Farm Bailouts

The costs of irresponsible policy.

“President Trump Delivers Remarks on Supporting America’s Farmers and Ranchers” by The White House is in the Public Domain, CC0

It is difficult to keep track of the ways in which this administration is engaged in poor governance. There is, for example, the possibility of doing serious harm to our relationship with Japan and South Korea, not to mention ongoing strains with our NATO allies. And then there’s this (via Bloomberg): Trump Pledged to Help Small Farms. Aid Is Going to Big Ones.

As per the headline:

Half of the Trump administration’s latest trade-war bailout for farmers went to just a 10th of recipients in the program, according to an analysis of payments by an environmental organization. The study asserted that payouts have been skewed toward larger operations and wealthier producers.

The top 1% of beneficiaries from the trade aid received 13% of the money distributed in the first round of payments under this year’s Market Facilitation Program, with an average payment of more than $177,000. But the bottom 80% of recipients received an average payment of $5,136, according to the Environmental Working Group, which analyzed records obtained through the Freedom of Information Act.

This is not particularly surprising, although it perhaps should be concerning. And, of course, the current mess (i.e, the trade war with China) is unnecessary and utterly man-made (with the man in question being Donald J. Trump).

Moreover, the following is pretty stunning:

The farm rescue is now more than twice as expensive as the 2009 auto industry bailout, which ultimately cost taxpayers $12 billion. Almost 40% of projected U.S. farm profits this year will come from trade aid, disaster assistance, federal subsidies and insurance payments, according to the American Farm Bureau Federation.

[…]

The Trump administration announced an additional $16 billion round of trade aid for farmers this year as the dispute with China drags on. That’s on top of a $12 billion pledge in 2018.

I would note that the auto bailout, which was controversial and opposed by the GOP, was in the context of the biggest global economic downturn since the Great Depression and was an emergency measure. The only reason for the bailout that Trump is funding is because of the trade war he started.

If ~40% of farm profits for the year will come from aid, assistance, federal subsidies and insurance then that looks a lot like the dreaded “socialism” that the Republicans say they are protecting us all from. Worse, it is the crude kind of meddling in the economy that is the worst kind of socialism. It is the ad hoc results of a president who really doesn’t know what he is doing engaging in a vainglorious, simplistic policy choice (the ever popular, and always “easy to win” trade wars). As that policy choice fails, he finds himself having to use public resources to prop up some of his constituents in an attempt to maintain their support going into 2020.

Meanwhile, the Business Insider reported back in October: Farm bankruptcies jump to highest level since 2011 as Trump’s tariffs bite.

Farmers filed 580 Chapter 12 bankruptcy filings between January and September, according to the American Farm Bureau Federation, the largest farm advocacy group in the country. That was a 24% increase from the previous year and the highest level since 2011, when there were 676 filings. 

[…]

Farm bankruptcies rose to or above decade-highs this year in Iowa, Kansas, Maryland, Minnesota, Nebraska, New Hampshire, South Dakota, Wisconsin and West Virginia, according to the federation. 

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Source

And note: these bankruptcies are in the context of an overall good economy and with billions in federal subsidies flowing in. The trade war really is a an utter disaster of a policy.

At a minimum, this reality does not match up with the rhetoric of fiscal responsibility and pro-market policies. Instead this is the kind of recklessness one expects from a amateur and a populist: simplistic policies and the usage of public funds to paper over the failures thereof. These kinds of things are far easier to hide in solid economic times, but if these conditions continue and we go, as we inevitably will, into recession again, this is going to be catastrophic.

FILED UNDER: Deficit and Debt, Donald Trump, US Politics
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is Professor of Political Science and Dean of the College of Arts and Sciences at Troy University. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. Jay L Gischer says:

    I wish I could believe this would help swing states like WI, MI, OH and MO to blue next presidential cycle. But I don’t know, the cult of Trump seems to be able to distract people from what’s right in front of them.

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  2. Kathy says:

    The study asserted that payouts have been skewed toward larger operations and wealthier producers.

    Have we forgotten what we’ve learned from Trickle-Down university?

    These “incentives” will allow agribusiness to grow more and make more money, which will let them buy for a pittance the smaller farms that go broke, and employ the former small farm owners for wages lower than the money they were making when they owned their farms. See? a rising tide lifts all boats!

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  3. DrDaveT says:

    The trade war really is a an utter disaster of a policy.

    Only if you think of it as an economic policy. As a pandering policy, it has been quite successful. Credit for that goes mostly to Fox News, who make sure that the victims have no idea that they are victims.

    I’ll say it again: this is not a battle over policies. It’s a battle of facts versus fiction, and the facts are losing badly.

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  4. Kit says:

    As that policy choice fails, he finds himself having to use public resources to prop up some of his constituents in an attempt to maintain their support going into 2020.

    Well, does Trump have their support? If so, then none of the above analysis matters except as further confirmation that Republicans will be the ruin of the republic.

    However, if Trump does not currently have the support of farmers, will all be forgiven and forgotten if Trump declares victory and winds back the trade war to the status quo ante?

    In any case, I have trouble seeing Democrats riding this issue (or pretty much any reality-based issue) to victory.

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  5. Just nutha ignint cracker says:

    @Kathy: No. This is an example of another principle. This principle was noted, I believe, by Keynes when he said

    the only thing that conservatives are ever interested in socializing is loss.

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  6. Robert C says:

    I’ve said on this site before and I’ll say it again: US farmers on the dole. But heaven forbid we bail out GM.

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  7. Stormy Dragon says:

    For Republicans, government spending is only “socialism” when it’s going to urban minorities. government spending for rural whites is “capitalism”.

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  8. Gustopher says:

    @Kathy:

    a rising tide lifts all boats!

    I suspect that as global warming continues, that phrase will take on a whole new meaning. Also, we will be divided into those with boats and those without.

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  9. Just nutha ignint cracker says:

    For Republicans, government spending is only “socialism” when it’s going to urban minorities. government spending for rural whites corporations is “capitalism”.

    FTFY. (ETA: At $5,000/avg., I would guess that rural whites are getting about 20% of the value of the crop lost. Scale is everything here.)

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  10. An Interested Party says:

    If nothing else, Trump has done much to expose Republican hypocrisy when it comes to government handouts…as others have noted, when it’s about helping ethnic minorities, particularly in big cities, it’s just so horrible but when it’s for white people, particularly in rural areas, it’s just ducky…Republicans could gain more respect if they were more honest about their motives…

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  11. Gustopher says:

    Shouldn’t farmers be buying insurance, or bracketing their sales by buying and selling options to reduce the price volatility? This is why we have a financial services industry that can sell complicated instruments over many year periods.

    Why are we involved in bailing them out at all?

    What would Jesus do? He would tell them to give unto the markets that which is the markets’.

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