Topic: General

Our “Pig in a Poke” Farm Subsidies

Not content to lavish federal subsidies on farmers and landowners just because they grow certain agricultural crops, Congress is also in the business of subsidizing them even when they do NOT grow those crops. In a major expose, the Washington Post reports that the federal government pays out billions of dollars in subsidies to landowners based on past production of certain program crops, such as rice, even when the land is no longer used to grow the crops. As a result, federal farm subsidies are being paid to landowners who have no interest in farming. As the Post reported yesterday:

Nationwide, the federal government has paid at least $1.3 billion in subsidies for rice and other crops since 2000 to individuals who do no farming at all, according to an analysis of government records by The Washington Post.

Some of them collect hundreds of thousands of dollars without planting a seed. Mary Anna Hudson, 87, from the River Oaks neighborhood in Houston, has received $191,000 over the past decade. For Houston surgeon Jimmy Frank Howell, the total was $490,709.

Other federal farm programs offer “loan deficiency payments” to corn growers in Iowa and elsewhere when the price of corn falls below a certain minimum. Farmers collect the payments even if they eventually sell their corn at a higher, profitable price. According to a Post story today, the program has cost American taxpayers $4.8 billion in the current fiscal year, and $29 billion since 1998.

Federal farm subsidies are not only costly to the U.S. Treasury but they also distort global agricultural markets by encouraging overproduction. Those subsidies contributed to the demise of the current round of trade negotiations in the World Trade Organization. A Cato Institute study last year, titled “Ripe for Reform,” documented the many ways Americans are hurt by our own farm programs.

Of course, members of Congress from farm states refuse to give up these costly programs unless other countries agree to reform their own farm programs. As today’s Post story concludes: “Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) has warned U.S. trade negotiators not to bow to foreign pressure unless they win major concessions for U.S. agriculture. ‘We’re not going to buy a pig in a poke,’ he said.”

“Pig in a poke” sounds like a fitting description of our own farm programs.

Competitive Federalism Can Reform Health Insurance, Med Mal

In a previous post, I suggested that my brother and his family could save thousands on their health insurance if they moved in with his former college roommate’s family in Pennsylvania, rather than settle and buy coverage in New Jersey.

I thought that former roommate’s wife (Kristin, another college friend) would shoot me virtual daggers. Instead, she wrote:

Wow — guess we’re pretty lucky! Although, we can’t seem to keep our doctors here in PA due to high malpractice insurance costs. So maybe the best deal for everyone would be to buy their insurance in PA, then drive to NJ for their doctor’s appointments.

That’s one way to get around unwanted costs imposed by a state’s medical malpractice laws. In our book Healthy Competition, Mike Tanner and I suggest another: Let patients, doctors, hospitals, and insurers agree up front on the level of malpractice protection that patients receive.

 

You like caps on non-economic damages? Sign yourself right up. You want more malpractice protection than that? It might cost you more, but the choice is yours. The contracts that providers are willing to write could even tell patients something about the quality of care.

Patients can already choose a different level of malpractice protection by traveling out-of-state or out-of-country for treatment. Why not let them do so without leaving home?

Uncle Sam Wants to Sell You a Latte

In a college town like Madison, Wisconsin, I suspect you can’t throw a copy of Das Kapital without hitting a coffee shop or a drum circle.  But the federal government insists upon subsidizing that city’s grandé mocha makers.  (It hasn’t found a way to subsidize the drum circles … yet.)

First, some background:  Every year, the federal government socks taxpayer money into the Community Development Block Grant program.  According to the program’s website, the goal is to encourage “viable urban communities” and expand “economic opportunities” across the nation and, in particular, within “entitled communities.”   

This is done by funneling loan guarantees and direct grants to local businesses.  It’s considered a form of “economic development.”  Or, to translate from bureaucratese into plain English, it’s a form of grass-roots corporate welfare.   

In 2004 the CDBG program funded loan guarantees for projects such as the Tempe Market Place project in Arizona (described as “a retail facility anchored by six nationally known retailers”) to the tune of $7 million.  It gave guarantees in the amount of $1.9 million to the Noah Hotel project in Kingston, New York, to build a 50-room “boutique hotel,” with a 16,500-square foot ballroom, a restaurant, meeting rooms, and commercial retail space.  $2.5 million went to a downtown parking garage in Watsonville, California, and $2.2 million to the redevelopment of the 427-acre Colorado Industrial Park in Lorain, Ohio.

Now back to Madison, Wisconsin.  As the Mercatus Center’s Eileen Norcross explained today in testimony to Congress, last year the feds spent roughly $1.5 million on loan guarantees to help underwrite two coffee shops, a bakery, and a restaurant in that city, just to name a few. 

How do the HUD managers justify this sort of thing?  They claim the money helps “create” jobs for low- and middle-income residents.  And who do those residents happen to be?  As Norcross notes, they are college students who are classified as below the poverty line because the money they receive from their parents while attending school in Madison doesn’t count as income. 

So, if you’re a local business owner it sounds like a pretty good deal, eh?  Now you can open your doors in a college town and get loan guarantees from the government to hire the kind of employee (read: college students) you would have probably hired anyway.

Many members of Congress will ask, “How can we fix this program?”  Only a handful – including Sen. Tom Coburn of Oklahoma, the head of the subcommittee that held the hearing on CDBG this afternoon – ever ask, “Why do we even fund this stuff in the first place?” 

Are We Reading the Same Report?

I have to disagree with Arnold Kling’s surprisingly upbeat assessment of the draft report from the Secretary of Education’s higher education commission. While some of the recommendations he likes may be tolerable in an ideal world, it’s critical to remember that we’re talking about politics here.

First, Arnold applauds the report’s call for colleges to improve data collection on student persistence in order to help inform prospective students and parents. That’s fine, and I would encourage consumers to avoid schools that wouldn’t furnish such information. Unfortunately, it’s not supply and demand that the report says should make schools publish the data. It’s government:

Federal and state policy should focus on improving persistence and sealing the leaks in the educational pipeline at all levels: K-12, post-secondary and workforce education. Colleges should be held accountable for the success of the students they admit. Improved collection of data on student persistence will allow consumers of higher education to evaluate institutional success and identify best practices.

What a terrific tool for government control! Once they collect persistence data, opportunistic politicians can declare that schools must graduate very large percentages of their students in order to receive government funds. If grade inflation seems bad now…

Next, Arnold blesses the report’s recommendation that states and schools “review and revise” their credit transfer policies. Again, this is a fine thing for consumers to require, but if government mandates it, credit transfer policies will end up being based on political calculations, not academic merits.

The same problem applies to Arnold’s next point, in which he supports reorienting student aid from “broad-based” to “need-based.” That sounds good at first, but the reality is that in order to build enough political support to give more aid to the “needy,” politicians will define “needy” to include almost everyone. Just look at the current system, which directs oodles of cash to aid programs in the name of the poor, yet somehow always ends up putting a bunch of it in the hands of upper-middle-class kids.

Finally, Arnold approves of the recommendation that all 50 states encourage “the collection of data allowing meaningful interstate comparison of student learning.”

Now, I’m not so sure I want state governments encouraging colleges to implement standards and testing regimes, which is what this would ultimately require. I’m positive, though, that I don’t want the feds doing it, because federal “encouragement” invariably leads to federal “control.” Just look at elementary and secondary education, where the No Child Left Behind Act has given Washington unprecedented control over local schools.

Harvard, Princeton, and Yale, say hello to NCLB:

The federal government should provide incentives for states, higher education associations, systems, and institutions to develop outcomes-focused accountability systems designed to be accessible and useful for students, policy makers, and the public….

In the end, like Arnold, I encourage people to read the Commission’s draft report for themselves and reach their own conclusions. As far as I’m concerned, though, one recommendation alone completely sums up the report’s frightening, command-economy thrust:

The Secretary of Education should take the lead in developing a national strategy to keep the U.S. at the forefront of the knowledge revolution, creating a system that encourages knowledge and skills to be obtained and continuously updated on a regular basis through a lifetime of learning.

I don’t know about anyone else, but that sounds like a bad thing to me.

If It Tastes Good, It’s Evil

This Washington Post op-ed from career Nanny Statists Joe Califano and Louis Sullivan reads like your standard public health talking points:  Unless adult-oriented products taste nasty, bitter, and disgusting, the companies who manufacture them will forever be accused of “marketing to children.”

Here’s my favorite part:

Buoyed by its success in pushing candy-flavored cigarettes, Reynolds has now introduced alcohol-flavored smokes. To make them appealing to our kids, Reynolds has marketed them with names based on gambling lingo as well: ScrewDriver Slots, BlackJack Gin, Snake Eyes Scotch and Back Alley Blend (a bourbon-flavored cigarette).

Color me befuddled.  So R.J. Reynolds is guilty of preying on kids because it’s marketing cigarettes (which can only be purchased by people over 18) that taste like alcohol (which can only be purchased by people over 21) with gambling-themed names (only people over 18–and 21, in some states–are permitted to gamble)?

Everything about these products is adult-oriented!  Yet for Califano and Sullivan, this is evidence that R.J. Reynolds is targeting youngsters.

Topics:

Medicare Part D: Who Is the Main Constituency?

Watson Wyatt Worldwide has just released a survey showing – again – that Medicare Part D’s employer subsidies and the availability of the new stand-alone drug plans are bailing out employers who can no longer deliver on their promises to retirees:

Despite widespread use of the Medicare federal subsidy, a vast majority of employers are planning to curtail their retiree medical plans for current and future retirees in the next five years…

Fourteen percent of employers plan to eliminate the benefit entirely for future post-65 retirees and 6 percent plan to eliminate it for their current post-65 retirees…

The lesson from the Pension Benefits Guarantee Corporation and other corporate bailouts could not be more clear: if government lets corporations escape the costs of making promises they can’t keep, we’ll get more corporations making promises they can’t keep.

FCC Fading into Irrelevancy

A fun news item for free-marketers who enjoy watching technology make government regulation (and justification for regulation) obsolete: Today’s Washington Post reports that the Internet has so altered media conglomerates’ business models as to make the Federal Communications Commission’s broadcast media ownership limits irrelevant.

Few people know that the FCC has strict rules limiting broadcast media firms’ ownership of various outlets in both local and national markets. A firm that owns TV stations is barred from owning enough stations to broadcast to a majority of the U.S. population, and a firm that owns the largest newspaper in a local market cannot also own the most-watched TV station in that market.

Michael Powell’s FCC tried to relax those rules in 2003, and with good reason. But the courts and Congress stamped out that effort. As the WP explains, media firms have subsequently taken a second look at Internet communications, shaking off Time Warner’s bad experience with AOL and Disney’s with the go.com network.

The result? According to the WP, media firms are finding so many profitable outlets on the Internet that they’re hardly interested in Congress’s and the FCC’s new receptiveness to the idea of relaxing the ownership rules.