Cato Trade Expert Sallie James: Agricultural Subsidies & Pork Barrel Funds Need to Stop

Sallie James – Policy Analyst for The Cato Institute’s Center for Trade Policy StudiesNeal Asbury opened the show by recounting that the nation’s unemployment rate is above ten percent, with some 15 million Americans looking for work, and millions more that just stopped looking or are underemployed or just working part-time.  Taking this into account he estimated that the total unemployment rate is actually closer to 20 percent. With such staggering numbers, Asbury suggested that it’s hard for most of us to grasp the human dimension to this atmosphere of despair, quoting some disturbing numbers that more than 1million men between the ages of 35-54 have been out of work for at least one year, and that nearly 1 million African Americans have been out of work for at least one year.

As Asbury has noted many times, jobs need to come from the private sector.  That’s where they have historically started, and that’s what ended previous recessions.   But that’s not happening.  Business owners are overburdened with taxes, regulations, health insurance and a sense of uncertainty that has kept employers on the sidelines. Even employers with money aren’t hiring until they have a sense of security.

Asbury proposed that things won’t change until the status quo on Capitol Hill does.   He urged listeners to elect officials in November that represent their needs and demonstrate fiscal responsibility.  He also asked listeners “not to let these nameless unemployed workers stay off for another year.   Help them find jobs by sending a message to employers that it’s OK to hire again.”

Joining the show for a return visit was Sallie James, a policy analyst with the Cato Institute’s Center for Trade Policy Studies, who writes and speaks on a variety of trade topics, with a research emphasis on the subject of agricultural trade policy. Before joining Cato in 2006, James was an executive officer in the Office of Trade Negotiations in the Australian Government’s Department of Foreign Affairs and Trade, working on industrials market access negotiations.

She thinks it is scandalous that $20 billion from the Farm Bill goes to subsidies and pork barrel projects. She would like to see that figure go to zero, although she doubts that will happen when the Farm Bill is renewed in 2012.  The current Bill was approved in 2008 by a bi-partisan vote from lawmakers that did not want to incur the wrath of large agricultural companies and citizens on food stamps, which is funded as part of the subsidy money.  She predicts that the 2012 Farm Bill will again receive bi-partisan support for the same reason.

She gives high marks to George Bush II for trying to reform the subsidy bill by vetoing parts of the bill.  His veto was overturned.

James notes that producers of five agricultural products dominate the subsidy allocations: cotton, beans, rice, corn and wheat.

James wants to see some fiscal responsibility that ends the large amount of money that goes to special agricultural interests, including some millionaires that have no real commitment to farming.  At one time, farm subsidies had a real need when they were established in 1933 by FDR to keep millions of small family farms from going bankrupt.  It was designed as a temporary measure, but today it has been perverted to reward large agricultural entities, not family farmers

She points to Japan and South Korea as countries that use subsidies to prevent farms from failing by controlling prices so that framers receive the revenue they need to stay in business.

The US approach of rewarding farmers to grow products even if they are not being exported or used domestically “has a chilling effect on prices in the world market,” says James.  In many cases, American farmers sell products 20-40 percent below production costs. This creates hardships for small farmers in developing countries which can’t get the prices they need for their products to be successful.

Looking at the world agricultural markets James maintains that the biggest threat remains in countries that have chosen isolation, essentially cutting off the flow of food supplies consumers need to survive.  North Korea is a case in point.

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