Taxes, Spending, and Corn

By: Mormon Heretic
April 15, 2013

I was late to church because I was finishing up on filing my taxes.  This is the time of year when we get to look and see how much we’re sending to the government, and while many of us enjoy the tax refund, we neglect to see how much we’re sending to the government.  Tea Party types have been keen on cutting government spending of all types, but one of the most popular forms of government spending involves farm subsidies.  Americans claim that we like free-market solutions, but that doesn’t seem to apply to food.  The U.S. Government subsidizes farmers immensely.

NixonDuring the Nixon Administration, food prices were on the rise, and Nixon asked agriculture secretary Earl L. Butz to do something to lower food prices.  In the past, the U.S. government paid farmers not to farm in order to allow farmers a profit on the produce they grew, especially in relation to corn.  However, Butz thought this was bad policy (reversing the policy of many previous Agriculture Secretaries, including Ezra Taft Benson.)  Butz decided that farmers should be paid to produce as much corn as possible in order to lower food prices.  Prices would inevitably drop because of so much supply, making it better for consumers, but worse for farmers.  This is where the government subsidies step in.

Without a government subsidy, they would lose $19.92 per acre of corn

Without a government subsidy, they would lose $19.92 per acre of corn

The documentary King Corn follows two recent college graduates from Boston that decide to move to Iowa and grow an acre of corn.  In February, the go to the Farm Bureau to learn that they will earn $14 for the promise to grow 1 acre of corn, and another $14 after it is harvested.   Without a government subsidy, they would lose money.

The reason why farmers grow so much corn is that it can be stored for a very long time, unlike other produce like lettuce, broccoli, or apples.  Corn is therefore stored until a farmer can get a good price.  You just can’t do that with apples, so that is one thing that makes corn so attractive to grow.  Additionally, technology has allowed farmers to grow a specific type of corn that yields more corn per acre, though it is less nutritious.  In fact, it is completely inedible and must be processed into edible food.  One-third of corn is also used as ethanol, which isn’t even edible.

Cattle farmers have discovered that corn makes cows (and chickens, turkeys, and other animals) grow fat faster, especially if they keep cows and chickens in small pens so there is no room to walk.  Cows and chickens are ready to slaughter in a much shorter time, allowing farmers to make more money by shortening to time to grow meat.  Once again, this is good for consumers, because it increases supply, driving down prices.  It also make it cheaper for fast food restaurants (such as McDonalds), to make cheap food.  (Even french fries are cooked in corn oil!)  But once again, the tradeoff is that the cows and chickens are less healthy, and humans are ingesting less healthy meat.  So in effect, the government is indirectly subsidizing McDonalds.  It also causes poorer people to shop at McDonalds because it is cheaper than buying more healthy, expensive vegetables.

KingCornFurthermore, farmers know that they must kill their cattle at a certain age, or the cattle will get sick.  It causes all sorts of heart problems, intestinal problems, etc.  If cows ate only the corn feed, they would be dead within 6 months, so it is actually useful to slaughter them when they are merely 4 months old.  And this is the stuff we eat at both the supermarket, as well as the fast food restaurants.  But it is cheap.

But that’s not all.  There is so much corn that farmers were looking for other ways to use corn.  One solution is high fructose corn syrup, and it is exceptionally cheap, and exceptionally high calorie.  Corn sweeteners are found in not only sodas, but “healthy” fruit juices (apple juice, cranberry juice, etc.) One of the surprising things about corn syrup is that the human body can’t distinguish that it is consuming so many calories.  One cab driver reported that by simply eliminating soda from his diet, he lost 100 pounds!  This is one of the reasons why New York City tried to limit the size of soda–corn consumption via soda is a huge problem contributing to obesity and associated diabetes.   Once again, corn subsidies are lowering the cost of food, but making it more unhealthy to eat.

But that’s not all.  Because the U.S. is selling corn so low, it is putting Mexican farmers (for whom corn is a historically grown product) out of business, because we are selling our corn below the cost to actually produce it.  In turn, this leads to Mexicans crossing the border to find work, because they certainly can’t compete with American farm subsidies.

The biggest problem with the obesity epidemic is the associated diabetes that comes with it.  Health Care costs are skyrocketing because of obesity induced diabetes.  It is one of the biggest problems with rising health care costs.  So we have cheap food, but high health care costs come from our cheap food.  The problem is that corn is so ubiquitous, a consumer can’t avoid eating corn syrup or corn-fed animals unless they grown their own food.  How likely is that going to happen?

The CDC has an amazing animation that shows the rising rates of obesity between 1988-2008.  The reality is that our cheap food is going to bankrupt us with astronomical health care costs.  Yet who out there wants to start paying $8/gallon for milk, or $15 for a hamburger?

Earl Butz, sitting in his home.  He is proud of lower food prices.

Earl Butz, sitting in his home. He is proud of lower food prices.

Earl Butz said that we now spend just 16-17% of our money on food. It used to be 30-35%. How do you spend the difference?

  • other (41%, 12 Votes)
  • higher health care premiums (28%, 8 Votes)
  • mortgages (28%, 8 Votes)
  • luxury items (3%, 1 Votes)

Total Voters: 29

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Are higher health care costs in the future worth cheap food today?

  • no (90%, 28 Votes)
  • I don't know (6%, 2 Votes)
  • yes (4%, 1 Votes)

Total Voters: 31

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Are you in favor of removing farm subsidies?

  • yes (78%, 25 Votes)
  • I don't know (16%, 5 Votes)
  • no (6%, 2 Votes)

Total Voters: 32

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Are farm subsidies making us fat?

  • yes (60%, 18 Votes)
  • I don't know (23%, 7 Votes)
  • no (17%, 5 Votes)

Total Voters: 30

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With April 15 here, what are your opinions on farm subsidies?

18 Responses to Taxes, Spending, and Corn

  1. Howard on April 15, 2013 at 6:23 AM

    Most food is slow poison, ultimately it kills us unless we die of something else sooner. Healthy food kills us less quickly. The abundance of low cost food is actually quite an automation achievement during our early history most people worked in farming or ranching but today only a couple percent of the population are employed in food production and we produce more than enough to feed the nation.

    Should we eliminate less healthy food or food production methods? Yes and no. Yes if a clear broad very high health risk can be shown. In this case we are making consumer choices for them but it is very hard to accomplish politically – see tobacco.

    Education helps – see tobacco. We have many healthy food choices available to us. Eat less animal, more fish, a broad variety of plants (maybe 10 a day) selecting them for darker colors because the color contains the health, a hand full of healthy nuts, berries, fruit is naturally packaged desert (it’s not health food). If you get moderate daily exercise you cannot eat enough on this healthy diet to gain weight. You’ll pay about 20% premium for Organic and more for organic meats. If the WoW isn’t a problem add red wine in moderation and green tea.

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  2. Howard on April 15, 2013 at 6:27 AM

    Btw, anything packaged is suspect, avoid preservatives and fast food.

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  3. Jeff Spector on April 15, 2013 at 6:54 AM

    I think that our processed food is largely responsible for the myriad of health and mental problems we see today.

    Between hood issues like autism, obesity, attention problems, aggression, etc could probably all be linked to our food.

    Also, farm subsidies might have been a good idea to protect family farms from being driven out of business by the Corporate farms, but that is a long since past issues as we now have more corporate farms than family farms.

    Any subsidies are plain wrong in this supposed free market econonmy. But again, it is the politicians that make the rules to help themselves and ruin America in the process.

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  4. Last Lemming on April 15, 2013 at 8:38 AM

    Your movie is a bit out of date. The price of corn has tripled since the filmmakers ran their experiment (you can verify that here if you select the 2005-2012 period). That is occasionally attributed to ethanol mandates, which went into effect the year the movie was released. So what do you think of the mandates?

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  5. jmb275 on April 15, 2013 at 9:17 AM

    Dear MH,
    I’d like to officially welcome you to the world of realizing that gov’t intervention often creates more problems than it solves. ;-) And when it doesn’t seem like it, just wait two decades. Now if we can only apply this important lesson to other sectors, like Wall-Street, real-estate, etc. perhaps we’ll turn this ship around.
    Sincerely,
    your friendly neighborhood (non-tea party) Libertarian

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  6. jmb275 on April 15, 2013 at 9:42 AM

    On a more serious note though, I think a lot of Americans are starting to get the drift that our current diets in this country are killing us. When enough of us have decided we’re not gonna eat processed crap anymore things will change (though it will change slowly since the market can’t actually work properly given all the gov’t intervention). I recently read an article showing how, if done right and carefully, eating natural, fresh, and healthy, can cost approximately the same as the crappy stuff. So I do have some hope.

    I think most of us (even most Libertarians) think we ought to have some shared responsibilities and therefore taxes. I’m fine with that. Shoot, I’d pay more to the state of Michigan if they’d fix the damn roads (saving me from destroying my car). I think the problem is in efficiency. Gov’t just isn’t efficient because it has the wrong set of incentives.

    In theory I’d be happy to pay more in food costs if health care were less expensive. But in the current system that’s ridiculous. I have to pay directly for food, not so for health care. Many of the health care costs are hidden, and the ones I do pay (except co-pays and prescriptions) I pay them whether I’m sick or not. If we could see it for what it is it would be like buying food every month knowing beforehand we were going to throw at least half of it out!

    There’s just no incentive to eat right because the unhealthy crap is cheaper, and with shared health care responsibility the system will save you. I think fixing health care has to start with fixing food and eating habits. Single-payer health care systems, and mandated insurance just cement bad incentives under the guise of altruism.

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  7. hawkgrrrl on April 15, 2013 at 9:56 AM

    I agree that govt doesn’t have the right incentives, and there are too many pet causes like farm subsidies that have downstream impacts. Having said that, I greatly miss preservatives in food. Here in Singapore if I spent $11 to buy a package of lunch meat, it goes bad within 2 days of opening it. Chickens here are about the size of quails in the US, not big enough to feed a family. And grass-fed beef is nowhere near as tasty as corn-fed.

    What amazes me is that when I’m in the US there are so many more healthy choices than we have seen in Asia, Australia and New Zealand. The stores in the US are just overflowing with fruits and vegetables, and all of it is so cheap. Yes, some Americans are eating total crap, but it’s not for lack of healthy alternatives.

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  8. Jake on April 15, 2013 at 10:52 AM

    Eve ate from the tree and introduced death to the world. We eat crappy food and we die faster. Coincidence? I think not.

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  9. Mormon Heretic on April 15, 2013 at 1:14 PM

    Howard, I think Hawkgrrl makes an excellent point regarding preservatives. While I do think that preservatives can cause health problems in the long term, in the short term they keep food edible for much longer. Without preservatives, food spoils really quickly. I guess it is a “pick your poison” kind of a choice.

    Last Lemming, yes the film is a few years old, so the prices may not be as accurate as when the film first came out. I’m not a fan of corn to make ethanol. It is my understanding that sugar cane is a much better source of ethanol than corn. Unfortunately, sugar doesn’t grow well in the corn belt.

    JMB, the guys at Freakonomics often talk about the law of unintended consequences, and this is a perfect example. On the one hand, surplus corn has definitely brought down food prices, so from that point of view, it is a huge success. But, as you mentioned, we’re paying for cheaper food through increased diabetes and obesity. I’d be curious if health care costs have increased the same (or more) than the drop in food prices. It could be a zero sum game.

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  10. Will on April 15, 2013 at 2:06 PM

    The low food prices in the US, and the reason it can be done by limited number of people is largely due to the abundance of oil, along with the combustion engine of course

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  11. Howard on April 15, 2013 at 5:22 PM

    MH,
    Sure I agree, food with preservatives beats no food or spoiled food but fresh food is much healthier. For example some people have a habit of buying processed meat for their daily lunch sandwiches because it keeps longer than fresh but this isn’t a healthy on-going practice. Most of our food choices come down to “pick your poison”, slow acting or faster acting.

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  12. Howard on April 15, 2013 at 5:32 PM

    Will #10,
    I’ve studied global food production and what you say is very true. World wide there are two methods that work best. If you have the flat farming land and oil to support large scale farming the US method will be your lowest unit cost model. If not the Cuban model is a very practical method although significantly higher in unit labor it is the cleaner healthier choice. When we blockaded Cuba and prevented them from importing oil they developed animal traction organic farming to an art form and their method is a better third world choice in most cases.

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  13. Will on April 15, 2013 at 8:10 PM

    Howard,

    Like your comments and would put a plug in for food storage. Given the shortsightedness of the current administration oil prices will rise significantly as the economy outside the us continues to grow. When oil prices rise food production and distribution costs will rise.

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  14. mh on April 15, 2013 at 8:32 PM

    Will, I am curious. As our resident tea party commenter do you support eliminating farm subsidies? How do you think Americans will react to higher food prices?

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  15. hawkgrrrl on April 15, 2013 at 10:53 PM

    Howard: “For example some people have a habit of buying processed meat for their daily lunch sandwiches because it keeps longer than fresh but this isn’t a healthy on-going practice.” I’m going to go on record and say we truly have NO idea how many preservatives we enjoy because even buying what appears to be unprocessed, natural sliced turkey breast for sandwiches here, it turns to white slime within 2-3 days of being opened. In the states, that sucker would last at least a week, possibly longer. Both appear to be fairly “fresh” and entirely “unprocessed” prior to being vacuum sealed. Is there a middle-schooler out there who wants a great idea for a science fair project? This is it.

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  16. Hedgehog on April 16, 2013 at 4:02 AM

    I have a hard time imagining meat that will last as long as you’d like it to hawkgrrrl. Prior to refridgeration meat had to be heavily salted to preserve it.

    Meats that last whilst sealed do so because they are packaged in a protective atmosphere (no oxygen), once opened however, there’s nothing to stop oxygen doing its destructive best. All packaged meats here instruct to consume within 2-3 days of opening.

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  17. hawkgrrrl on April 16, 2013 at 4:07 AM

    Hedge – I am dead serious. Meat in the US has some serious longevity. I do not know what they do to it.

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  18. Hedgehog on April 16, 2013 at 8:11 AM

    Health problems associated with processed meats:
    https://www.scientificamerican.com/article.cfm?id=meat-of-the-matter-modern-methods-preserving-cooking-meat-healthy

    On the OP, the EU has its own farming subsidy problems.

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