Tag Archives: political economy

Subsidy and Food

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Here are some minor facts concerning a particular subsidy, courtesy of an The Wall Street Journal op-ed.

USDA lowered its 2012 corn forecast by 13% from last year’s, to 10.8 billion bushels, the shortest harvest since 2006, even though the planted acreage is the highest since 1937 and 4% more than last year.

only 24% of the corn crop is in good or excellent condition in the 18 major corn belt states, down from 72% just since June.

USDA’s world agricultural outlook board estimated that global corn consumption will be reduced by 38.9 million tons, with US problems responsible for ¾ of the shortage.

As a result,

Corn futures are up nearly 50% over the last six weeks.  The US accounts for 60% of global exports, and corn feeds cows, pigs, chickens, and humans through its role as a key ingredient in a broad range of foods.

Those corn futures will be realized as actual, sharp price increases that consumers will pay.  The price increase wouldn’t be so bad, but for a certain Federal subsidy.

The food-to-fuel mandate, Renewable Fuels Standard, requires 13.2 billion gallons of ethanol to be blended into the gasoline supply this year, rising to 36 billion gallons by 2022.  Fully 40% of 2011’s corn production went to ethanol, and courtesy of our EPA (though the subsidy originated in an earlier administration), and now more corn is devoted to fuel than to livestock or other foods.

But not to worry.  Despite the drought, the resulting corn crop failures, and the succeeding price increases driven by the crop failure, despite all of these hardships and negative impacts on the food supply, the ethanol makers got theirs.  The Renewable Fuels Association put out a statement, without a trace of irony, that there’s no danger of an ethanol shortage:

obligated parties under the RFS will have every opportunity to demonstrate compliance this year.

Helps to have your priorities straight.

“Ryan Budget” in a Nutshell

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Here’s a summary of the budget that the Progressives have begun demagoguing the moment Congressman Paul Ryan (R, WI) was asked to run for Vice President.

  • The latest full-scale version of the plan, unveiled in March, vows to cut spending by $5 trillion over the next decade, compared against President Obama’s plan.
  • The plan would, a decade from now, give seniors the option of taking a government payment to purchase health insurance. That payment could be used to buy a private insurance plan, or go toward the traditional Medicare plan. The plan calls for extra assistance to help low-income beneficiaries and those with “greater health risks.”
  • The plan would overhaul Medicaid by turning it into a block grant system for states.
  • The plan would cut the corporate tax rate from 35 percent to 25 percent. It would implement two individual income tax brackets — 10 percent and 25 percent.
  • The plan would head off the scheduled automatic defense cuts, first by diverting the planned $55 million defense cut in 2013 by implementing those cuts elsewhere.
  • The plan vows to bring the size of government to 20 percent of GDP by 2015.

Of what are the Progressives so terrified in this budget?  Ryan put his finger on it two years ago in the summary paragraph of his Wall Street Journal op-ed, reprinted by the WSJ over the weekend:

The contrast with our budget couldn’t be clearer: We put our trust in citizens, not government.  Our budget returns power to individuals, families and communities.  It draws inspiration from the Founders’ belief that all people are born with an unalienable right to the pursuit of happiness. Protecting this right means trusting citizens, not nameless government officials, to decide what is in their best interests and make the right choice about our nation’s future.

With the people in charge, Progressives won’t have anything to do.

What a Central Bank Does vs What the European Central Bank is Doing

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…and to too great an extent, what the Fed is doing….

As Spiegel Online International reports, the ECB intends to attempt to buy up southern Europe’s sovereign debt instruments on an enormous scale.  The idea is to get those, I’ll call them, toxic assets off the market so that lending can resume and the euro zone’s (and EU’s) market economies can restart.

There are a couple of fundamental problems with this scheme (and I use that term in the American sense).  I’ll elide, in this post, the clumsiness of it: it doesn’t satisfy central bank statutes, and the ECB risks becoming a secondary government while simultaneously losing its independence to national politicians.

One problem is the enormous risk this entails—not just for the ECB, but for the EU member nations that fund the ECB and so are on the hook for its failures.  That is to say, the taxpaying citizens of those nations are on the hook.  The risk is whether the bailed out nations will benefit and recover their economies.  If they do not, the losses will become astronomic: the Spanish and Italian debts alone sum to nearly €3 trillion.

Another problem is that this sort of scheme, even if carried out without those…inefficiencies…does not work.  For instance, the euro zone finance ministers, in their latest bailout round, approved a €100 billion to rescue the Spanish banks.  However, the benefits only lasted until those €100 billion ran out; then yields—the prices borrowers must pay in order to get others to lend—on Spanish and Italian government bonds went back up to dangerous levels.

Some understand this: Jürgen Stark, a former member of the ECB Executive Board, has already said

The ECB has a clear mandate to guarantee price stability.  Every additional responsibility compromises this core function.

Notice that: the purpose of the ECB—of any central bank—is to maintain price stability.  The legitimate purpose doesn’t even include maintaining full employment, as the Fed attempts to do.  (In a free market, unfettered by government interferences beyond such niceties as enforcing contract law and laws against things like lying or cheating, price stability combined with freedom in the market tend to maintain full employment through market forces.)

Price stability—monetary policy—for the EU, and for the euro zone in particular, is the über-framework, within which the various nations can structure their individual market economies as they see fit: against a backdrop of price stability.

Interferingintervening in the markets—monetary policy—is the job of elected governments, not that of central banks.

The ECB needs to stay out of the market for sovereign debt.

What’s Their Plan?

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What is Democratic Party’s plan, exactly, for getting our country out of its debt hole, out of its economic hole that’s deepening that debt hole and ruining individual American lives?  What is Barack Obama’s plan?

Republican Presidential Candidate Mitt Romney and his supporters out-raised Democratic Presidential Candidate Barack Obama and his supporters last month by $100 million to $75 million, marking the third straight month the Republican candidate has out-raised the Democratic candidate.

In response, the Democratic Congressional Campaign Committee sent out the following, more in support of the Democratic Presidential candidate than any Democratic Congressional candidate:

BREAKING NEWS: Mitt Romney and the Republicans brought in a whopping $101 million in July.

You and I both know that Mitt Romney will sell America out if he becomes President — giving more tax breaks to his Big Oil and billionaire backers.

The only way we can stop them is to close this fundraising gap – starting today.

Please do your part — make a donation of $3 or more right now to back up President Obama with a Democratic majority.

The reality is simple: If Mitt can bury us under a wave of corporate special interest cash, we will lose in November.

But if everyone who’s been waiting to give pitches in a few dollars, we can start closing the gap today.

http://dccc.org/Close-The-Gap

Thanks for all you do,

Robby

Robby Mook
DCCC Executive Director

Well.  I guess, being a poor, dumb conservative, I just don’t understand.  What was that Democratic Party plan, again?

One European’s View of Democracy

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Italian Prime Minister Mario Monti had this to say earlier in the week:

If governments allow themselves to be entirely bound to the decisions of their parliament, without protecting their own freedom to act, a break up of Europe would be a more probable outcome than deeper integration.

Hmm….  The people’s representatives should be disregarded when Government Knows Better?  So much for the Sovereign People.

He went on, though, in a vein that leads me to believe that he’s not so much anti-democratic as he is simply incompetent, saying that if the euro were allowed to become a factor in Europe drifting apart,

then all the foundations of the European Project will be destroyed.

Of course the euro is at the core of the “European Project,” since it was designed as the tool with which the varying nations of Europe would be drawn together.  On top of which, without a common currency, there can be no expectation of a common Europe: it would be like each of the united States under the Articles of Confederation having its own currency as well as the use of everyone else’s.

Oh, wait….

Of course, a day later, Monti…clarified, suggesting that his remarks had been intended to support “constant and systemic dialogue” between governments and parliaments; however, when it comes to government negotiations at the European level

a certain amount of flexibility is necessary in order to reach agreements.

And he added this

Every government has a duty to explain itself and interact in a dynamic, transparent and effective way with parliament[.]

Fill the square of discussing, then overrule the parliament.  And notice his fundamental view of parliament, expressed twice above: government is separate from parliament, and above it.  The people’s representatives have no place in the government, except at government’s sufferance.

Again: hmm….