I just witnessed one of the most disturbing interviews I have ever seen on cable news. Neil Cavuto was interviewing Newt Gingrich on Fox News about Pres. Trump’s trade war and, like any other politician, Newt was talking gibberish — but then he said something really stupid.
Gingrich said he was going to call Trump and recommend that the government take half the tariffs it receives on Chinese products and give the proceeds to the corn and soybean farmers. What Gingrich failed to mention was that businesses that have to pay the tariffs don’t give raises to their employees.
I do not want my hard-earned money passed on to the American farm cartel. I can afford it, but the little guy can’t.
Trump must have listened to Gingrich’s message because he has initiated a $12 billion payment to the American farm cartel. Not only am I confused about this corporate welfare handout to large farmers, but Peter Navarro, Trump’s trade advisor, said that the $12 billion handout is just a “rounding error.” According to a 2013 Department of Agriculture report, 5.6 percent of American farms control 53.7 percent of cropland. Now that’s a pretty hefty cartel.
Farm subsidies began during the Great Depression as a stopgap measure to help American farmers who were put out of work due to the financial crash. As mentioned, it was supposed to be a temporary measure to help out farmers but has instead become the fourth rail of politics.
Why? Because farmers vote.
Yes, farmers are hurt by China’s imposed tariffs on American crops, but the middle class is also being harmed. Tariffs are taxes and the middle-class will be paying the brunt of them. Adding the new $12 billion to the existing $21.5 billion that the government hands out to farmers means that all Americans are paying the piper.
Let’s chat about why we should eliminate farm subsidies.
According to an article titled “Ten Reasons to Cut Farm Subsidies” on examiner.com in June 2007, “In 2005, the average income of farm households was $79,965, or 26 percent higher than the $63,344 average for all U.S. households. In recent years, 10 percent of farm businesses have received 72 percent of farm subsidies. Farm programs cause overproduction, the overuse of marginal farmland, land price inflation and excess borrowing by farm businesses.”
Trump’s tariffs on steel and aluminum are not only raising prices, they have created a bureaucracy beyond belief. Let’s call it a “double whammy.” If Trump goes through with his threat of a 25 percent tariff on imported cars, not only will the consumers cost of an imported car go up by 25 percent or more, it will also increase the foreign car manufacturers’ cost of complying with the new rule.
According to the Wall Street Journal article on Aug. 6, “Trump’s Political Tariff Bureaucracy,” when tariffs are high, it creates a political incentive for exemptions and favoritism. Trump has created a bureaucratic mess. I cannot find fault with Trump’s war on tariffs, but I am highly critical of the way his Commerce Department is administering the exemption process. It is costing U.S. industry tens of millions of dollars in compliance costs when seeking an exemption to the tariffs.
The Wall Street Journal article details the trials and tribulations that American industry has to go through to get an exemption from Trump’s tariffs: “Once exemption requests are filled, they are subject to a 30-day comment period so U.S. steel and aluminum suppliers can object. Commerce had to provide a crash course for four dozen or so workers tasked with reviewing the more than 21,000 requests. Many have no experience in metals, so they rely on the not-unbiased counsel of domestic suppliers.”
We should not be surprised with the swamp we have created that provides new opportunities for crony capitalism and corruption. Yes, tariffs feed the swamp.
Robert Pembroke is the former chairman and CEO of Pembroke’s Inc. in Salt Lake City.