Friday, February 11, 2011

More Corn Subsidies?

So wonders Stan Collender:
That's why this story in yesterday's New York Times about size of corn reserves caught my eye.  The story says that, because of increased use by ethanol producers, the demand for corn in the U.S. is so high that reserves are at their lowest level in 15 years and prices are going up significantly (Note: the ethanol folks deny this). This is expected to affect consumer prices both on products that include are corn itself -- chips, creamed, on the cob, salsa, etc. -- and those where corn is a major component like soft drinks and gasoline.
So my federal budget self is wondering how long it will take before someone, or perhaps lots of people, start calling for some type of new federal tax break to encourage additional production of corn and, therefore, whether current budget estimates will have to be revised to account for the higher deficit from the revenue loss (I know: I really need to get out more).
Never mind that the higher prices themselves should provide all the incentive growers need to increase production, shift their efforts from another crop with a lower yield to corn, encourage research into farming methods that allow more to be grown per acre, etc.  Let's put aside the fact that higher prices should reduce demand and, therefore, that the market should stabilize on its own.  The fact that there are substitutes for some uses of corn (I can get salsa without black beans, can substitute some other complex carb when I cook, and can use whole wheat instead of corn tortillas, for example) that will allow consumers to reduce the impact of the higher prices on their lives.  And let's forget about the existing tax subsidies for ethanol.
The economic theory may well be beside the point.  I hope I'm wrong, but it looks to me as if there's a potential broad coalition of producers and consumers that could come together to push for some type of new federal corn subsidy.  It's worth watching.
I find this doubtful.  I think politicians will seriously consider cutting the direct payments, and very possibly the ethanol subsidy, if prices remain this high or continue to climb.  I find it interesting that Washington insiders are paying close attention to farm subsidies right now, and weighing whether it makes sense to continue them when farmers are doing so well, and the federal budget is doing so poorly.  This will be the point where the rubber meets the road for rural, Tea Party Republican politicians.  In general, farmers are old and conservative, and in general, older conservative folks are more likely to vote than younger, less conservative folks. Just sayin'

No comments:

Post a Comment