An audience member asked a panel of seven farmers what they thought about government farm subsidies. The response was unanimous: first laughter, then this: “Subsidies only subsidize those who don’t pay taxes.”

This article at Roma locuta est explains the economics of it. Essentially, as farmers bid prices down, they hit a point where they break even and can no longer drop the price. The government offers a subsidy, and one farmer lowers his prices beyond the breaking even point to accept the subsidy. All farmers are then forced to follow suit. Because the government “cannot simply create money out of nowhere,” these subsidies are paid for through federal income taxes. “Thus, if you are someone who pays federal income tax, then you essentially break even in this deal.  The only people that actually benefit in the end are those who don’t pay any federal income tax.”

Basically, the point is this:

Subsidies are often not all they are cracked up to be, and the best way to handle market forces is to simply let the market work.  The free market will work on its own to drop the price of commodities, but it will do so through innovation rather than compulsory subsidies.  Attempts at interference rarely make a difference - at best they offer a compelling illusion.  (Unfortunately, it is often compelling enough to win votes.)

Unfortunately, the farmer who prefers to make a living without government assistance is left with a choice: be a “taker” or go out of business.

Articles by Katherine Infantine


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