Open letter to our federal legislators – please try to balance costs and benefits during this pandemic!

An open letter to our federal representatives  (I emailed this to my three federal representatives:
As you consider how much the federal government should spend in response to the current pandemic, please consider the following:
One trillion dollars equals about $3,000 per person for every man, woman, and child in the U.S., or about $12,000 per family of four!  Please be careful not to spend our tax money on anything that is not needed and not directly caused by the pandemic.  Specifically, there should be no money spent on the following:

  • Seniors and others on Medicare, disability, pensions, and other fixed incomes – they will continue to be paid.
  • People who have had no reported W-2 earnings during the past year – since they have been getting by on unearned income
  • People who have household earnings around or over $75,000 per year – they qualify for unemployment benefits.

Don’t give grants, but make low-interest rate loans available.  We can decide later whether or not to forgive any loans.  Don’t allow unrelated “riders” on any pandemic response bill.  For example, don’t’ forgive student loans, don’t add any permanent employer mandates such as child care, sick pay, paid family leave, etc.  Watch out for and deny other special-interest legislation trying to take advantage of this crisis.

Please try to balance costs versus benefits.  We have lived normally with the flu killing tens of thousands of U.S. citizens every year.  I am a senior – age 66 – and I don’t need any bailout.

Farmers are doing okay.

The front page headline of the Des Moines Register on October 210, 2017 read: “Hoping To Break Even”  The sub-heading read, “Iowa farmers are facing their fourth year of possible losses as they head into this year’s harvest season”.  (See link below.)

The story mostly about the worries of some farmers.  It painted a picture of farmers on the brink of bankruptcy for reasons that were out of their control.The Register reported, “For a good number of farmers, it will be a fourth year of losses.”

I  don’t doubt that a “good number” of farmers will lose money, but it may be due to their own fault rather than factors that are out of their control… just like businesses in many other industries.  There was one telling fact that contradicted the mostly emotional report: “Since 2013 Iowa farm income has dropped from $5.72 billion to $2.6 billion in 2016…”  That fact  makes it pretty clear that a lot of farmers are still making a substantial profit, and are not losing money.

Farmers are working very hard to make sure that they don’t lose their federal subsidies, even though they have more wealth and higher incomes than most U.S. citizens.  When the current Farm Bill expires in 2018, we need to sharply reduce farm welfare subsidies.

Link to Register article: https://www.desmoinesregister.com/story/money/agriculture/2017/10/20/iowa-farmers-face-fourth-year-possible-losses-heading-into-harvest/775626001/

 

Crop insurance is essential, but no taxpayer subsidy is needed.

Craig Hill’s editorial explaining the importance of crop insurance to farmers made a lot of sense. (“This much is certain – For farmers, crop insurance is essential” 10/5/2016)   Most business and individuals buy insurance to reduce risk, and, as Mr. Hill explained, farmers have plenty of risk.  What he did not explain is why taxpayers need to subsidize about 60% of the premium.  Contrary to his opinion, it definitely is a handout.  Farmers, on average, have much more wealth than the average person.  It doesn’t matter that much of the wealth is tied up in land values.  Land can be sold for cash just like any other asset.  Crop insurance is a good idea, it just should not be subsidized by taxpayers.  In the next farm bill, a couple of years from now, we need to eliminate the taxpayer subsidy for crop insurance.

Link to Register article: http://www.desmoinesregister.com/story/opinion/columnists/iowa-view/2016/10/04/much-certain-farmers-crop-insurance-essential/91551614/

The new welfare dependent class – businesses

If seems as if all businesses now require some type of welfare program.  The definition of economic development is grants or loans or special tax breaks given by our government to businesses.  Banks get their welfare indirectly – from loan guarantees from many government programs.  Of course our farmers must be protected from losses by government – through crop insurance subsidies that not only cover natural disasters, but actually protect against price declines.  All types of energy companies receive special tax credits or tax breaks.  The biggest manufacturers in Iowa receive large tax credits for research.  Now, Mediacom and John Deere want a grant of $800,000 from the federal government to help bring high speed internet to farmers who buy high-tech, internet connected tractors that cost hundreds of thousands of dollars.  We should say no!  We need to reverse the trend of expecting taxpayers to fund all types of economic development.  Just as with with individuals and families, welfare for businesses create dependency.  Our economy will continue to grow sluggishly as long as we look to government to manage our economic development.

Government protects special interests – casinos and greyhound breeders.

Only government could create a situation like we have with the casinos and the dog racing industry.  Casinos want to pay the dog racing people $92 million so that they won’t be required to continue to subsidize dog racing.
In any kind of free market situation, the casinos would either shut down the dog tracks or sell them to a private investors, if any could be found.  In a free market, casinos would have competition.  But, in Iowa, the casinos are protected from competition by government.  Recently the Racing and Gaming Commission ruled against a couple of proposed new casinos because they would “cannibalize” other casinos.  So, casino profits are protected and dog owners get bailed out.  This is cronyism at its best.
The only good thing about this whole situation is that taxpayers are not on the hook.

Stop subsidy for both dog and horse racing.

Iowa originally got into gambling by legalizing betting on horse racing and dog racing.  Legalization of gambling was sold to the public, in part, as an economic development idea.  Horse breeding and training jobs would be created.  Voluntary gambling would not only pay for the racing purses (and get the money to the animal owners and trainers to create the jobs), but would also provide money to governments and charities.  Of course, as it has evolved, there is not enough money being gambled on either horse or dog races to pay for the purses, much less any money for government or charities. Profits from traditional casino gambling are covering the tremendous losses from animal racing.

There is a proposal in the Iowa Legislature to end dog racing by paying $70 million dollars to the private dog racing industry.  There is no current proposal to end horse racing.  Both need to be ended, and there should be no payment to either the horse or dog racing industries. If the racing were eliminated, it should not be allowed to result in windfall profits for private, for-profit owners of casinos that are funding the current losses.  If the owners of the of race tracks are willing to pay $70 million to the dog owners in return for ending dog racing, then they should be willing to pay that same $70 million to either government to charities.

Don’t fear end of Freddie and Fannie.

President Obama and both houses of Congress are calling for an end to Fannie Mae and Freddie Mac, the two government owned entities that guarantee most of the home mortgages in the U.S.  Real estate agents, home builders, mortgage brokers, wall street bankers, and others who have a vested interest in keeping our government in the mortgage guarantee business are scared to death.  They have all become so addicted to government guarantees that they can’t imagine a world without them.

When Fannie and Freddie are closed down, and private lenders are left to decide what risks they will or will not take, It is likely that 30 year fixed interest rate mortgages will become more difficult to obtain.  It is also likely that when lenders risk their own money, they will want things like significant down payments, accurate appraisals, and borrowers who have a proven ability to make the monthly payments. ( Back in the olden days, before government guarantees, mortgage bankers used to do something called “underwriting” before deciding whether or not to make a loan – you can look it up on Wikipedia.)

Still, there are businesses such as life insurance companies, annuity companies, pension plans and others that need to invest large sums for long periods of time in secure investments like home mortgages.  So, there is no reason to believe that mortgages will not be available in a private market.

It may be that mortgages in the future will have fixed interest rates for only 10 to 15 years, and will need to be refinanced at the end of that time.  But, the monthly payments can still be based on a 30 year payoff schedule.  This has been the situation in parts of Europe for many decades.  There is a risk to the home owner that interest rates will be significantly higher at the time of refinance, but the principal balance will be paid down significantly, so the risk of having to make significantly higher monthly payments fairly low, and the ability to get a refinance should be fairly easy.

So, don’t believe those who have a vested interest government guaranteed mortgages when they tell you that housing markets will fall apart if Fannie and Freddie cease to exist.  Fannie and Freddie still allow all of the players in the home mortgage marketplace to shift much, if not all, of their risk to taxpayers.   If Fannie and Freddie had never existed, it is likely that we never would have had the housing crisis and the great recession that followed.  When people are required to pay for their own mistakes, people make fewer mistakes.  We need to get our government out of the mortgage guarantee business.

Farm Bill changes needed.

The Farm Bill should not pass until the following changes are made:

Separate the food stamp program (the SNAP program) from the rest of the farm bill.  The huge size of the food stamp program dwarfs the farm subsidies and, in effect, hides them.  Farm subsidies need to be exposed to a more open process.  It would also help make the food stamp program more transparent.

Stop subsidizing crop insurance.  Make farmers pay 100% of the cost.  If that raises the price of food, so be it.  If it reduces farmers’ incomes, so be it.  Subsidizing crop insurance is not a proper role for our government.  Today’s federally subsidized crop insurance not only covers losses due to unforeseen disasters, it also covers drops in revenues!   If farmers had to pay the full price for their coverage, they might prefer higher deductibles and lower levels of coverage.  But to add insult to injury,many farmer who receive subsidies are also very wealthy.  There is no good reason why wealthy farmers should be subsidized, even for crop insurance.  If our goal is to help poor farmers, then surely the subsidy should be phased out as a farmer’s wealth and income increase.

Establish a maximum amount of subsidy that can be received by any individual or commonly owned group of farms under all farm subsidy programs combined.  Again, we shouldn’t be subsidizing big farmers or farm organizations.

Don’t place tariffs on imports unless the country of origin first places tariffs on our exports to that country.  Free trade is beneficial to all.  It is voluntary!  It requires no intervention by government other than to resolve disputes.  Free people should not be forced exchange or be prevented from voluntarily exchanging with another party.  Amazingly, under the current Farm Bill, we pay Brazilian cotton farmers almost $150 million per year as compensation for the damage done to them by the subsidies we provide to our U.S. cotton farmers!  Is that not insane trade policy?

Separate the “rural development” programs from farm subsidies.  Again, the tens to hundreds of millions of dollars spent in this area are hidden within the much larger primary subsidy programs.  It is questionable whether or not rural economic development is even a proper  role of government.  In any event, consideration of spending for rural economic development should not be mixed with farm subsidies.

Tie environmental practices to any subsidies granted.  We shouldn’t expect perfectly clean water in our lakes and rivers.  Wild animals have defecated in them forever.  But, it reasonable to expect farmers to not fowl the water down stream from them, and to pay for damages when they can be reasonably determined.  The idea of requiring minimum buffer strips between farms and rivers and lakes is reasonable.

Still no reason to subsidize crop insurance

The opinion piece by Doug Stark on 3/24/2013 in The Des Moines Sunday Register gave several great reasons why crop insurance is important and beneficial to both farmers and our economy. (See: “Another View: Crop insurance stabilizes jobs and economy” link below.)  However, he did not give a single reason why taxpayers should subsidize the premiums.  Purchasing insurance to cover various types of risks is usually a smart business decision.  Most businesses and individuals by various types of insurance to cover a variety of risks of loss.  But most businesses and individuals are expected to pay the full cost of whatever coverage they need – unless they are poor.  Most farmers are not poor.  Most farmers should not receive any subsidy.  Maybe only poor farmers should be given a welfare voucher that would provide a partial subsidy up to a specific dollar amount premium.

 

Link to Register article: http://www.desmoinesregister.com/comments/article/20130324/OPINION01/303240035/Another-View-Crop-insurance-stabilizes-jobs-economy

Stop crop insurance boondoggle!

Thanks to the Des Moines Register for the article, “Crop insurance payment soar” on 3/14/2013.  It is not right that we taxpayers are required to subsidize crop insurance premiums for farmers.   I can accept our government administering a crop insurance insurance program if there is no viable private market.  But I cannot understand why taxpayers should subsidize the crop insurance program.  Farmers make higher than average incomes.     Many farmers and farm owners are very wealthy.  Both large corporate farms and wealthy absentee owner investors get Insurance premium subsidies.  Fees and commissions paid to crop insurance companies and sales representatives appear to be very generous.   We need to stop the farm welfare.  Charging the full cost of the insurance to farmers will cause farmers to help keep cost down and prevent abuse.