Elizabeth Warren’s latest position paper, on agricultural policy, is a disappointment on two fronts: too wonky to be considered a purely political document, but not nearly wonky enough to be defensible in terms of substance.
The most striking feature of her team’s plan, called “Leveling the Playing Field for America’s Family Farmers,” is what it doesn’t call for: namely, an abolition of farm subsidies, a reform favored by virtually all economists. Those payments often run more than $20 billion a year, and are typically considered an inefficient form of crony capitalism.
Understandably, not many politicians push for this reform, especially given the first-in-the-nation Iowa caucuses. Still, it is a sign that neither expertise nor economics is in charge here.
The third sentence of the document cements this impression: “Last year, farmers got less than 15 cents of every dollar that Americans spent on food — the lowest amount since the Department of Agriculture began tracking that figure in 1993.” Yet according to standard economic reasoning, falling farm costs are a good thing, even if it means lower incomes for farmers and more people leaving the sector. The flight of labor from agriculture and the declining cost of food are signs of progress in every economic development story.
Warren’s document asserts that “food prices aren’t going down.” That’s true but misleading. When the Federal Reserve is targeting near 2 percent inflation, most prices in the economy will rise steadily over time. The link behind that claim, to a U.S. Department of Agriculture report, offers some recent data, but it is hardly damning: In 2018, it notes, retail food prices rose 0.4 percent. “This was the first increase in 3 years, but the rate was still below the 20-year historical annual average of 2.0 percent.” Or how terrible are these numbers, from the same report: “In 2019, price growth may continue to remain low at the grocery store. Food-at-home prices are expected to rise between 0.5 and 1.5 percent, as potentially the fourth year in a row with deflating or lower-than-average inflating retail food prices.”
A look at the longer-term historical data also shows slow, steady inflation in the food and beverage sector, rather than a recent crisis of price spikes. Food price inflation does become higher after 1973, but that is probably due to higher energy prices and the more general productivity slowdown that has plagued the U.S. economy.
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"Food price inflation does become higher after 1973, but that is probably due to higher energy prices and the more general productivity slowdown that has plagued the U.S. economy."
ReplyDeleteOdd that he doesn't connect this to Nixon taking the US off the gold standard.