I know that pointing out the economic illiteracy of politicians is akin to shooting fish in a barrel, but I have an irrationally optimistic hope that shining a light on such illiteracy will help reduce it. Today’s economic illiterate is U.S. Secretary of Agriculture Tom Vilsack, who in an interview with Ezra Klein revealed that he does not understand the economic consequences of farm subsidies:
EK: You keep saying that rural Americans are good and decent people, that they work hard and participate in their communities. But no one is questioning that. The issue is that people who live in cities are also good people. People who live in exurbs work hard and mow their lawns. So what does the character of rural America have to do with subsidies for rural America?
TV: It is an argument. There is a value system that’s important to support. If there’s not economic opportunity, we can’t utilize the resources of rural America. I think it’s a complicated discussion and it does start with the fact that these are good, hardworking people who feel underappreciated. When you spend 6 or 7 percent of your paycheck for groceries and people in other countries spend 20 percent, that’s partly because of these farmers.
EK: My understanding of why I pay 6 or 7 percent of my paycheck for food and people in other countries pay more is that I’m richer than people in other countries, my paycheck is bigger. Further, my understanding is that a lot of these subsidies don’t make my food cheaper so much as they increase the amount of it that comes from America. If we didn’t have a tariff on Brazilian sugar cane, for instance, my food would be less expensive. If we didn’t subsidize our corn, we’d import it from somewhere else.
TV: Corn and ethanol subsidies are one small piece of this. I admit and acknowledge that over a period of time, those subsidies need to be phased out. But it doesn’t make sense for us to have a continued reliance on a supply of oil where whenever there is unrest in another part of the world, gasoline prices jump up. We need a renewable fuel industry that’s more than corn-based, of course, and there are a whole series of great opportunities here. But as soon as we reduced subsidizes for biodiesel, we lost 12,000 jobs there. So if you create a cliff, you’re going to create significant disruption and end, for a while, our ability to move beyond oil. And keep in mind that the Department of Agriculture has moved, for years, to reduce our spending. We cut $4 billion in crop insurance and put that to deficit reduction. So we are making proposals to get these things in line. But a lot of our money goes to conservation, and goes to some of those 600,000 farmers who are barely making it.
I think that last sentence tells us what we need to know about U.S. farm policy and its lead practitioner: it’s backward-looking and reactionary, not really about being forward-looking and increasing productivity. It’s about creating a top-down impression of increased productivity through pushing the government-elite-approved renewable energy options for income diversification, regardless of whether or not ethanol, wind power or solar power actually create real economic value.
I’d ask Secretary Vilsack what the opportunity cost is of this spending to preserve (as an extinct insect in amber) rural communities, but I’m confident that he would fail to understand the question.
We cannot afford this kind of economic illiteracy in our political elites.