Monday, May 20, 2019

Big Farmers Are Ending Up Getting A Big Chunk of Trump's Tariff-War Bailout Funds

What a mess.

President Trump has launched a trade war with China by slapping tariffs on a broad array of goods imported into the United States from China. In retaliation, the Asian giant has slapped tariffs on a number of products imported into China from the US.

Parts of the US agriculture sector have been particularly hard hit by the tariffs (As I have explained, it isn't always consumers who are hurt).

To help out the US farmers, that is to make the economy even more of a central planning crony nightmare and make the average American pay through taxes or higher government debt, the Trump administration has been making bailout payments to the farmers through what is known as the Market Facilitation Program.

The Finacial Times notes:
The government had doled out $8.5bn ahead of last Friday’s application deadline for farmers, the US department of agriculture said...

The payments reflect the farm sector’s political clout in Washington. No other US industry has received direct payments to relieve losses caused by tariffs...

The department is now working on a second direct payment scheme worth as much as $20bn.
But here is how it gets even worse. According to theTimes, a tenth of US farm operators have received more than half the money from the bailout.

Some use legal loopholes to collect multiples of a $125,000 cap on payments.

Between September and mid-April, $4.5bn of MFP payments went to 10 per cent of recipients, according to records the Times obtained under the US Freedom of Information Act.

The government limited payments to $125,000 per person or legal entity in each of three commodity categories. Farmers were also ineligible if their adjusted gross income topped $900,000. 

But the records showed that more than 3,000 farm businesses got paid in excess of $125,000 within a single category, and more than 100 received at least $500,000 and a handful collected almost $1m.

“Some farmers create complicated entities in order to receive more payments than they could as an individual,” Jonathan Coppess, a former administrator of the USDA’s Farm Service Agency told the Times.

The byzantine business structures designed to maximise subsidies have become known amongst policymakers as  “Mississippi Christmas trees.”

In other words, the devil is in the details and it is only firms with a slew of lawyers that can fully take advantage of the crony system. This is how cronyism works. 

Trump is not draining the swamp, he is adding new species of critters to it.


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