The GOP is supposed to be the party that “gets” economics. Republicans pride themselves on fiscal responsibility and censure Democrats for wasteful spending. But, when it comes to farming, many Republicans fail Econ 101.
Renowned economist Henry Hazlitt writes in Economics in One Lesson: “The most frequent [economic] fallacy by far today … is to concentrate on the short-run effects of policies on special groups and to ignore or belittle the long-run effects on the community as a whole.” He continues: “In the eyes of most congressmen the farmers simply cannot get enough credit.” But this ends up hurting the society as a whole because the government’s lenders have looser standards than private lenders (who either lend with their own money or are accountable to clients).
Whether a farmer is qualified to farm or not is irrelevant to a government lender. Because bad farmers and unnecessary crops have a nearly equal chance of getting funding as good farmers and marketable crops, taxpayers will not fully capitalize on their investment. Hazlitt explains: “…the recipients of government credit will get their farms and tractors at the expense of those who otherwise would have been the recipients of private credit. Because B has a farm, A will be deprived of a farm.”
Politicians can blame the weather for drought. But they cannot blame the weather for government mandates that led farmers to overplant corn this spring for ethanol production, which monopolizes 40 percent of America’s corn yield.
Miles of useless corn fields are boosting the price of corn (almost 23 percent). Restaurateurs, consumers and livestock farmers will suffer while the many of the farmers who planted the corn have subsidized insurance and, so, despite overplanting, will not feel pain.
As Hazlitt points out, politicians who pass farm subsidies tend to overlook the fact that by helping one group (such as corn farmers) they hurt other groups like hog and cattle ranchers. Today, many livestock producers are unable to afford feed and are desperately selling their animals.