The First Law of Holes warns, “If you find yourself in a hole, stop digging.”
Unfortunately, Congress and the Trump administration continue to dig taxpayers deeper, as misguided reactions to the trade war have combined to increase the deficit, dampen economic growth and harm the environment.
Throughout 2018, many new tariff or retaliatory action announcements dealt farm country a blow — including those actions aimed at our allies. Tariffs on steel and aluminum increased the cost of equipment, repairs and infrastructure construction. As the trade war dragged on, China responded with tariffs on commodities like soybeans, corn and pork. Soybeans have been particularly affected due to their short shelf life, limited storage options, and the fact that China was the number-one market — by a long shot — purchasing a quarter of the U.S. crop.
Instead of reversing course or taking other action to restore trade relations and stabilize the markets that U.S. products need, policymakers and government officials have pushed through plans to buy off farmers with little thought for the real cost or long-term effect.
Congress rushed the 2018 Farm Bill across the finish line — in the Senate’s case less than 24 hours after the bill was posted and mere minutes after the Congressional Budget Office score was publicly available. Despite major differences between the Senate and House versions and the option of a one-year extension, both parties and chambers claimed a Farm Bill was essential to counter “trade uncertainty.”
And what did farmers get to combat this trade problem? Not provisions that addressed tariffs or opened new markets. Cash. Lots of cash. Each change to the underlying statute was aimed at maximizing taxpayer payouts to farmers, like expanding payments to cousins, nieces and nephews — even if they don’t work on the farm(!), and increased marketing loan rates, all on top of the already heavily subsidized crop insurance (or, more accurately, revenue insurance) farm businesses already receive.
In July, the Department of Agriculture announced a $12 billion trade mitigation package to help farmers hurt by the corrosion of our trading relationships. This “help” comes in the form of already tried-and-failed welfare payments and a return to the days of surplus government food. Initially, certain commodity producers, 75 percent of them soybean growers, received $4.7 billion in direct payments, followed this month by an additional $4.9 billion. An additional $1.2 billion was tagged for commodity purchases and $200 million un-ironically deemed to “develop foreign markets.”
But even generous shallow-loss programs, insurance that guarantees a profit, and bailouts seemingly aren’t enough. Incoming House Agriculture Committee chairman Collin Peterson, D-Minnesota, predicts farmers will need even more aid, though he’s unsure when or how much.
Corn growers have complained that their Market Facilitation Program payments haven’t been as generous as those to soybeans, despite facing high tariffs on corn, corn product, and corn ethanol exports in a major market. Apparently they aren’t content with their own special pay-off: more ethanol in the U.S. fuel supply thanks to recent approval for year-round sales of higher 15 percent ethanol blends of gasoline, even though there’s little consumer demand for a product that could harm many car, boat and other engines.
Already, Americans are paying a steep price as a result of our unnecessary trade disagreements. The National Taxpayers Union Foundation Free Trade Initiative estimates that tariffs currently in place or on the table could exceed all the taxes imposed by the Affordable Care Act. Worse, if the proposed 25 percent tax on imported cars and parts moves ahead, taxpayers will see their recent tax break effectively cut in half. Unfortunately, these and other direct costs to taxpayers, like commodity payments and crop insurance subsidies, are only part of the ultimate price tag.
With the federal deficit poised to once again explode, taxpayers can’t afford these public policy distortions on behalf of one industry, particularly when the means won’t achieve the ends. Congress should act quickly in 2019 to get to the root of the problems and protect free markets. It’s time to stop digging and give taxpayers a ladder.