WEBVTT NOTE No Policy, Just Rents: An Insider’s Perspective on US Agricultural Subsidies 1 00:00:00.000 --> 00:00:04.000 We're going to talk about farm subsidies today and 2 00:00:04.000 --> 00:00:06.880 of course we're going to start 3 00:00:06.880 --> 00:00:10.760 with the proposition and end with the proposition that farm subsidies are bad. 4 00:00:10.760 --> 00:00:15.280 You probably, if you know any economics at all, don't really need us to explain why. 5 00:00:15.280 --> 00:00:18.620 What we want to do is draw in on an insider's perspective. 6 00:00:18.620 --> 00:00:25.620 Now we brought a true insider, a real rent seeker, my dad, Les, who's a farmer. 7 00:00:25.620 --> 00:00:31.620 We're going to give you some real world specific examples of how bad they actually are. 8 00:00:31.620 --> 00:00:36.620 What we're going to basically point to is that these programs fail by their own terms. 9 00:00:36.620 --> 00:00:43.620 It's kind of like a horror movie. You know how it's going to end, but you kind of want to watch anyway because you're going to be entertained. 10 00:00:43.620 --> 00:00:49.620 So first off, just a quick overview of what we're talking about here. 11 00:00:49.620 --> 00:00:54.140 over the last fifteen or so years we've got almost a quarter trillion dollars in 12 00:00:54.140 --> 00:00:58.820 money handed out to US farmers under various programs 13 00:00:58.820 --> 00:01:00.820 so we're talking about quite a bit of money 14 00:01:00.820 --> 00:01:04.860 and quite a few people, as much as almost two million people receiving the 15 00:01:04.860 --> 00:01:06.260 money every year 16 00:01:06.260 --> 00:01:08.380 but really what's going on here is 17 00:01:08.380 --> 00:01:12.700 as with most rent seeking programs it's the elite rent seekers that top ten 18 00:01:12.700 --> 00:01:15.660 percent that's receiving the vast majority of the benefits 19 00:01:15.660 --> 00:01:18.140 or the handouts 20 00:01:18.140 --> 00:01:25.420 Now, there's several official rationales provided by the supporters of these things. 21 00:01:25.420 --> 00:01:26.420 We need food security. 22 00:01:26.420 --> 00:01:28.420 You'll hear the politicians especially say this a lot. 23 00:01:28.420 --> 00:01:29.420 What the hell does it mean? 24 00:01:29.420 --> 00:01:33.340 Well, we don't want to rely on foreigners to supply us with food. 25 00:01:33.340 --> 00:01:40.900 We'll see that this rationale is totally irrelevant on the grounds that the U.S. does have a 26 00:01:40.900 --> 00:01:41.980 huge advantage. 27 00:01:41.980 --> 00:01:46.620 We have tremendously productive farm grounds, so we'd probably be exporting food in a totally 28 00:01:46.620 --> 00:01:48.260 Laissez-faire Economy. 29 00:01:48.260 --> 00:01:50.220 But even so, even if we weren't, what would that mean? 30 00:01:50.220 --> 00:01:53.740 That would mean that foreign countries have a comparative advantage in providing us food. 31 00:01:53.740 --> 00:01:57.380 So why would we want to lose out on the gains from trade there? 32 00:01:57.380 --> 00:01:59.460 This is going to fall apart. 33 00:01:59.460 --> 00:02:02.440 Now the environmentalist cause is pretty huge. 34 00:02:02.440 --> 00:02:09.220 A lot of these government programs and farming are designed to appease the environmentalists. 35 00:02:09.220 --> 00:02:14.780 We're going to solve all your environmental ills from pollution, from unsustainable practices. 36 00:02:14.780 --> 00:02:19.460 We're going to see that this rationale, this argument falls apart entirely too, where we'll 37 00:02:19.460 --> 00:02:23.340 see a really interesting example of this. 38 00:02:23.340 --> 00:02:27.740 And the people really ultimately know this, the people who are promoting these things 39 00:02:27.740 --> 00:02:34.100 know it, so most of the time what they say is, well, we need a safety net for U.S. farmers. 40 00:02:34.100 --> 00:02:37.780 Some would call it welfare, some might call it handout. 41 00:02:37.780 --> 00:02:41.740 Some people around here might call it what it really is, legalized plunder, we're okay 42 00:02:41.740 --> 00:02:43.120 with that term. 43 00:02:43.120 --> 00:03:06.120 Economists of critique farm subsidies on many, many grounds. They're not needed. There's no public good here. You pay the farmer to provide the food. It's not a public good. 44 00:03:06.120 --> 00:03:13.120 They're not needed. There's no public good here. You pay the farmer to provide the food. It's not a public good. 45 00:03:13.120 --> 00:03:20.120 They're wasteful for the taxpayer. They distort the market in agriculture. They redistribute, again, the elite rent seekers. 46 00:03:20.120 --> 00:03:25.120 They're already pretty rich. It's not like they need it from some kind of socialist perspective. 47 00:03:25.120 --> 00:03:34.120 And it harms the poor people, the unseen foreign farmers who suffer from the actual reduction in farm prices, crop prices. 48 00:03:34.120 --> 00:03:41.120 Why the heck do they persist then and they continue even though economists are almost universally against them? 49 00:03:41.120 --> 00:03:54.120 Well, it's a classic public choice thing of concentrated benefits, dispersed costs, and again, it's a really elite group of maybe several hundred thousand people that are getting huge, reaping huge gains. 50 00:03:54.120 --> 00:04:03.120 We have several entities, the environmental working group, they're kind of a bunch of leftists, but they're good because they expose who's getting this money. 51 00:04:03.120 --> 00:04:07.920 and they've got these lists of who's getting, who's really cashing in on the farm subsidies. 52 00:04:07.920 --> 00:04:12.000 The top people are getting millions of dollars every year. 53 00:04:12.000 --> 00:04:14.600 So they're really interested in making sure this thing continues. 54 00:04:14.600 --> 00:04:21.080 Now the costs fall on the general taxpayer to the tune of maybe hundreds of dollars every 55 00:04:21.080 --> 00:04:27.480 year so it's hard for us to organize and try to fight it while it's easy and it's really 56 00:04:27.480 --> 00:04:31.000 in their self-interest for the people who are currently getting the benefits to keep 57 00:04:31.000 --> 00:04:47.680 We agree we entirely endorse all the arguments I just listed. Farm subsidies are economically 58 00:04:47.680 --> 00:04:53.000 terrible, wasteful, what have you. We want to kind of add another wrinkle to the argument 59 00:04:53.000 --> 00:04:58.400 against them. Farm policies are incoherent. They fail by their own terms, right? James 60 00:04:58.400 --> 00:05:03.080 James Boevard, who's this great libertarian journalist, sums it up really well. For almost 61 00:05:03.080 --> 00:05:08.120 every foreign program, there's another equal but opposite foreign program. So, when we try 62 00:05:08.120 --> 00:05:12.360 to discover what's the policy, what's the single driving force behind all these things, 63 00:05:12.360 --> 00:05:16.840 it's doing what politicians do best, handing out other people's money. So I'm going to, 64 00:05:16.840 --> 00:05:21.960 with that, turn it over to my dad, who's going to give some real-world, scary, interesting 65 00:05:21.960 --> 00:05:23.440 examples of this absurdity. 66 00:05:23.440 --> 00:05:24.440 Can you run that? 67 00:05:24.440 --> 00:05:25.440 I'll keep running this. 68 00:05:25.440 --> 00:05:34.440 Okay, Tyler told me to take my time in a hurry, so we could get the, that's what you do if you're a gunslinger. 69 00:05:34.440 --> 00:05:40.440 You know, you want to draw, you want to take your time, get your aim right, but you've got to do it in a hurry. 70 00:05:40.440 --> 00:05:46.440 And I wanted to give you a geography lesson on the high plains. 71 00:05:46.440 --> 00:05:48.440 We don't have time for that. 72 00:05:48.440 --> 00:06:03.440 All I can really say is that farming especially, not ranching so much, but farming on the High Plains, which would be the western portion of the Great Plains, is at best a very risky endeavor. 73 00:06:03.440 --> 00:06:12.440 If you can just kind of remember that, if you have questions later, I'll spend some time out there or whatever and tell you how risky it is. 74 00:06:12.440 --> 00:06:20.440 Looking at the chart, I just realized that I've finally achieved a milestone in my life. 75 00:06:20.440 --> 00:06:26.440 I've made it into that 10% category and a national category into that upper echelon. 76 00:06:26.440 --> 00:06:30.440 So I want you to have confidence that I am a qualified rent seeker. 77 00:06:30.440 --> 00:06:35.440 I know how to do it. I am, I have become, learned how to do this. 78 00:06:35.440 --> 00:06:39.440 I'm an expert game player at this. I want you to trust me on that. 79 00:06:39.440 --> 00:06:46.940 Just trust me, if you've got some questions about my credentials on that, I'll answer them out there later. I'll explain that. 80 00:06:46.940 --> 00:06:55.940 So, the High Plains is a short grass prairie, very risky area to farm. Go to the picture, Tyler. 81 00:06:55.940 --> 00:07:06.440 This is a bumper crop that is on my farm. It's about a one and four year possibility. 82 00:07:06.440 --> 00:07:09.720 Okay, that's enough on that. Let's go to the... 83 00:07:09.720 --> 00:07:13.480 Oh, that is grain sorghum. We call it milo. 84 00:07:13.480 --> 00:07:15.960 It's primarily used in livestock feed. 85 00:07:15.960 --> 00:07:19.240 You can make cereal and do some few things with it. 86 00:07:19.240 --> 00:07:26.840 It is edible, consumable by humans as well as animals. 87 00:07:26.840 --> 00:07:30.760 Okay, our glossary. I've got a few terms up here. 88 00:07:30.760 --> 00:07:34.280 Of course, everybody knows what the USDA is. 89 00:07:34.280 --> 00:07:39.240 FSA is the Farm Service Agency. 90 00:07:39.240 --> 00:07:42.760 The thing to remember about them, they pass out a lot of dollars. 91 00:07:42.760 --> 00:07:47.200 NRCS, Natural Resources Conservation Service, 92 00:07:47.200 --> 00:07:51.160 as their name implies, they're the ones that are 93 00:07:51.160 --> 00:07:54.480 the true believers, they want to take care of the land. 94 00:07:54.480 --> 00:07:59.560 And generally in your rural office, the FSA is on one side of the office building, 95 00:07:59.560 --> 00:08:02.480 across the hall is the NRCS. 96 00:08:02.480 --> 00:08:13.800 RMA is the risk management agency, subdivision of the USDA, also could be termed Federal Crop Insurance Corporation. 97 00:08:13.800 --> 00:08:22.800 DCP is the direct and counter-cyclical program, this is the one I call payment for being a farmer, that's all you need to know, 98 00:08:22.800 --> 00:08:30.720 the DCP pays you for being a farmer, don't have to do anything, grow, not grow, they just pay you that money directly. 99 00:08:30.720 --> 00:08:38.720 EQUIP, Environmental Quality Incentives Program, it's the one I call payment for being a rancher. 100 00:08:38.720 --> 00:08:47.720 CSP, Conservation Stewardship Program, payment for playing along with the USDA. 101 00:08:47.720 --> 00:08:53.720 I wanted to call it, you've been a good boy in the past, here's some money. 102 00:08:53.720 --> 00:08:57.720 If you keep being a good boy in the future, we'll give you more money. 103 00:08:57.720 --> 00:09:04.040 CRP, Conservation Reserve Program, that's payment for not farming. 104 00:09:04.040 --> 00:09:08.800 Other programs, if we have some time we'll talk about those. 105 00:09:08.800 --> 00:09:12.280 This is just a few 106 00:09:12.280 --> 00:09:16.480 of the programs and endeavors that the Department of Agriculture has. 107 00:09:16.480 --> 00:09:19.480 What we want to do next is 108 00:09:19.480 --> 00:09:23.200 get into a few specific examples. 109 00:09:23.200 --> 00:09:27.700 I truly could go on for hours 110 00:09:27.700 --> 00:09:33.820 and tell you about direct conflicts within programs that the USDA has. One program will 111 00:09:33.820 --> 00:09:39.500 head you this direction, the other program will head you that direction. Payment for both. 112 00:09:39.500 --> 00:09:45.100 So the first one we have, and this is a simple one, maybe it'll make you chuck a little bit, 113 00:09:45.100 --> 00:09:49.200 we're talking about spy versus spy. I know a lot of you are older here and I know, you 114 00:09:49.200 --> 00:09:55.880 might not admit it, you've read Mad Magazine and you remember spy versus spy. Well that's 115 00:09:55.880 --> 00:10:05.880 The situation we've got here, bats versus railings, under an EQIP contract, the Department of Agriculture will pay you to put in a stock tank. 116 00:10:05.880 --> 00:10:08.880 They cost there, they don't pay the whole thing. 117 00:10:08.880 --> 00:10:17.880 One of the requirements is to have a railing around that tank to keep young calves and livestock from getting into the tank and drowning. 118 00:10:17.880 --> 00:10:20.880 You've got to have that or you don't get your money. 119 00:10:20.880 --> 00:10:26.080 I was in the NRCS office the other day and the young technician hands me a brochure and he says, 120 00:10:26.080 --> 00:10:29.080 hey, this is good, read it. 121 00:10:29.080 --> 00:10:36.580 It directly encourages you to remove your railings from the tanks because bats and other birds, 122 00:10:36.580 --> 00:10:38.680 and I didn't know this, they drink in flight. 123 00:10:38.680 --> 00:10:41.380 They swoop down, get their drink and swoop up. 124 00:10:41.380 --> 00:10:46.780 And of course, if you have bats and these birds are highly desirable. 125 00:10:46.780 --> 00:10:50.480 If you have the railing around the tank, they can't drink in your tank. 126 00:10:50.480 --> 00:10:57.580 So consequently, you've got Habitat that encourages them to fly and hit the railing and drown, okay? 127 00:10:57.580 --> 00:11:05.280 So just a simple little example of two conflicting directions. 128 00:11:05.280 --> 00:11:10.880 The next one's a little more serious, and we call that Equip versus Equip. 129 00:11:10.880 --> 00:11:16.380 You can receive a direct incentive payment. 130 00:11:16.380 --> 00:11:19.380 The whole program and practice is very complicated. 131 00:11:19.380 --> 00:11:23.100 I'm just going to give you the very brief part of it. 132 00:11:23.100 --> 00:11:28.460 You can receive a direct incentive payment if you enter into a rotational grazing contract 133 00:11:28.460 --> 00:11:30.340 on your range land. 134 00:11:30.340 --> 00:11:36.460 And under this contract, you're to leave a half to a third of the standing forage at 135 00:11:36.460 --> 00:11:38.780 the end of the growing season. 136 00:11:38.780 --> 00:11:44.020 And it's very beneficial to the long-term health of your grass. 137 00:11:44.020 --> 00:11:46.940 That's about all I can say about it. 138 00:11:46.940 --> 00:11:50.620 you receive a direct cash payment for that. 139 00:11:50.620 --> 00:11:54.780 However, there's another equip program 140 00:11:54.780 --> 00:11:59.580 that is for the preservation of mountain plover habitat. 141 00:11:59.580 --> 00:12:02.220 The mountain plover is a little tweety bird 142 00:12:02.220 --> 00:12:05.460 that doesn't live in the mountains, it lives out on the plains, 143 00:12:05.460 --> 00:12:07.820 and it needs bare ground 144 00:12:07.820 --> 00:12:09.140 to nest. 145 00:12:09.140 --> 00:12:15.500 So under this other equip contract, you can receive direct incentive payments 146 00:12:15.500 --> 00:12:20.660 to graze that grass down to bare ground at the end of the season. 147 00:12:20.660 --> 00:12:22.300 So we've got one program 148 00:12:22.300 --> 00:12:24.980 that encourages you to leave 149 00:12:24.980 --> 00:12:27.520 four or five inches of standing forage. 150 00:12:27.520 --> 00:12:29.280 Another program 151 00:12:29.280 --> 00:12:34.400 that pays you to graze it down to the bare ground, about like this carpet. 152 00:12:34.400 --> 00:12:38.560 Are you with me? 153 00:12:38.560 --> 00:12:41.700 We can take real good care of the grass 154 00:12:41.700 --> 00:12:44.480 or we can take real good care of the mountain plover. 155 00:12:44.480 --> 00:12:49.800 both at odds with each other, but we'll pay it for both of them. 156 00:12:49.800 --> 00:12:54.720 Okay, the last example, now we're getting serious because we're talking about big dollars. 157 00:12:54.720 --> 00:12:57.880 There's dollars involved in these other two, of course, 158 00:12:57.880 --> 00:13:02.720 and this one's a little bit harder to understand and there's a lot of subtleties, 159 00:13:02.720 --> 00:13:09.000 but you remember spy versus spy. This is more spy versus spy versus spy. 160 00:13:09.000 --> 00:13:13.160 It's the Risk Management Agency versus the CRP 161 00:13:13.160 --> 00:13:17.320 versus the NRCS. 162 00:13:17.320 --> 00:13:21.960 This is happening a lot in our part of the world right now. It's very, very 163 00:13:21.960 --> 00:13:25.840 costly and just very quacky. 164 00:13:25.840 --> 00:13:29.000 It makes no sense whatsoever. 165 00:13:29.000 --> 00:13:33.080 The Conservation Reserve Program contract is a ten-year contract. 166 00:13:33.080 --> 00:13:38.040 It pays direct rents to take highly erodible farmland out of production and plant it 167 00:13:38.040 --> 00:13:42.360 back into native grass. 168 00:13:42.360 --> 00:13:46.600 A lot of those contracts are expiring and the farmer has the option to re-enroll for 169 00:13:46.600 --> 00:13:49.140 another ten years. 170 00:13:49.140 --> 00:13:52.900 And I want you to keep in mind the goal of CRP 171 00:13:52.900 --> 00:13:57.440 take the highly erodible ground out of production. 172 00:13:57.440 --> 00:14:01.560 So the farmer has to decide what to do with this ground. 173 00:14:01.560 --> 00:14:06.980 The same farmer has another 320 acres of native rangeland, never been plowed, 174 00:14:06.980 --> 00:14:08.620 never been farmed. 175 00:14:08.620 --> 00:14:18.820 The NRCS has a goal to get the rancher to leave that ground in grassland, not touch it, keep running cattle on it. 176 00:14:18.820 --> 00:14:24.500 So we've got the goals of the CRP and the NRCS in mind. 177 00:14:24.500 --> 00:14:30.100 Risk Management Agency is their purpose, that's the federally subsidized crop insurance. 178 00:14:30.100 --> 00:14:36.900 Their purpose is to help the economy of the farmer, not your economy, but the economy of the farmer. 179 00:14:36.900 --> 00:14:47.900 I want you to remember that with federally subsidized crop insurance, you can insure yourself a profit. 180 00:14:47.900 --> 00:14:53.900 Now, if you can tell me of another business that can insure a profit, I want you to talk to me afterwards. 181 00:14:53.900 --> 00:15:00.900 I want to look at the returns on it and the margins, and I may sell my place and go into that business. 182 00:15:00.900 --> 00:15:09.900 You can insure a profit. That's the honest truth. I can give you numbers. I could talk for hours about that and show you how it really works. 183 00:15:09.900 --> 00:15:20.900 So what does this farmer rancher do? Does he go into CRP, leave the grassland in production? Here's what he does. 184 00:15:20.900 --> 00:15:35.900 He re-enrolls the ground in CRP. He's going to get, in our area, over 10 years, $128,000 to leave that ground out of production for 10 years. 185 00:15:35.900 --> 00:15:45.900 Then he goes to his 320 acres of native rangeland that the NRCS would like him to leave that way. And guess what? He turns that into farm ground. 186 00:15:45.900 --> 00:16:00.100 Okay, then he goes to his private insurance company and purchases RMA subsidized insurance and guarantees himself a profit. 187 00:16:00.100 --> 00:16:09.900 So the results are that there's no net decrease in plowed land, so that CRP goals are negated. 188 00:16:09.900 --> 00:16:17.400 In fact, more highly erodible ground, poor farm ground, than the CRP ground, goes into farm production. 189 00:16:17.400 --> 00:16:18.400 Okay? 190 00:16:18.400 --> 00:16:23.800 There's no net crease in wildlife habitat, and that has become one of the big goals of CRP. 191 00:16:23.800 --> 00:16:28.200 It's evolved from taking highly erodible ground out of production, 192 00:16:28.200 --> 00:16:35.300 and putting even more productive ground, taking it out of production, to create wildlife habitat. 193 00:16:35.300 --> 00:16:39.600 And that's a whole other area. It's just whacked out. 194 00:16:39.600 --> 00:16:53.320 The ground with lower productivity is farmed, and the best case scenario for that poorer ground to the farmer would be a crop failure, because then you just go collect your insurance payment. 195 00:16:53.320 --> 00:16:59.600 You don't have to pay the cost of harvest, which lowers your margin. 196 00:16:59.600 --> 00:17:02.000 You're still going to make a profit, but it lowers the margin. 197 00:17:02.000 --> 00:17:07.880 So the best case is a hundred percent crop failure, collect your insurance check. 198 00:17:07.880 --> 00:17:37.880 Okay, questions, or wait, I'm sorry Tyler, just a small sampling of the incoherence here and as you could see he could go on and on and on so what's what conclusion do we draw from our economic analysis of this the only policy is rent seeking right because all these stated policies whether it's you know the policy goals the environmentalist or the policy goal of food security what all these other things and we only listed a few of the pertinent ones 199 00:17:37.880 --> 00:17:42.280 They're all negated by another government program that's working in an opposite direction. 200 00:17:42.280 --> 00:17:44.960 So this is just strictly about the money. 201 00:17:44.960 --> 00:17:46.660 It's all about the money, right? 202 00:17:46.660 --> 00:17:51.360 As one of my good friends in college said, politics is the world's second oldest profession. 203 00:17:51.360 --> 00:17:57.840 This is politics at its finest, doing what they do best, and of course closely related 204 00:17:57.840 --> 00:18:00.880 to the world's oldest profession. 205 00:18:00.880 --> 00:18:02.840 So this is what it is. 206 00:18:02.840 --> 00:18:05.160 Push your button for your government handout. 207 00:18:05.160 --> 00:18:06.160 That's all we have. 208 00:18:06.160 --> 00:18:07.560 So hopefully we'll have some questions at the end. 209 00:18:07.560 --> 00:18:08.060 Thank you very much.