John Phipps: USDA's "Helicopter Money" Doesn't Solve Underlying Issue

September 7, 2018 10:05 AM

In late August, the U.S. Department of Agriculture (USDA) released details of rumored payments to farmers to offset market losses from the various trade wars currently underway. The payment rates had been leaked a few days earlier, but the rumors did not include one small fact: the payments would indeed be based on actual 2018 production, but only half, 50%.

Maybe I’m the only famer who had already inserted a full $1.65 per soybean bushel on my budget spreadsheet, but the result of such pre-hatch chicken counting is a faint feeling of getting cheated somehow. It is illogical to feel the loss of something you never had, but that’s how our brain works.

In fact, money that falls out of the sky – unearned wealth – messes with our judgment and emotions. It is why inheritances are so remarkably difficult to distribute without hard feelings. Behavioral economics has demonstrated that unearned wealth is valued differently than earnings even though once we own them one dollar is worth the same as any other. Studies also show that helicopter money, as such government payouts are labeled – are almost never seen as fair by the people receiving them.

Look at the statements from various commodity groups and they could all be summed up as “not enough”. Part of this problem is the sense the U.S. government has trillions of dollars to hand out, so why not more to me? The other factor is we see our injury as worse than others, so our piece of the pie always looks too small.

Finally, if you try to create schemes to make payments seem more equitable, they become more complicated. As straightforward as this handout – and it is a handout – seems, there will undoubtedly be arguments over how to count our 2018 production. For example, my guess is there are suddenly a lot fewer 2017 bushels stored on farms than last week.

I have many problems with subsidies and have mentioned this on occasion. This payout is one more example of one reason: they increase dissatisfaction for the recipients, while failing to solve the underlying problem.

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Spell Check

Jordan, MN
9/7/2018 05:47 PM

  One could make a pretty good argument that long term (i.e. next year) the soybean carryover is worse due to the payment. Why would a farmer sell all his soybeans when he can store some for another year. The problem is that just makes the surplus that much greater and even harder for the market to bid up beans.

Dan B
9/8/2018 09:06 AM

  Interesting that the Magical Band-aid is happening at the same time as the Syngenta Class Action suit. That suit derives from Syngenta altering the corn market by releasing traits without full export acceptance. Wonder if Trump has an LLC or if we can sue him directly for destroying our markets? Time to wake up!

auburn, IN
9/9/2018 08:28 PM

  WOW, some very smart words from a very smart person, had trouble understanding any of it, John must be a politician , wonder what smart college he went to


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