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December 2010 Archive for Economic Sense

RSS By: Matt Bogard, AgWeb.com

Matt's primary interest is in the biotech industry and ag policy.

Agriculture and Economics: A year in review

Dec 21, 2010

Matt Bogard


This radio broadcast from AgriTalk with NCBA president Steve Foglesong pretty well sums up many of the major issues in agriculture and economic policy for 2010.  As he says, GIPSA is another example of excessive government overreach, among other things including the takeover of the financial industry, the auto industry, as well as proposed regulations on dust and greenhouse gases, not to mention proposed tax increases on thousands of family farms and ranches.


The year started out with a great movie, Avatar, which taught us about what is and isn’t capitalism, as well as the relationship between property rights and environmental  sustainability.  


This was a great year for agvocating as well. Pilot Travel and Yellow Tail can attest to the risks of supporting groups with anti-agricultural agendas in the age of social media.


Much of the airtime this year was spent covering the BP oil spill, which demonstrated the risks and disincentives associated with government regulation.  Also from this came the notoriously un-American ‘government’s got its boot on our throat’ comment.


This year several companies removed high fructose corn syrup from their food ingredients perpetuating what amounts to an "ose"gate   (a term coined by my Uncle Sonny) conspiracy against family corn farmers. 


We also saw financial reform, and although it didn’t address the root causes of the financial crisis, it did provide more handouts to Wall Street in addition to having a negative impact on agriculture.


Things may be looking up though, Ron Paul (see New York Times) has recently been named as the chairman of the house domestic monetary policy subcommittee. Given Paul is one of the few elected officials that understands the causes of the crisis and how to prevent them, we could finally get some serious discussion of meaningful financial reform. We’ve also seen a turnaround on tax policy. Earier this year we had the following comments from treasury secretary Timothy Geithner regarding extension of the tax cuts:


"That broad philosophy helped produce the worst financial crisis and the worst recession we’d seen in generations."


After looking at the evidence, our leaders have reversed this position and opted for at least a temporary extension of tax cuts for thousands for family farms and businesses.


 Happy New Year and Merry Christmas.

Trickle Down Economics

Dec 12, 2010

By Matt Bogard

Many people are very upset that after looking at the evidence, (which I have discussed here before) our nation's leaders have embraced the idea of extending marginal tax cuts for the wealthiest Americans.

"I don’t believe in trickle-down economics... I don’t believe it will promote growth, and I need to know the consequences to the deficit and the debt." -Sen. Barbara Mikulski (D-Md.)( Still Work to Do on Tax Deal (Politico)Tuesday, December 7, 2010)

The term 'trickle-down' economics, also referred to 'voodoo' economics bewilders me. It's kind of like the terms 'factory farm' or 'industrial agriculture.' These terms are all used like profanity, to be disparaging, and are tools for cutting off debate without having to really talk about facts or evidence.

The idea of trickle down economics as implied by the people using the term goes like this:

Socitey is stratified into a small block of very wealthy and priviledged people and then there is everyone else with the poorest at the bottom.  If we cut taxes for the rich, their spending and investing will eventually 'trickle down' to benefit even the poorest like voodoo. How silly is it that cutting taxes by a few thousand dollars for a billionaire will make the poor smuck flipping burgers better off. This is voodoo economics designed for and by the wealthiest of Americans.

This is very much an oversimplification of very complex processes and interactions and the coordinaton of decisions made by millions of people based on knowledge spread across the entire economy. This is a spontaneous order, and nothing about it is 'trickle down.'  It is not 'voodoo', but a complex process that government, nor a committee of bureaucrats or experts, or pollsters can even begin to grasp fully. We can look at the evidence on tax cuts (as I linked to above) and see that, yes, cutting marginal taxes for the wealthiest Americans has led to increased revenues and reductions in the deficit.

If we were to dismiss every complex process as 'voodoo' or 'trickle down' how logical would that be?  How silly is it that a plant can take in tiny invisible CO2 molecules and turn them into carbohydrates (and food crops like corn, soybeans, wheat etc?) Would we say: photosynthesis is voodoo, and anyone that believes that is practicing 'trickle down' agriculture?

Those using the term 'trickle down' to describe economic policies, like tax cuts, either aren't being intellectually honest or simply don't understand the underlying processes and don't care to debate the evidence.



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