Topic: Government and Politics

U.S. Sugar Program Costs Another $1.75 Billion

The state of Florida announced yesterday that it will pay $1.75 billion to buy out the nation’s largest sugar producer and 300 square miles of land it owns north of the environmentally sensitive Florida Everglades. Although most news stories ignored the connection, the deal is yet another cost Americans continue to pay for our misguided agricultural programs.

The company selling the land, United States Sugar, has for decades benefited from a federal program that guarantees a minimum price for United States Sugar’s crop through a system of loan guarantees and strict import quotas. This means American families and sugar-consuming industries are typically paying two to three times the world price for sugar.

The sugar program also imposes damage on the environment, which motivated yesterday’s announcement. Like other farm programs, the sugar program encourages over-production. In the case of United States Sugar, that means the extraction of fresh water that would otherwise flow naturally into the Everglades, and the over-application of fertilizers that artificially raise the phosphorous content of the runoff, causing a sharp decline in periphyton, such as algae, that supports bird and other animal life in the Everglades. [For more about the environmental damage caused by U.S. farm programs, see my 2005 article published by the Property and Environment Research Center.]

In large part because of the damage caused by subsidized domestic sugar producers, Congress allocated $8 billion in 2000 for cleaning up the Everglades. Florida’s purchase of United States Sugar was just the latest installment in an ongoing clean-up operation.

Of course, Congress could have avoided much of this mess years ago by repealing the sugar program. If Americans had been free to buy sugar at world prices, our domestic sugar industry would have been smaller and more efficient with a much smaller environmental footprint. Converting the sugar-cane fields to more environmentally friendly uses would have been much less expensive because the annual subsidies would not have been capitalized into the value of the land.

When the Democrats took power in Congress in 2007, they pledged themselves to be in favor of reform, fiscal responsibility, and protection of the environment. Yet the new farm bill that Democrats voting overwhelmingly in favor of last month, and that their likely presidential candidate Barack Obama endorsed, strikes out on all three counts.

A Big-Government Running Mate for McCain?

The Washington rumor mill has Minnesota Governor Tim Pawlenty as the leading candidate to be John McCain’s running mate. If so, that would be a clear slap in the face to small-government conservatives.

Pawlenty, who reportedly coined the term “Sam’s Club conservative” to describe his political philosophy, has been an economic populist and big-spender generally. Among other things, he:

  • Supported government subsidized health care for all children as the first step toward universal health insurance, and opposed President Bush’s veto of a Democratic bill that would have expanded the State Children’s Health Insurance program (SCHIP) to families earning as much as $83,000 per year;
  • Supports Massachusetts-style health care reform, including a “health care exchange” and an individual mandate;
  • Has called for banning all prescription drug advertizing, and seeks government imposed price controls for drugs offered through Medicare;
  • Proposed a $4000 per child preschool program for low-income children;
  • Pushed a statewide smoking ban smoking ban in workplaces, restaurants and bars;
  • Increased the state’s minimum wage;
  • Imposed some of the most aggressive and expensive renewable energy mandates in the country;
  • Was an ardent supporter of the farm bill;
  • Received only a “C” ranking on Cato’s 2006 Governor’s Report Card, finishing below such Democrats as Iowa Governor Tom Vilsack and tied with Democratic Pennsylvania Governor Ed Rendell.

It was the Republicans’ big-spending, big-government ways that helped ensure their defeat in the 2006 midterm elections. Suburbanites, independents, and others who were fed up not just with the war and corruption, but also with the Republican drift toward big-government who stayed home, or even voted Democratic, on election day 2006. That night, more than 65 percent of voters told a pollster they believed that “The Republicans used to be the party of economic growth, fiscal discipline, and limited government, but in recent years, too many Republicans in Washington have become just like the big spenders they used to oppose.”

John McCain cannot hope to win this fall without the support of economic and small government conservatives. Many are attracted to what appears to be McCain’s genuine fiscal conservatism. But many others are suspicious of McCain’s populist, big-government tendencies on issues from energy and the environment to civil liberties, the war and campaign finance. McCain needs to reach out to Reagan/Goldwater small-government conservatives. Vice President Pawlenty would be sending a very different signal.

Jim Webb, Drug War Peacenik?

I’ve just posted a piece at the Guardian on Sen. James Webb’s Scots-Irish ethnic populism. But he’s got his good side, too. A Virginia newspaper reports today:

Virginia Sen. Jim Webb began building a public case Thursday to change the nation’s drug laws to stress treatment over incarceration for nonviolent offenders.

The freshman Democrat held a hearing of the Joint Economic Committee to solicit testimony from prosecutors and scholars who argued that the decades-long emphasis on incarceration has been costly and ineffective.

Right Message, Wrong Messenger

A column in the Wall Street Journal correctly explains that Senators Obama and McCain have a habit of displaying economic illiteracy. So it is rather ironic that the author is Karl Rove, the man who spent the past seven years steering George W. Bush into one bad economic decision after another.

On many occasions, I visited economists in the administration to complain about their Keynesian fiscal policy (such as rebates), wasteful spending (such as farm bills and Medicare expansion), and senseless regulation (such as Sarbanes-Oxley), and invariably I would be told that the Bush White House was pursuing bad policy but that there was nothing that could be done because Karl Rove’s political strategy shop was calling the shots.

Only in Washington can people disply this amount of chutzpah and still retain credibility:

Barack Obama and John McCain are busy demonstrating that in close elections during tough economic times, candidates for president can be economically illiterate and irresponsibly populist. In Raleigh, N.C., last week, Sen. Obama promised, “I’ll make oil companies like Exxon pay a tax on their windfall profits, and we’ll use the money to help families pay for their skyrocketing energy costs and other bills.” Set aside for a minute that Jimmy Carter passed a “windfall profits tax” to devastating effect, putting American oil companies at a competitive disadvantage to foreign competitors, virtually ending domestic energy exploration, and making the U.S. more dependent on foreign sources of oil and gas. Instead ask this: Why should we stop with oil companies? They make about 8.3 cents in gross profit per dollar of sales. Why doesn’t Mr. Obama slap a windfall profits tax on sectors of the economy that have fatter margins? Electronics make 14.5 cents per dollar and computer equipment makers take in 13.7 cents per dollar, according to the Census Bureau. Microsoft’s margin is 27.5 cents per dollar of sales. Call out Mr. Obama’s Windfall Profits Police!

…This past Thursday, Mr. McCain came close to advocating a form of industrial policy, saying, “I’m very angry, frankly, at the oil companies not only because of the obscene profits they’ve made, but their failure to invest in alternate energy.” …And do we really want the government deciding how profits should be invested? If so, should Microsoft be forced to invest in Linux-based software or McDonald’s in weight-loss research? Mr. McCain’s angry statement shows a lack of understanding of the insights of Joseph Schumpeter, the 20th century economist who explained that capitalism is inherently unstable because a “perennial gale of creative destruction” is brought on by entrepreneurs who create new goods, markets and processes. The entrepreneur is “the pivot on which everything turns,” Schumpeter argued, and “proceeds by competitively destroying old businesses.”

…Messrs. Obama and McCain both reveal a disturbing animus toward free markets and success. It is uncalled for and self-defeating for presidential candidates to demonize American companies. It is understandable that Mr. Obama, the most liberal member of the Senate, would endorse reckless policies that are the DNA of the party he leads. But Mr. McCain, a self-described Reagan Republican, should know better.

Econ 101 for Democrats

Executives from Goldman Sachs and Morgan Stanley met with Democratic staff members of the Senate Energy and Natural Resources Committee last week to make the case that trading in energy contracts is not the reason that oil prices are rising. Judging by Jeff Birnbaum’s report in the Washington Post, it’s not easy to teach Democrats about economics:

But the executives were met with skepticism and occasional hostility. “Spare us your lecture about supply and demand,” one of the Democratic aides said, abruptly cutting off one of the executives.

Another aide “warned the executives that no matter what arguments they muster, it would be hard to prevent Congress from acting.” So much for fact-finding and economic sanity in an election year.

He’s a Politician after All

This might be a shocker to many, but Barack Obama has admitted that he’s a politician after all. After calling NAFTA “a big mistake” and “devastating” just 2 months ago, the presumptive Democratic nominee now thinks that the trade agreement is not that bad.

He justifies this U-turn saying that “Politicians are always guilty of [overheated and amplified rhetoric], and I don’t exempt myself.” This is coming from someone who, on the campaign trail, has attacked those who would say anything to get elected.

Pundit Watch

I pulled the September 24, 2007, copy of the New Republic out from a stack on my coffee table last night and happened on a fascinating column about the upcoming primaries. John Judis laid out in convincing detail just why the primary race was likely to go all the way to June and maybe even to the convention. He did acknowledge that people had made such predictions before:

Of course, dire prognostications of brokered conventions are made nearly every election…. But the structure of the election has changed this year. The old schedule of primaries and caucuses was designed to winnow the field. Invariably, only two candidates were left standing by March, one of whom would eventually capture enough delegates through the remaining contests to win the nomination. By contrast, the 2008 schedule concentrates more than half of the primary and caucus votes in the first month, which ends February 5. If there is no clear frontrunner by then, the race will probably continue on into June and perhaps even up until the convention.

And that’s why, he said, the delegates just might find themselves choosing the nominee at their convention in Minneapolis.

Yes, Minneapolis. Not Denver. The Republican convention. Because, Judis said, it was likely that Rudy Giuliani, Mitt Romney, and Fred Thompson would divide the states on a regional basis and no one would get a majority of the delegates. “So there is a very good chance that, by June, none of the Republican candidates will have secured the nomination.”

And then what would happen? Well, “the struggle for the nomination would probably move to the GOP convention’s rules committee,” which would have to decide, among other things, whether to disqualify delegates from Florida and other states that held their primaries too early.

TNR readers might have been worrying, Could this happen to our party? Not to worry, said Judis:

Democrats seem far less likely to face this sort of challenge next year. Indeed, Hillary Clinton appears to be putting her competition behind her, and none of her challengers has a built-in regional advantage that will ensure a respectable block of delegates….In fact, the compressed primary schedule could make a stalemate less rather than more likely for Democrats….While Republicans become ever more fractious as the general election approaches, Democrats will have already spent months coalescing around a new leader.

In this I think Judis was doubly, or triply, wrong. Not only did he get the primary process completely wrong in each party, I think he was wrong to predict that a drawn-out nominating process would be bad for the party. It seems clear today that Barack Obama has greatly benefited from the long battle with Hillary Clinton: he held the nation’s attention longer, he became a sharper debater, he raised unprecedented sums of money, he built an organization in every state, he faced a lot of the revelations and charges that would otherwise have come up closer to the election.

So … what are the pundits predicting about the fall election?