AT&T and a few other companies (AK Steel Corporation, Caterpillar, Deere and Co., and Valero Energy) have recently said that the new health care law "would raise their expenses," and AT&T said they might have cut back on health benefits for workers.
http://www.nytimes.com/2010/03/27/technology/companies/27phone.html?ref=business
Here's the crux of the problem for the companies: Previously, the federal government would provide subsidies to cover 28% of what the companies paid on medicare prescriptions (for their retired workers) and the companies could deduct the total of their expenditures on these prescriptions from their taxable income -- including what they already got reimbursed for. Essentially, they got to double-dip in this regard.
The new health care law closes this loop hole and states that companies will still receive subsidies to cover 28% of what they spend on prescriptions, but they will be allowed to deduct only 72% of what they spend from their taxable income. In other words, they won't get the subsidy and get to deduct it from their taxable income.
Sorry, but I don't think the corporations are going to gain my sympathy on this one -- especially AT&T, which earned more than $120 billion in consolated revenue in 2009.
Saturday, March 27, 2010
Tuesday, March 23, 2010
Capitalists against free-marketeers: Restaurants vs. Free Enterprise Groups
I was reading the New York Times and came across this article that epitomizes the issue that I have tried to highlight in this blog: capitalists favoring government intervention even when free market adherents oppose it.
Check out this article: http://www.nytimes.com/2010/03/24/business/24menu.html
The article discusses a little noticed measure in the new health care bill that requires restaurant chains to provide calorie information on their menu boards, including drive-through menus.
Take a look. The 8th and 9th paragraphs (which begins "The measure was approved by Congress. . .") explain that the restaurant industry likes the new measure, while two paragraphs later we read that "some free enterprise groups" opposed the measure.
Check out this article: http://www.nytimes.com/2010/03/24/business/24menu.html
The article discusses a little noticed measure in the new health care bill that requires restaurant chains to provide calorie information on their menu boards, including drive-through menus.
Take a look. The 8th and 9th paragraphs (which begins "The measure was approved by Congress. . .") explain that the restaurant industry likes the new measure, while two paragraphs later we read that "some free enterprise groups" opposed the measure.
Monday, March 22, 2010
Health Care Reform: Clinton's failure, Obama's success
On the day after the passage of historic health care policy in the US House, let me try to wrap up this discussion of recent health care reform in the US.
So, why did Clinton’s health care reform fail in 1994? Throughout most of the 1990s – even in the fall of 1993 – public opinion polls showed that the majority of Americans favored some kind of significant government role in health care. Leading up to the 1992 presidential election, even Republican candidates expressed support of health care reform that included an increased government role (though a smaller role than envisioned by most Democrats).
And, as we have seen, a cross-class coalition that included workers, unions, and many businesses and trade organizations supported an expansion of government activity in health care. Again, large businesses who had long offered their employees health insurance saw their costs (i.e., premiums) rise alarmingly during the 1980s. They turned to the federal government to regulate health insurance, create cost controls, and spread the costs of providing health care.
Remember, the U.S. Chamber of Commerce supported government-mandated employer health benefits, as did many large corporations, including Bethlehem Steel, Lockheed, Chrysler, Xerox, and Westinghouse. Not only did these businesses want to control premiums, but many of them also wanted to correct what they saw as an unfair situation: most small businesses did not provide health insurance for employees; these employees were often married (or otherwise related) to someone who worked for a medium- or large-business that provided health insurance for that employee’s family. Many medium- and large-businesses saw this as a subsidy that reduced the labor costs of small businesses (and put some large businesses at a competitive disadvantage in the global market).
So we return to the question at hand: Why did the Clinton health care proposal fail? There were obviously many immediate political factors: intense partisan opposition, a strong effort by the insurance lobby, and a “combative and secretive strategy” by the Clinton administration, among others. Such factors, no doubt, contributed to problems.
But these answers overlook a key factor: the expansion of HMOs began to effectively rein in rising health care costs. The annual growth in private health insurance premiums (i.e., the cost to employers) fell from 17% in 1990 to 10% in 1992, 8% in 1993, and -1% in 1994. This sent a signal to many businesses that had favored – and even advocated for – health care reform that the insurance industry was reforming itself and controlling costs through managed care.
Consequently, these businesses backed off from their previous advocacy for reform. This loss of strong support was very significant and affected the political debate, resources behind the political battle, and ultimately affected public opinion because some of the voices in favor of an expanded government role (including an employer mandate to provide employees with health insurance) weakened or disappeared.
What does all of this mean for the passage of health care reform under Obama? Obviously, there were notable partisan battles, parliamentary strategies, resistance from the insurance lobby, questions about the administration’s strategy, and so forth. There are always these kinds of issues.
But beneath this level of partisan politics are more fundamental dynamics. I have not researched the recent battle over health care reform and therefore can’t point to the underlying coalitions. Nevertheless, they are there.
For example, here is one telling link between Clinton’s failed attempt and Obama’s success. HMOs controlled health costs from the 1994 thru 1997, when the cost of insurance premiums did not rise more than 2.5% in any year. A few years later, however, health care costs were rising rapidly once again. In 2000, the growth in health insurance premiums was at 10%. The ability of HMOs to contain costs began to falter. In that context, what groups had been hit hardest by rising premiums? Maybe some businesses once again had an interest in containing health care costs.
One thing is for sure: The Obama health care reform is not about socialism. But it is very likely about capitalism. And in capitalism – in a market economy – based as it is on competition and the drive for profit, some segments of capital will seek national policies that protect them from competition or even from the market, itself, in an effort to secure “adequate” profits (which is always relative, of course).
This can be seen in Clinton’s effort at health care reform, in the history of US agricultural policy, as well as in labor policy, social security, and many other policy arenas.
A full understanding of recent efforts at health care reform requires us to move beyond much of the current political debate.
So, why did Clinton’s health care reform fail in 1994? Throughout most of the 1990s – even in the fall of 1993 – public opinion polls showed that the majority of Americans favored some kind of significant government role in health care. Leading up to the 1992 presidential election, even Republican candidates expressed support of health care reform that included an increased government role (though a smaller role than envisioned by most Democrats).
And, as we have seen, a cross-class coalition that included workers, unions, and many businesses and trade organizations supported an expansion of government activity in health care. Again, large businesses who had long offered their employees health insurance saw their costs (i.e., premiums) rise alarmingly during the 1980s. They turned to the federal government to regulate health insurance, create cost controls, and spread the costs of providing health care.
Remember, the U.S. Chamber of Commerce supported government-mandated employer health benefits, as did many large corporations, including Bethlehem Steel, Lockheed, Chrysler, Xerox, and Westinghouse. Not only did these businesses want to control premiums, but many of them also wanted to correct what they saw as an unfair situation: most small businesses did not provide health insurance for employees; these employees were often married (or otherwise related) to someone who worked for a medium- or large-business that provided health insurance for that employee’s family. Many medium- and large-businesses saw this as a subsidy that reduced the labor costs of small businesses (and put some large businesses at a competitive disadvantage in the global market).
So we return to the question at hand: Why did the Clinton health care proposal fail? There were obviously many immediate political factors: intense partisan opposition, a strong effort by the insurance lobby, and a “combative and secretive strategy” by the Clinton administration, among others. Such factors, no doubt, contributed to problems.
But these answers overlook a key factor: the expansion of HMOs began to effectively rein in rising health care costs. The annual growth in private health insurance premiums (i.e., the cost to employers) fell from 17% in 1990 to 10% in 1992, 8% in 1993, and -1% in 1994. This sent a signal to many businesses that had favored – and even advocated for – health care reform that the insurance industry was reforming itself and controlling costs through managed care.
Consequently, these businesses backed off from their previous advocacy for reform. This loss of strong support was very significant and affected the political debate, resources behind the political battle, and ultimately affected public opinion because some of the voices in favor of an expanded government role (including an employer mandate to provide employees with health insurance) weakened or disappeared.
What does all of this mean for the passage of health care reform under Obama? Obviously, there were notable partisan battles, parliamentary strategies, resistance from the insurance lobby, questions about the administration’s strategy, and so forth. There are always these kinds of issues.
But beneath this level of partisan politics are more fundamental dynamics. I have not researched the recent battle over health care reform and therefore can’t point to the underlying coalitions. Nevertheless, they are there.
For example, here is one telling link between Clinton’s failed attempt and Obama’s success. HMOs controlled health costs from the 1994 thru 1997, when the cost of insurance premiums did not rise more than 2.5% in any year. A few years later, however, health care costs were rising rapidly once again. In 2000, the growth in health insurance premiums was at 10%. The ability of HMOs to contain costs began to falter. In that context, what groups had been hit hardest by rising premiums? Maybe some businesses once again had an interest in containing health care costs.
One thing is for sure: The Obama health care reform is not about socialism. But it is very likely about capitalism. And in capitalism – in a market economy – based as it is on competition and the drive for profit, some segments of capital will seek national policies that protect them from competition or even from the market, itself, in an effort to secure “adequate” profits (which is always relative, of course).
This can be seen in Clinton’s effort at health care reform, in the history of US agricultural policy, as well as in labor policy, social security, and many other policy arenas.
A full understanding of recent efforts at health care reform requires us to move beyond much of the current political debate.
Monday, March 1, 2010
Health Care Reform: Is it actually "socialism"?
Okay, I'm way behind in posting this. I actually had most of this written last November, but life took me on a detour. I have a little energy tonight (surprisingly, my three-year-old son didn't sap all of it), so I'm posting.
With the U.S. Congress (and public) still embroiled over the health care bill, it’s time that I finally get around to posting about this perspective on national policies accused of being socialist.
Here’s the tie-in with agricultural policy, as I see it: Supply management policy – with its regulation of production and prices – was not about socialism. Instead, that policy was the outcome of competing political-economic interests trying to ensure profitable production.
In particular, southern planters growing cotton were hardly socialists. They were simply large landowners trying to cope with a chronic problem of overproduction and low prices. They saw supply management policy as protection against vagaries of the market economy. They were “Capitalists Against Markets.” (That is the title of Peter Swenson’s book comparing national policy formation in the US and Sweden.)
This same kind of analysis is useful in exploring health care reform. Take, for example, Clinton’s attempted health care reform in 1993-94. Two health care issues became central in the early 1990s: universal coverage and cost containment. (Sound familiar?) Health care costs were rising, and tens of millions of people were uninsured. But, these conditions had existed to a greater or lesser extent for decades. Something else put health care reform at the forefront of US politics in the early 1990s.
An important coalition emerged to support an increased government role in health care: a cross-class coalition between workers and industry. Labor unions and many large businesses (such as Bethlehem Steel, Lockheed, Chrysler, Xerox, and Westinghouse) formed the National Leadership Coalition for Health Care Reform (NLCHCR), which was a leading advocate for health care reform at the time. This organization advocated for government-mandated employer-provided health insurance. (That’s right: many businesses were in favor of some kind of national health care system.)
In addition, more than half of CEO’s for Fortune 500 companies favored a government mandate for all employers to provide health benefits. And, the U.S. Chamber of Commerce supported government-mandated employer health benefits.
Why did some business advocate expanded government action in health care?
First, rising health costs fell heavily on business, especially large employers. In 1988, for example, Chrysler famously spent more on health care than on steel: $600 million per year on health care; $600 per car.
Second, there were an increasing number of strikes and labor conflicts over health care.
Third, international competition likewise encouraged some US companies to favor an expanded role for the government in health care, because other nations – Germany, Japan, France, etc. – provide health care for all workers.
In the early 1990s, then, health care reform was not really about socialists pushing for government control of the market economy. Instead, there were large companies whose economic interest in controlling health care costs – especially insurance premiums – prompted them to favor a greater role for government in health care.
Why, then, did Clinton’s health care reform proposal fail? See my next post, which I hope will not take another three or four months...
By the way, much of the information for this post came from an article written by Peter Swenson and Scott Greer, "Foul Weather Friends: Big Business and Health Care Reform in the 1990s in Historical Perspective," in Journal of Health Politics, Policy and Law, Vol. 27, No. 4, August 2002, pages 605-638.
With the U.S. Congress (and public) still embroiled over the health care bill, it’s time that I finally get around to posting about this perspective on national policies accused of being socialist.
Here’s the tie-in with agricultural policy, as I see it: Supply management policy – with its regulation of production and prices – was not about socialism. Instead, that policy was the outcome of competing political-economic interests trying to ensure profitable production.
In particular, southern planters growing cotton were hardly socialists. They were simply large landowners trying to cope with a chronic problem of overproduction and low prices. They saw supply management policy as protection against vagaries of the market economy. They were “Capitalists Against Markets.” (That is the title of Peter Swenson’s book comparing national policy formation in the US and Sweden.)
This same kind of analysis is useful in exploring health care reform. Take, for example, Clinton’s attempted health care reform in 1993-94. Two health care issues became central in the early 1990s: universal coverage and cost containment. (Sound familiar?) Health care costs were rising, and tens of millions of people were uninsured. But, these conditions had existed to a greater or lesser extent for decades. Something else put health care reform at the forefront of US politics in the early 1990s.
An important coalition emerged to support an increased government role in health care: a cross-class coalition between workers and industry. Labor unions and many large businesses (such as Bethlehem Steel, Lockheed, Chrysler, Xerox, and Westinghouse) formed the National Leadership Coalition for Health Care Reform (NLCHCR), which was a leading advocate for health care reform at the time. This organization advocated for government-mandated employer-provided health insurance. (That’s right: many businesses were in favor of some kind of national health care system.)
In addition, more than half of CEO’s for Fortune 500 companies favored a government mandate for all employers to provide health benefits. And, the U.S. Chamber of Commerce supported government-mandated employer health benefits.
Why did some business advocate expanded government action in health care?
First, rising health costs fell heavily on business, especially large employers. In 1988, for example, Chrysler famously spent more on health care than on steel: $600 million per year on health care; $600 per car.
Second, there were an increasing number of strikes and labor conflicts over health care.
Third, international competition likewise encouraged some US companies to favor an expanded role for the government in health care, because other nations – Germany, Japan, France, etc. – provide health care for all workers.
In the early 1990s, then, health care reform was not really about socialists pushing for government control of the market economy. Instead, there were large companies whose economic interest in controlling health care costs – especially insurance premiums – prompted them to favor a greater role for government in health care.
Why, then, did Clinton’s health care reform proposal fail? See my next post, which I hope will not take another three or four months...
By the way, much of the information for this post came from an article written by Peter Swenson and Scott Greer, "Foul Weather Friends: Big Business and Health Care Reform in the 1990s in Historical Perspective," in Journal of Health Politics, Policy and Law, Vol. 27, No. 4, August 2002, pages 605-638.
Wednesday, November 25, 2009
Meat Consumption and Food Supply
Thanksgiving is upon us, and hundreds of millions of Americans will be feasting on turkey or other animals. At the same time, millions of Americans will volunteer at food kitchens and shelters to help feed the needy during the holidays. (It’s the busiest time of the year for volunteering, often resulting in too many volunteers.) And, people frequently express concern about the food being wasted while millions around the world go hungry.
So, this is a good time to have a slight diversion from my ongoing discussion of national policy formation to talk about meat consumption and the politics of food supply. What’s the connection between meat consumption and hunger/malnutrition? More generally, what the some of the implications of meat consumption?
In 2008, approximately 9 billion chickens are slaughtered and eaten in the
(Just in case you’re wondering, approximately 270 million turkeys were killed and eaten in 2008.)
In 2007, per capita meat consumption in the
This level of meat consumption eats up (pun intended) an amazing amount of corn and soybeans, which are two of the central ingredients for animal feed. The production of feed grains for the billions of animals to consume rests heavily upon chemical fertilizers and machinery that use petroleum. Researchers estimate that a gallon of gas is required to produce one pound of beef, for instance.
On just these two points, we should recognize that meat production consumes immense resources. Redirecting these resources to food grains could make a significant contribution to the potential to reduce hunger.
So, why do we consume so much meat? Part of the answer has to do with the market economy: meat is a high-value commodity. A farmer can get much more profit out of a bushel of soybeans by feeding it to a chicken or cow and then selling that as meat than the farmer can get from selling the soybeans directly to the market. That is, meat is more profitable than the field crops that animals eat.
Another part of the answer has to do with agricultural policy. As I show in my book (here’s my shameless plug for this post…), the combination of price supports and production controls in the 1900s drove up the production of various commodities. One solution to the overproduction of and consequent low prices for feed grains was to increase meat consumption.
Meat consumption is a central part of the politics of food supply. National agricultural policies have supported expanding meat consumption, and rising meat consumption – in the
Wednesday, October 7, 2009
Charges of Communist Agriculture in the 1950s
The extensive federal regulation of agricultural prices and production under supply management policy was at times controversial. And, this policy often drew the charge of being “socialist” or “communist.” In fact, a heated debate erupted during a House subcommittee meeting on supply management policy in 1958.
The members of the House subcommittee included several southern Democrats, who generally favored both price supports and production controls. Robert Poage, a Democrat from Texas, was the chair of the subcommittee. The hearing included testimony from representatives of the American Farm Bureau Federation, the largest and politically most influential farm organization.
These two sides – southern Democrats and the Farm Bureau – held opposing views of supply management policy. Southern Democrats believed that price supports and production controls were necessary to support prices for southern crops, such as cotton and tobacco. By contrast, the Farm Bureau advocated for a policy that would eliminate many production controls, dramatically reduce price supports, and create greater reliance on markets.
This hearing took place in the midst of the Cold War, in which anything could be labeled “communist” and everything “communist” was automatically bad or wrong.
During the hearing, the southern Democrats wrangled with the Farm Bureau representatives. Tensions rose over discussions of price supports, production controls, farm income, and the Farm Bureau’s policy positions generally. The southern Democrats favored maintaining extensive government involvement in agriculture with high price supports, rigid production controls to raise farm income. By contrast, the Farm Bureau officials advocated for a more market-oriented policy that would dramatically lower price supports and eliminate many production controls.
But, tempers reached the boiling point toward the end of the hearing, when the specter of communism emerged. The exchange over this issue began between Paul Jones (D-MO) and Frank Woolley, Legislative Counsel for the Farm Bureau.
Mr. Jones: I have one question before we adjourn. Mr. Woolley . . . didn’t you tell me then that the program we were suggesting of payments on cotton had been originally inspired by Communists, and that it was a Communist-inspired program—did you tell me that?
Mr. Woolley: No. What I said to you was that in 1955—and I am glad you asked that because—
Mr. Jones: . . . did you tell me that?
Mr. Woolley: Now, Congressman, I want—
Mr. Jones: I want you to tell me yes or no.
Woolley said he could not remember if he had brought up the issue of communism with Mr. Jones, but Woolley went on to discuss a pamphlet in his possession that was printed in 1955 by the Communist Party in the U.S. and titled “The Farm Crisis.” According to Woolley, the pamphlet showed that the Communist Party “unequivocally supports production payments.” Chairman Poage then joined the fray.
Mr. Poage: Well, now, let us get this straight.
When you come to making those comments charging communism in this committee, and that is what you are doing, calling us Communists, because we are opposed to your proposal—let us lay it out on the table, and you just go ahead and name the people that you think are the Communists on the committee, and I want you to put that in the record; I don’t want you to be going behind my back and, frankly, if you think I am a Communist, say so here and get it on the record.
Mr. Woolley: . . . I told Mr. Jones . . . that when I said that the Communists were supporting the production payment [program], . . . this did not carry with it the idea that he or anybody else that was proposing production payments was a Communist. . . .
The point I am trying to make . . . [is] that if the Communists spend thousands of dollars propagandizing for a particular method . . . doesn’t it cause somebody to raise a question as to whether it might or might not be against our interest? That is the question, and it is not that you are a Communist—I know you are not—at least, I hope you are not.
..........
Mr. Jones: Are you inferring by your propaganda, are you trying to say that a bill that we introduced here was inspired by a Communist program? I resent that very much. . . .
Mr. Fleming: Might I make a statement, Mr. Chairman?
Mr. Poage: [gaveling] This committee is going to adjourn right here and now, . . . and I am sorry that anybody dragged communism into this, when it has nothing to do with the corn bill or the cotton bill or any other bill . . . and I will not permit it to go any further.
Mr. Fleming: Just one sentence?
Mr. Poage: No; you can make it somewhere else, anywhere you want to.
The committee is adjourned.
Then, according to newspaper accounts, Poage shouted, “But if you want to discuss it further, I’ll meet you in the alley.”
It is not very often that a Congressional hearing ends with the committee chair inviting a panel witness into the alley to settle a dispute. Nor was it common for southern Democrats to be charged with being “communist.” More often, the southern Democrats were the accusers, finding communists among especially among civil rights activists and union organizers.
In truth, southern Democrats could hardly be labeled “liberals” much less “communist.” So, why did they favor a policy that relied so heavily on government and oppose a more market-oriented policy? Why did the Farm Bureau officials opposed to supply management policy so much as to raise the specter of communism?
The answer has two parts. First, painting a policy or person as “communist” could severely undermine its legitimacy. That is, it was political strategy. The real issue is what lay beneath this political charge.
Second, the division between southern Democrats, representing southern cotton producers, and Farm Bureau officials, representing farmers in the Corn Belt. These groups of farmers had very different economic interests. Cotton farmers were suffering from overproduction, declining exports, and growing competition from synthetic fibers. They needed government assistance to turn a profit and bring production in line with demand.
Corn Belt farmers, growing corn and soybeans, did not suffer from these same problems. Then as now, the vast majority of corn and soybeans were fed to livestock, especially hogs. In fact, this was the most important source of farm income in the Corn Belt: hogs were much more profitable that field crops, such as corn or soybeans. So, these corn farmers had little interest in artificially high crop prices. They were more interested in maintaining the significant growth in per capita meat consumption, which prevented any overproduction as seen with cotton.
So, what does this have to do with the current debate about health care reform? The same tone and style of political debate occurred around agricultural policy in the 1950s as is occurring around health care today. We need to look beyond the political rhetoric and red-baiting to examine the underlying economic interests represented in the debates. For example, take the Clinton-era attempts at reform. That will be my next installment.
The members of the House subcommittee included several southern Democrats, who generally favored both price supports and production controls. Robert Poage, a Democrat from Texas, was the chair of the subcommittee. The hearing included testimony from representatives of the American Farm Bureau Federation, the largest and politically most influential farm organization.
These two sides – southern Democrats and the Farm Bureau – held opposing views of supply management policy. Southern Democrats believed that price supports and production controls were necessary to support prices for southern crops, such as cotton and tobacco. By contrast, the Farm Bureau advocated for a policy that would eliminate many production controls, dramatically reduce price supports, and create greater reliance on markets.
This hearing took place in the midst of the Cold War, in which anything could be labeled “communist” and everything “communist” was automatically bad or wrong.
During the hearing, the southern Democrats wrangled with the Farm Bureau representatives. Tensions rose over discussions of price supports, production controls, farm income, and the Farm Bureau’s policy positions generally. The southern Democrats favored maintaining extensive government involvement in agriculture with high price supports, rigid production controls to raise farm income. By contrast, the Farm Bureau officials advocated for a more market-oriented policy that would dramatically lower price supports and eliminate many production controls.
But, tempers reached the boiling point toward the end of the hearing, when the specter of communism emerged. The exchange over this issue began between Paul Jones (D-MO) and Frank Woolley, Legislative Counsel for the Farm Bureau.
Mr. Jones: I have one question before we adjourn. Mr. Woolley . . . didn’t you tell me then that the program we were suggesting of payments on cotton had been originally inspired by Communists, and that it was a Communist-inspired program—did you tell me that?
Mr. Woolley: No. What I said to you was that in 1955—and I am glad you asked that because—
Mr. Jones: . . . did you tell me that?
Mr. Woolley: Now, Congressman, I want—
Mr. Jones: I want you to tell me yes or no.
Woolley said he could not remember if he had brought up the issue of communism with Mr. Jones, but Woolley went on to discuss a pamphlet in his possession that was printed in 1955 by the Communist Party in the U.S. and titled “The Farm Crisis.” According to Woolley, the pamphlet showed that the Communist Party “unequivocally supports production payments.” Chairman Poage then joined the fray.
Mr. Poage: Well, now, let us get this straight.
When you come to making those comments charging communism in this committee, and that is what you are doing, calling us Communists, because we are opposed to your proposal—let us lay it out on the table, and you just go ahead and name the people that you think are the Communists on the committee, and I want you to put that in the record; I don’t want you to be going behind my back and, frankly, if you think I am a Communist, say so here and get it on the record.
Mr. Woolley: . . . I told Mr. Jones . . . that when I said that the Communists were supporting the production payment [program], . . . this did not carry with it the idea that he or anybody else that was proposing production payments was a Communist. . . .
The point I am trying to make . . . [is] that if the Communists spend thousands of dollars propagandizing for a particular method . . . doesn’t it cause somebody to raise a question as to whether it might or might not be against our interest? That is the question, and it is not that you are a Communist—I know you are not—at least, I hope you are not.
..........
Mr. Jones: Are you inferring by your propaganda, are you trying to say that a bill that we introduced here was inspired by a Communist program? I resent that very much. . . .
Mr. Fleming: Might I make a statement, Mr. Chairman?
Mr. Poage: [gaveling] This committee is going to adjourn right here and now, . . . and I am sorry that anybody dragged communism into this, when it has nothing to do with the corn bill or the cotton bill or any other bill . . . and I will not permit it to go any further.
Mr. Fleming: Just one sentence?
Mr. Poage: No; you can make it somewhere else, anywhere you want to.
The committee is adjourned.
Then, according to newspaper accounts, Poage shouted, “But if you want to discuss it further, I’ll meet you in the alley.”
It is not very often that a Congressional hearing ends with the committee chair inviting a panel witness into the alley to settle a dispute. Nor was it common for southern Democrats to be charged with being “communist.” More often, the southern Democrats were the accusers, finding communists among especially among civil rights activists and union organizers.
In truth, southern Democrats could hardly be labeled “liberals” much less “communist.” So, why did they favor a policy that relied so heavily on government and oppose a more market-oriented policy? Why did the Farm Bureau officials opposed to supply management policy so much as to raise the specter of communism?
The answer has two parts. First, painting a policy or person as “communist” could severely undermine its legitimacy. That is, it was political strategy. The real issue is what lay beneath this political charge.
Second, the division between southern Democrats, representing southern cotton producers, and Farm Bureau officials, representing farmers in the Corn Belt. These groups of farmers had very different economic interests. Cotton farmers were suffering from overproduction, declining exports, and growing competition from synthetic fibers. They needed government assistance to turn a profit and bring production in line with demand.
Corn Belt farmers, growing corn and soybeans, did not suffer from these same problems. Then as now, the vast majority of corn and soybeans were fed to livestock, especially hogs. In fact, this was the most important source of farm income in the Corn Belt: hogs were much more profitable that field crops, such as corn or soybeans. So, these corn farmers had little interest in artificially high crop prices. They were more interested in maintaining the significant growth in per capita meat consumption, which prevented any overproduction as seen with cotton.
So, what does this have to do with the current debate about health care reform? The same tone and style of political debate occurred around agricultural policy in the 1950s as is occurring around health care today. We need to look beyond the political rhetoric and red-baiting to examine the underlying economic interests represented in the debates. For example, take the Clinton-era attempts at reform. That will be my next installment.
Friday, September 4, 2009
The case of US agricultural policy -- socialism?
From the 1930s to 1996, supply management was the core of U.S. agricultural policy. Supply management rested on three principal programs: price supports, production controls, and export subsidies. Price supports were essentially guaranteed minimum prices that farmers would receive for certain commodities – including cotton, wheat, and corn. To receive price supports, farmers had to adhere to production controls, which limited the acreage that could be devoted to growing these crops. Export subsidies helped to reduce the costs of US agricultural goods to make them more competitive in the world economy.
Through supply management policy, then, the federal government set prices, closely regulated production, and was deeply involved in trade. This was a tremendous about of government intervention in the market economy. More than seen previously in agriculture, and more than seen in almost any other sector of the economy. Supply management policy severely restricted the “normal operation” of the market economy - for more than 60 years.
This policy was meant to (1) raise prices for farm commodities and (2) prevent the overproduction that plagued agriculture (especially cotton and wheat) in the 1920s and 1930s. All of this was also intended to raise farmers’ incomes.
How did the policy exist in the U.S. for the duration of the Cold War, when socialism and communism were vehemently eschewed in every corner of society? Why did the US engage in such extensive regulation of the market at a time when it was the leader of laissez faire economics?
Was supply management policy an example of the federal government imposing its socialist will on American farmers and consumers? Was this policy an example of anti-market (i.e., socialist) groups winning a national policy?
The answer to these questions will come soon. (Or, you can just read my book…)
Through supply management policy, then, the federal government set prices, closely regulated production, and was deeply involved in trade. This was a tremendous about of government intervention in the market economy. More than seen previously in agriculture, and more than seen in almost any other sector of the economy. Supply management policy severely restricted the “normal operation” of the market economy - for more than 60 years.
This policy was meant to (1) raise prices for farm commodities and (2) prevent the overproduction that plagued agriculture (especially cotton and wheat) in the 1920s and 1930s. All of this was also intended to raise farmers’ incomes.
How did the policy exist in the U.S. for the duration of the Cold War, when socialism and communism were vehemently eschewed in every corner of society? Why did the US engage in such extensive regulation of the market at a time when it was the leader of laissez faire economics?
Was supply management policy an example of the federal government imposing its socialist will on American farmers and consumers? Was this policy an example of anti-market (i.e., socialist) groups winning a national policy?
The answer to these questions will come soon. (Or, you can just read my book…)
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