A couple of days ago, I shared a segment from a TV interview about trade and warned that retaliatory tariffs were a painful consequence of Trump’s protectionism.
I also was asked in that interview about the negative effect on farmers. I speculated that farmers (and many other groups) were giving Trump the benefit of the doubt in hopes that this process might actually lead to trade liberalization – sort of like what Trump suggested at the G7 meeting.
While I was depressed and glum in that interview, it turns out that things are worse than I thought.
Instead of keeping their fingers crossed for trade liberalization, farmers may be nonplussed by protectionism because President Trump’s expansion of bad trade policy may also wind up being the pretext for an expansion of bad agricultural policy.
The Wall Street Journal opines on the upside-down logic of Washington.
When pork prices collapsed amid a global trade war during the Great Depression, the Roosevelt Administration in 1933 had an idea—slaughter six million piglets.
Put a floor under prices by destroying supply. It didn’t work. Now the Trump Administration may try its own version of Depressionomics by using the Commodity Credit Corporation (CCC) to support crop prices walloped by the Trump tariffs: Hurt farmers and then put them on the government dole.
Given the economic misery of the 1930s, it should be obvious that copying the awful policies of Hoover or Roosevelt is never a good idea.
But that’s not stopping the crowd in Washington.
In 2012 Congress put limits on CCC purchases of surplus commodities and on price supports after the Obama Administration used it for a costly 2009 disaster program without Congressional approval. But then out of the blue this year, Congress lifted the limits
on CCC’s power to remove surplus crops from the market to support prices. Republicans made that change because the Trump Administration wants to use the CCC to mitigate the damage to U.S. crop prices from the Trump trade war. In a June 25 USA Today op-ed, Agriculture Secretary Sonny Perdue wrote that the Administration is ready to “begin fulfilling our promise to support producers, who have become casualties of these disputes.” Too bad these U.S. casualties were caused by friendly fire.
And don’t be surprised if today’s handouts wind up becoming permanent entitlements.
The bigger danger is that the need for Mr. Perdue’s “help” is unlikely to be temporary. …With the higher tariff, Beijing will turn even more to Brazil and Argentina for soy and grains; Australia and Chile for fruit, nuts and wine; and Canada and the European Union for some or all. …The CCC is a relic of Dust Bowl America. Today the American farmer is high-tech, productive and eager to compete. Mr. Trump’s trade policy is creating a problem that didn’t exist and next he may create another one to ease the pain he has caused.
In other words, one bad government policy is being used the justify another bad government policy.
This is a classic example of Mitchell’s Law, otherwise known as the lather-rinse-repeat cycle of government failure.
We see it when government over-spending is used as an excuse for big tax increases.
We see it when government-run healthcare is used as an excuse to impose nanny-state policies.
We see it when government drug-war failures are used as an excuse to push for gun control.
And now we’re seeing it when bad trade policy is leading to more bad farm subsidies.
I realize this is pure fantasy, but wouldn’t it be nice to have the reverse approach? How about we simultaneously eliminate trade barriers and get rid of the Department of Agriculture?
Given the inherent corruption of Washington, I won’t hold my breath for that outcome. I’ll have more luck waiting for this fantasy to become reality.
International Liberty 
[…] Over and over and over and over again. […]
[…] Over and over and over and over again. […]
[…] for instance, will enact a policy that distorts the economy and causes damage (with regards to trade, bailouts, guns, health, whatever). And they’ll then point to the damage and assert that even […]
[…] the way, Trump’s protectionism is also part of the […]
[…] nation with a corrupt and distorting system of subsidies. Similar handouts exist in Canada and have become part of NAFTA negotiations, as reported by the Wall Street […]
[…] repeatedly has demonstrated that he has no idea how trade works. He actually thinks a trade deficit is somehow evidence of economic defeat. But that’s […]
Apropos subsidies, Trump really ought to rescind the absurd law that compels the oil companies to mix gasoline with ethanol. This is a sop to the: ‘green’ lunatics, and a subsidy for the farmers. Equally, ethanol is harmful to engines – and a disaster for classic cars.
Better to give any subsidy (in the form of a UBI) to those that work for the farm, and those who own the farm, rather than give subsidies to businesses for any reason.
Yes, that is where I would draw my line of support for the dissonant tactical practice of imposing tariffs while aiming at an overall freer trade.
Indeed, trade policy is rather easily reversible. Entrenched subsidies are virtually irreversible.
Part of the reason for this reversibility vs irreversibility is that half the people negatively affected by tariffs live overseas, so they don’t vote here, and many of the consumers affected do not see the full connection, so they don’t care. So reversal of tariffs is, relatively speaking, easier in a voter-lemming democracy. Not so with subsidies where all the rent seekers are actual voters, and again those negatively affected voters (mostly consumers) are too indirectly affected and dispersed to care.
Along the same theme, from a tactical perspective, the authoritarian governments we are imposing tariffs on don’t have voters to answer to, so they’re in for the long game, better able to exploit the electoral dynamics of our voter-lemming democracies. The same is true, but to a lesser extent, for our contention with Europe over tariffs, where European voter-lemmings have long ago capitulated to high taxes and regulation. For a European living under fifty percent marginal income tax and another thirty percent value added and excise taxes, another ten percent is just a “wafer thin mint” as Monty Python would say (beware if you Google it, the video is timelessly one of the most repulsive clips ever made).
PS. Another good name for Mitchell’s Law would be “The Mitchell Drain”. Once you get closer to it and start circling it …. you go down.
PPS. Eliminate all trade barriers and the Department of Agriculture? And what are we going to do with all the politicians we pay to manage these things? Which profession is it that ever campaigns for its self elimination? Voter-lemmings need to become familiar with public choice dynamics. And where are they going to learn that? In public schools? From Union teachers?