John Phipps: USDA's "Helicopter Money" Doesn't Solve Underlying Issue

090118-Johns World
John Phipps explains why USDA's tariff aid for farmers doesn't solve the underlying problem. ( MGN )

In late August, the U.S. Department of Agriculture (USDA) released details of rumored payments to farmers to offset market losses from the various trade wars currently underway. The payment rates had been leaked a few days earlier, but the rumors did not include one small fact: the payments would indeed be based on actual 2018 production, but only half, 50%.

Maybe I’m the only famer who had already inserted a full $1.65 per soybean bushel on my budget spreadsheet, but the result of such pre-hatch chicken counting is a faint feeling of getting cheated somehow. It is illogical to feel the loss of something you never had, but that’s how our brain works.

In fact, money that falls out of the sky – unearned wealth – messes with our judgment and emotions. It is why inheritances are so remarkably difficult to distribute without hard feelings. Behavioral economics has demonstrated that unearned wealth is valued differently than earnings even though once we own them one dollar is worth the same as any other. Studies also show that helicopter money, as such government payouts are labeled – are almost never seen as fair by the people receiving them.

Look at the statements from various commodity groups and they could all be summed up as “not enough”. Part of this problem is the sense the U.S. government has trillions of dollars to hand out, so why not more to me? The other factor is we see our injury as worse than others, so our piece of the pie always looks too small.

Finally, if you try to create schemes to make payments seem more equitable, they become more complicated. As straightforward as this handout – and it is a handout – seems, there will undoubtedly be arguments over how to count our 2018 production. For example, my guess is there are suddenly a lot fewer 2017 bushels stored on farms than last week.

I have many problems with subsidies and have mentioned this on occasion. This payout is one more example of one reason: they increase dissatisfaction for the recipients, while failing to solve the underlying problem.