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The Wrongologist

Geopolitics, Power and Political Economy

Start a Trade War. Now, Bail Out Your Adversely Effected Buddies

The Daily Escape:

Near Canon City, CO – 2018 photo by Debbie Chambers

Trump said on Tuesday that the administration would provide up to $12 billion in aid for US farmers to shield them from the economic repercussions of trade disputes with China and the European Union.

Those are the very trade disputes caused by the tariffs Trump imposed on our trading partners. It’s a bit like the arsonist showing up at the fire he started, just in time to help the firefighters put it out.

Reuters reports that the US has never before offered aid of this scale in a trade dispute. Large, short-term assistance programs are typically offered during times of recession or low prices for agriculture commodities. The government last offered farmers a comparable amount of emergency assistance in 1998 to address low hog, corn and soybean prices.

Here’s how Trump’s plan will work: An agency of the US Government, the Commodity Credit Corporation (CCC) will borrow the $12 billion from the capital markets. It has broad authority to do so. Then it will offer proceeds of the loan(s) to domestic agriculture producers. So instead of farmers profiting from the sale of agricultural goods to China, Trump will borrow money from China, and then pay interest to China, so that American farmers can survive this period of not selling their goods to China.

That makes sense.

A decade ago, Republicans protested strenuously against economic stimulus during the Great Recession. But, where is the tea party? They are largely supporting the $12 billion in subsidies to farmers caused by Trump’s plan using 1920’s thinking to develop a trade policy.

When we had our First Black President™, the GOP said the US couldn’t spend anything without paying for it by reducing expense elsewhere. But this time is different, because farmers are in a protected demographic of corporate welfare recipients. Chan Lowe gets it:

Trump did this to help soften the negative impact his tariffs will cause in the “breadbasket” states that are critical to the GOP’s chances of holding the House in the mid-terms.

Surely, the hard-core fiscal conservatives in Congress who believe that government hand-outs are a slippery slope to socialism, will rise up and say that they can’t support Trump’s plan.

Surely, they’ll say that the free market is the American way. If farmers can’t hold out on their own, well, that’s just Mr. Market at work. No?

We’ll soon see that most Republicans supporting this bail-out include the same people who were totally against Obama’s bail-out of the automobile industry.

Some political definitions: First, there’s “welfare”. That’s what black and brown people get. Then, there’s “a leg up”. That’s for white folks down on their luck. Finally, there are “price supports”. That’s “welfare” for the white owners of corporate farms. It’s money that is sent to them when the president screws up a market, and still needs their votes.

Understanding Trump-o-nomics is easy. Welfare is: for group #1, a privilege; for #2, a right; and for #3, a necessity.

This is a $12 billion partial solution to a self-inflicted political problem. The tariffs are hitting people who voted for Trump in the first place, and this bail-out is really about protecting him, not them.

After all, as CNN let us hear on the Trump/Cohen tape, Trump is clearly willing to pay someone off to get himself out of a mess that he caused.

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  • Terry McKenna says:

    I am not a believer in free markets, but if we want trade policy, we must make some sense of it. For us, if we wish to confront China, we would have to coordinate with Europe and even develop means to replace what China produces. So start be reopening rare earth mines and working to stimulate the production of the parts needed for cell phones (like the glass). Instead, the orange menace has isolated us from Europe – and has no idea how to create a new supply chain for computer and phone parts. We have a supply chain for auto parts – much of it in Mexico and Canada. But we are not ready to produce computer parts (or cameras either). But who would expect Trump to take careful small steps, when a big stupid idea is easier.

    July 26, 2018 at 9:09 am

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