Someone at the Washington Post Actually Understands Economics?
As difficult as this may be to believe, it is apparently so, judging by Steven Pearlstein's article of Sunday, September 23, 2007; Page F03:
Tobacco Road, ReduxThe Wall Street Journal last week had a wonderful article about the revival of tobacco farming in the United States in the three years since the government stopped subsidizing it.
The lead of the story was about an Illinois farmer, Martin Ray Barbre, who was doing better than ever with this year's corn crop, netting a record $250 an acre. But what Barbre is really proud of is his 150-acre tobacco crop. Each acre nets $1,800.
How could this be? It turns out that the subsidy program generated so much supply that it drove prices down below the cost of production, making it appear the subsidies were essential for the farmer's survival. Once the subsidies ended, however, so many subsidy-addicted farmers got out of the business that supply fell below what the cigarette companies needed, creating the $1,800-an-acre windfall. But don't worry: Before long, the market will do what markets do well, which is bring supply and demand back in balance at a price that allows a reasonable profit.
So tell me this: Why is Congress -- a Democratic Congress, no less -- about to renew a farm program that wastes $15 billion a year on market-distorting subsidies?
The answer to his question is obvious, of course. Democrats do not understand Economics. They do not believe, for instance, that prices affect one's purchasing behavior, so they propose increasing excise taxes and do not account for the inevitable drop in purchases. Similarly, they want to increase capital gains taxes, and insist that this will not reduce the investment in capital.
Of course we all know that this is willfull ignorance. When Al Gore wants to reduce C02 emissions, he proposes a gasoline tax. When our own Stay Puft Marshmallow Man, hereafter known as "puffalump," wants to keep handguns out of the hands of the poor, he proposes a tax on handguns. Funny how puffalump does not see this as a violation of the Second Amendment rights of the poor, even though he would tax handguns beyond their ability to purchase them, but Giuliani thinks the poor have a right to an abortion, so the government should pay for it.
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