John Stossel

I often bash government. I say it can't do anything better than people in a free market.

But the government is unequalled in producing one thing: negative unintended consequences. Show me a government activity, and I will show you bad results that even the program's advocates probably don't like. Here's one example.

Congressmen say our government should "support and strengthen family-based agriculture."

Abstractly, supporting family-based agriculture sounds good. Government policies often harm small farms by favoring corporate agribusinesses. Government could help family farms by ending the subsidies that mostly go to the big guys. But that doesn't interest the politicians. They prefer to do things like creating tax breaks to encourage livestock breeding.

The tax breaks have led to a boom in alpaca breeding. Twenty-five years ago, there were 150 alpacas in America. Now, there are 150,000.

One website even advertises: "Have Uncle Sam Help You Buy Your Alpacas."

Rose Mogerman raises alpacas in New Jersey, the most densely populated state. "I fell in love with them," she said.

But she fell in love with the tax break first.

"Yes. I have to be honest," she said. "I might have had two. I wouldn't have had 100. ... I was looking for a tax shelter."

The Alpaca Breeders Association asked its members, on a scale of 1 to 10, what motivated them to get into alpaca breeding. More than half rated "tax benefits" a 10.

Yes, alpacas are cute. They are also valued for the fiber made from their fleece. But selling the fleece doesn't explain the growth in alpaca raising. At auctions, prices have gotten absurdly high. Half-ownership of one male alpaca sold for $750,000.

This is not necessarily a good thing. Economists at the University of California, Davis warn that the industry is in a speculative bubble. "Alpacas sold today as breeding stock have values wildly in excess of even the most optimistic scenarios based upon current fiber prices and production costs," Tina L. Saitone and Richard J. Sexton write.

"(C)urrent prices are not supportable by economic fundamentals and, thus, are not sustainable," the UC Davis economists write. Their paper was originally published in the Review of Agricultural Economics in 2007 with the great title "Alpaca Lies? Speculative Bubbles in Agriculture."

In other words, people have overinvested, bid up input prices and produced too many animals given expected future demand for their fleece. As a result, I bet lots of people will lose money. Tax policy is surely a big reason for the overinvestment, and an unintended consequence will be bankruptcy for some alpaca breeders.


John Stossel

John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "No They Can't: Why Government Fails, but Individuals Succeed." To find out more about John Stossel, visit his site at >johnstossel.com. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com. ©Creators Syndicate