. commodities abroad. Otherwise, wealthier countries like China would likely buy up the extra supply on the open market.

Biden’s proposal comes despite prior statements by key White House and USDA officials that high commodity prices alone would encourage U.S. farmers to increase their crop production and help meet global demand in the wake of Russia’s invasion of Ukraine. The president on Thursday described the plan as “good for rural America, good for the American consumer and good for the world.””

The Build Back Better Bill Will Give You $12,000 for Buying an Electric Car. Unless It’s a Tesla.

“As part of Biden’s plan to rein in carbon emissions, the bill contains a provision which would provide a $7,500 tax rebate to any consumer who purchases an electric vehicle (EV), including both all-electric and plug-in hybrids. However, that amount increases by $4,500 if the car was manufactured in a unionized U.S. factory, as well as by an additional $500 if the vehicle contains a U.S.-made battery.

Ostensibly, this provision is part of Biden’s “Buy American” policy of incentivizing or mandating purchases to be made domestically. In practice, the order has simply carried over the protectionism of the Trump trade policy and increased costs to taxpayers. The EV credit proposal, though, is much more egregious, in that it not only incentivizes a particular type of product, but incentivizes particular brands, as well.

If enacted as written, the bonus $4,500 in EV credits could only apply to cars made by Ford, General Motors, and Stellantis (formerly Fiat Chrysler). In other words, a driver who wants to purchase a hybrid Toyota Camry, which U.S. News & World Report ranks as having “Great” reliability, does not qualify for the extra money, even though the car is manufactured in Kentucky. But if that same shopper elects to purchase a Chevrolet Bolt, which recently halted production because the batteries were catching fire, they would receive the extra rebate. As a matter of fact, out of more than 50 EVs currently on the market, the only vehicles which currently qualify for the extra money are two variations of the Bolt.

This is what is most pernicious about this policy: Rather than simply a blanket advantage for American companies (which would be bad enough), it is a clear giveaway to the United Auto Workers (UAW).”

India’s farmers confronted Modi and won. What happens now?

“In a surprise reversal after more than a year of nonstop protests, Indian Prime Minister Narendra Modi has agreed to repeal three controversial laws affecting the country’s agricultural industry.
The laws, which sparked a massive protest movement after they were passed in September 2020, were designed to modernize India’s agriculture industry — but India’s farmers and other critics said they would advantage corporations at farmers’ expense.

Modi’s decision to back down is a key victory for farmers, whose protests have centered on the Indian capital of New Delhi, and a sign of growing dissatisfaction with the increasingly Hindu-nationalist Bharatiya Janata Party, which Modi leads.”

“The laws promised to open the agriculture market to commercial buyers, as opposed to the current system of government markets purchasing farmers’ goods and effectively guaranteeing them a minimum income. But as Vox’s Jariel Arvin explained in December 2020, farmers feared this would subject them to the whims of the market and massive corporations, and make it harder to make a living.”

Biden’s Build Back Better Plan Contains One Potentially Helpful Housing Program

“Homelessness is a major issue in the U.S., and is inherently intertwined with the cost of housing. In fact, in a recent poll, respondents from the 20 metro areas that experienced the largest population growth between 2010–2019 listed both the cost of housing and homelessness as their top two concerns, and by almost identical margins (86 and 87 percent, respectively). The average cost of rent has increased nearly 20 percent within the last year alone, and since 2001, in nearly every state, rents have risen at a faster rate than incomes.

But simply offering rental assistance without a simultaneous increase in the supply of housing would only serve to exacerbate the cost problem, as a larger amount of money would chase after the exact same amount of inventory. In fact, the U.S. is currently as many as 5 million houses short of meeting estimated demand.

Of the roughly $150 billion which the Build Back Better Act appropriates toward housing, more than half is put toward dubious use, via rental assistance programs. About a third of that portion, though, is specifically tailored toward the construction or rehabilitation of more affordable housing units to increase the overall supply, which could help drive down costs.”

“The Build Back Better Act does fund the establishment of a “competitive grant program,” the Unlocking Possibilities Program, to incentivize “streamlining regulatory requirements and shorten[ing] processes, [and] reform[ing] zoning codes.” As with any grant program, its efficacy will be dictated by its implementation, but with more than $4.26 billion appropriated, there is plenty of breathing room to potentially make a difference.

In an ideal scenario, of course, there would be as few zoning restrictions as possible, allowing developers to simply respond to the needs of the community without requiring the government’s stamp of approval. While public funding to incentivize a reduction or simplification of red tape is better than the status quo, it is still not a perfect solution.”

It’s Time To Kill the Mandatory Beef Tax That Underwrites “Beef, It’s What’s for Dinner”

“”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.””

America’s Semiconductor Industry Doesn’t Need $52 Billion in New Subsidies To Stay Ahead of China

“Rather than countering a perceived threat from China, lawmakers risk bogging down one of the most innovative and successful parts of the American economy with an industrial policy that will force chipmakers to care more about what makes Washington happy than what is best for their own businesses.”

“Companies that, by the way, admit they don’t need the cash to be competitive. Intel, one of the world’s biggest chipmaking companies, is in the process of building a $20 billion fabrication facility in Arizona. In March, CEO Pat Gelsinger said the project “would not depend on a penny of government support or state support.” (Though he immediately followed that comment by saying that “of course…we want incentives” and it appears that Congress is prepared to dutifully provide them.)”

“According to the Semiconductor Industry Association, a trade group, American-based firms control 47 percent of the global share of the semiconductor industry—a far cry from congressional concerns about the U.S. losing its competitive edge.”

“The trick that lawmakers are trying to pull here is to focus on where semiconductors are made. But this doesn’t really matter. It’s true that a smaller share is manufactured in the U.S. today than 30 years ago, but that’s the result of natural shifts in the market, not evidence of a collapse in American technological prowess.
Indeed, American companies are still at the forefront of semiconductor development—earlier this month, American-based IBM announced a breakthrough in the development of the world’s first two-nanometer chip.”

“It takes a long time to make semiconductors—up to 26 weeks, in some cases—and production is still ramping up again in the wake of last year’s disruptive pandemic. This isn’t a nationalist issue in which some evil foreigners are cutting off America’s share of semiconductors, but a market-based issue that will be resolved as chipmakers increase production capacity to catch up to increasing demand.
But what about China? Yes, the Chinese government is investing heavily in semiconductor-making technology, but it remains far behind America in terms of technological know-how. A recent Nikkei report shows that China mostly manufactures nothing smaller than 14-nanometer chips, which are several generations behind the most advanced chips being made elsewhere—remember, IBM just announced plans for a two-nanometer chip. Closing that gap will be difficult now that America has banned the sale of semiconductor-manufacturing equipment to China (and enforced that ban even when the sale involved other countries).

If there is one major worry for the global supply chain of semiconductors, it is the island of Taiwan. The majority of the world’s semiconductors are made in Taiwan, which is home to the Taiwan Semiconductor Manufacturing Company, by far the world’s largest chipmaker. There are obviously many complicated geopolitical issues involving Taiwan that America and the world’s semiconductor industry will have to navigate in the coming years—but it is downright foolish to believe that $52 billion in subsidies will make a meaningful impact in that complex situation, or in a global market that was worth $425 billion last year alone.”

“All it will do is shovel $52 billion of taxpayer money (some of it probably borrowed from China, ironically enough) to successful businesses flush with cash.”

Foxconn Finally Admits It Won’t Create 13,000 Jobs in Wisconsin

“When you subsidize something, the old adage goes, you’ll get more of it.

But some ideas make so little economic sense that even the largest corporate subsidy ever awarded by a state government isn’t enough.

It’s been obvious for quite some time that Wisconsin’s highly touted deal with Taiwanese tech giant Foxconn was going to fall well short of the lofty promises made by the project’s supporters. Then-President Donald Trump, for example, predicted in 2018 that the planned factory on the outskirts of Milwaukee would be nothing less than “the eighth wonder of the world.”

Exactly how short it will fall is now official. In filings with the state, Foxconn says it now plans to employ 1,454 people and invest about $672 million into its still-under-construction factory in Mount Pleasent, Wisconsin. That’s a long way from the $10 billion that the company initially promised to spend building a plant that would have employed 13,000 workers. In response to the amended contract, the state will recover $2.77 billion of the subsidies originally promised to Foxconn—though the company will still receive $80 million from Wisconsin taxpayers, according to a statement from Gov. Tony Evers.

But recovering those subsidies won’t bring back the residential neighborhood that was flattened to make space for the factory. Developers bulldozed 75 homes, some of which were seized through eminent domain, because why should mere houses full of people stand in the way of the eighth wonder of the world?

The town of Mount Pleasent invested more than $1 billion in the project—effectively mortgaging its entire future on the promise of thousands of new jobs and the tax-paying residents who would come to fill them. Those jobs won’t be coming, but the town did have its credit rating downgraded.”

“From the outset, the deal didn’t make sense. Foxconn promised to make Wisconsin a hub for the manufacturing of HD television screens and other high-tech products, but the company never explained how it planned to make the math work. Besides the relatively higher cost of American labor, there were serious supply chain and logistical issues to be overcome for a factory that was, as TechCrunch put it in 2019, “essentially [in] the middle of nowhere, without the sort of dense ecosystem of suppliers and sub-suppliers required for making a major factory hum.””

“The state’s Legislative Fiscal Bureau, a number-crunching agency similar to the federal Congressional Budget Office, calculated that it would take the state until 2043 to recoup the $3 billion handout, which was the largest such subsidy in Wisconsin history. Even if all 13,000 promised jobs went to Wisconsinites, the tab would be more than $230,000 per job created, the bureau found.”

“The entire saga provides an obvious lesson about the wasteful mistakes that state governments make when they throw tax dollars at businesses that promise to create jobs. The best way to create jobs in any state, of course, is to provide a stable economy with comparatively low taxes and a light regulatory touch for all—not to provide special treatment for some and stick others with the bill.

But there’s also a lesson here for politicians who would pursue economic nationalism through greater industrial policy at the federal level. Trump saw the Foxconn deal not only as a way to create jobs, but as proof that reorienting supply chains was a matter of political will rather than economics. The factory, he said in 2018, was evidence that his policies were “reclaiming our country’s proud manufacturing legacy.”

If the largest subsidies ever offered to a foreign company were insufficient to make the Foxconn deal work, maybe that says something about the ability of our political leaders to steer the economy.”

The Government Is Making Us Fat and Susceptible to Viruses

“In all the coronavirus coverage, one issue that rarely makes the headlines is the correlation between body weight and the severity of COVID-19’s effects. And one angle that virtually never makes the headlines is how the government funds the unhealthy foods that increase obesity rates, thereby increasing our susceptibility to such diseases.
Last month the Centers for Disease Control and Prevention (CDC) released a study showing that nearly 80 percent of those hospitalized with COVID-19 were overweight or obese. After age, body weight is the second greatest predictor of COVID-related hospitalization and death. Almost three quarters of all Americans ages 20 and up are overweight, and close to half of that group is considered obese.”

“Not only is the U. S. government not making any efforts to reduce the obesity epidemic, it is actively subsidizing food that contributes to the problem. The U.S. Department of Agriculture recommends that people fill half their plate with fruits and vegetables, yet the vast majority of its food subsidies—$170 billion from 1995 to 2010—go toward the major ingredients of junk food, such as corn, wheat, rice, soy, and milk.”

“We have the power to make real changes in the way we eat and move. The government could help that process by taking its thumb off the scale and ceasing to subsidize these foods.”

Schumer Insists on Keeping Beachfront Bailouts for Wealthy Americans’ Vacation Homes

“The National Flood Insurance Program (NFIP) run by the Federal Emergency Management Agency (FEMA) is $20.5 billion in the hole, even after Congress canceled $16 billion in debt in 2017. This financial shortfall is largely because the program does not charge nearly enough in premiums to pay for the flood damage on the properties it insures. For decades, taxpayer bailouts of the NFIP have enabled people to live and build in flood-prone areas instead of bearing the risks themselves.

In order to address this problem, the NFIP has been working on its new Risk Rating 2.0 initiative, with the aim of charging premiums that more accurately reflect the unique flooding risks of individual properties. The agency had planned to release its updated rates later this year.

Not so fast, says Senate Majority Leader Chuck Schumer (D–N.Y.). The senator’s office recently informed FEMA that adjusted premiums could have a “severe impact” on homeowners, and urged Congress and the Biden administration to work together toward “affordable protection” for flood-prone communities.”

“lots of beachfront dwellers in New York (and elsewhere) have been “unfairly” taking advantage of taxpayers. A recent study by the nonprofit research group First Street Foundation calculates that the average estimated annual loss for each of the 4.3 million properties most at risk of flooding is $4,419, whereas NFIP premiums average $981. In other words, their flood insurance premiums would have to increase 4.5 times over their current rates to fairly cover the flooding risks to these properties.”

“as a result of “direct government provision of subsidized insurance, private markets no longer generate price signals regarding the cost of living in severe-weather regions.” Suppressing the true cost of insurance encourages “private parties to (rationally) assume excessive risk, and dump the cost of living in the path of storms on others. Indeed, much of the development of storm-stricken coastal areas is due to insurance subsidies, and would likely not have happened at the same magnitude otherwise.””