Understanding Government

The Wall Street Journal’s Scott Kilman visits Shelbyville, Illinois and reports that in “this typical Midwestern town” crop prices are now high enough that they no longer trigger billions of dollars in federal subsidies to farmers. Kilman’s narrative is a feel-good one for WSJ readers: the market has done what special-interest Washington politicians never could — cut farm subsidies in half during the last six years. The high crop prices are a result of both growing demand from consumers in developing countries like China and also the fact that each year millions of tons of corn is used to produce ethanol for auto fuel.

However, there are still egregious farm subsidies that ought to be eliminated from the U.S. Dept. of Agriculture budget. For example, the federal government still doles out billions of dollars so farmers uphold their promise to not grow crops in highly erodible land.

Schools in Illinois, Kentucky and Tennessee will participate in a U.S. Dept. of Agriculture pilot program to provide free meals for all students at any school where at least 40 percent of the students are deemed low-income. The Chicago Tribune’s Tara Malone and Monica Eng report that this is part of the “Community Eligibility Option” being rolled out by USDA and that the program will be implemented in all states by the 2014-15 school year.

It’s confusing, though, whether the program makes financial sense for participating schools. The participating schools get federal reimbursement based on the number of needy children that they have. So the costs for meals for non-needy students shifts from the student’s parents to the school district. Stay tuned to see how schools in the pilot states choose to participate.

The big news from Wisconsin yesterday was that the state supreme court upheld the law taking away most collective bargaining rights for state public employees who are neither police nor fire fighters. This is obviously a huge, though expected, victory for Gov. Scott Walker and the state Republican party. One thing to note, though, is that Walker’s anti-government employee agenda has recently met resistance among even Republicans in the state legislature. The legislature rejected a plan to significantly roll back the number of state employees who work on behalf of food stamp and Medicaid recipients. The main result of the anti-public employee union bill may be a backlash on other Walker policies as well.

So reports Eartha Jane Melzer of the Michigan Messenger: There is bipartisan support in Congress to cut down on ethanol subsidies.  Some Republican candidates for president, including erstwhile Minnesota Governor Tim Pawlenty, also support a subsidy rollback. This seems particularly notable because the whole ethanol-aura is that any presidential candidate running in the Iowa caucus dare not speak ill of the subsidies.

As Melzer notes, corn-based ethanol depletes the U.S. corn supply and drives up international food prices. More than that, though, despite all Barack Obama’s talk of “winning the future” through renewable energy, no renewable energy product gets more federal subsidies than environmentally dubious ethanol.

Republican presidential candidate Tim Pawlenty raised some eyebrows earlier this week when he called for a possible end to U.S. Dept. of Agriculture ethanol subsidies. “You can’t do that!” pundits exclaimed. “You need to win the Iowa caucus, and everyone in Iowa loves ethanol!” But Jason Clayworth of the Des Moines Register points out that the politics of ethanol are changing. Industry trade groups have called for a subsidy phaseout and even Iowa U.S. Senator Charles Grassley wants to gradually reduce the federal money for ethanol.