EQIP, the Factory Farm Incentive Program

Good for the New York Times! An excellent article is running on a component of the Farm Bill: the Environmental Quality Incentives Program (EQIP):

… when the program was created as part of the 1996 farm bill … the government agreed to pay a share — up to 75 percent — of a conservation project, and the payments were limited to $10,000 a year. Farmers used the money for small-scale projects that had environmental benefits, like planting cover crops to prevent erosion and soak up excess nitrogen or installing fencing to better manage grazing cattle.

But in the 2002 farm bill, the program was changed at the livestock industry’s behest, and funding for the program was raised from $200 million a year to, eventually, $1.3 billion. Yearly payment limits were scratched, replaced by a provision that farmers could get no more than $450,000 during the bill’s life.

Another change: large-scale livestock facilities that once were not eligible for EQIP money were encouraged to participate under the 2002 bill.

As a result, many farmers are using their EQIP money for animal waste management practices, which include helping to pay for lagoons to store manure. The lagoons are lined ponds that are used to keep the waste until it can be pumped out for some other use, usually as fertilizer on nearby fields. In some instances, manure lagoons have leaked or overflowed into the groundwater or neighboring streams.

…

For the 2006 fiscal year, for instance, the Department of Agriculture paid farmers about $179 million for animal waste management practices, with Iowa, Wisconsin and North Carolina getting the most money. More recent data was not available, nor were individual payments.

That compares with $125 million for soil erosion and sediment control, $139 million for irrigation water management and $74 million for grazing land practices, according to Department of Agriculture records.

The article is semi-rant – which is fine by me. What I like is the acceptance, by the author, that this is the way it is (the House version of the bill is more expansive, yet): they only propose more honesty.

… if Congress is to keep sending taxpayer money to farmers to build manure lagoons, it may want to consider a more honest name for the program.

How about “Factory Farm Incentive Program”?

This is, however, where the Farm Bill, in toto, is so distortionary. Here’s a thought: I’m vegan. I purchase nothing that should, in any way, contribute to shit like this. Yet I’m taxed to subsidise exactly this sort of agricultural stupidity, so that non-vegans can purchase, in blissful ignorance, Mad Cow Steaks in cheap abundance from their supermarket. Why do citizens and taxpayers, rather than consumers, have to foot the bill for the subsidies that are required to bribe Mega-farms to operate at a level of minimal environmental containment?

Absent such, of course, things would be a lot worse. But is that the only alternative? Can the government not force farms to perform certain environmentally prudent acts, and pass the cost along to the consumer? That is certainly the economics that I teach: between them, Supplier and Demander share the social cost of the negative externality of the good or service. The NY Times asks the same:

Why should taxpayers foot the bill for manure lagoons, particularly under the flag of environmental conservation? Why should taxpayers subsidize expansion of livestock farms? And if livestock farms have created environmental problems, shouldn’t the polluters have to pay for the mess that they created, rather than the taxpayers?

“Having a lagoon that doesn’t leak into groundwater, that’s the cost of doing business,” said Ferd Hoefner, policy director of the Sustainable Agriculture Coalition. “You shouldn’t be justifying that as a conservation payment. You are building things that have been proven time and time again to cause severe environmental damage when they misfunction.”

The simple answer is yes, they can – but why would they? Agricultural sectors have significant lobbying power, and it is entirely in their interest to secure money from general taxation – because we just pay taxes, don’t we? No chance of us consuming less meat because we realise that the true price of that tray of … meat (it’s been a while) is significantly greater. Moreover, we do not lessen that burden on ourselves by purchasing less of the good – so we may as well go ahead on. We simply do not need this level of administration (consider, too the cost of having the government debate and administer this sort of dog-wagging tail of a piece of legislation). Simple regulations, with simple policing, with simple market mechanisms, could sort the whole thing out.

EQIP is perfect a perfect Trojan Horse for this, of course, because, as long as it does in fact help conservation and clean-up, it’s hard to fight.

This is also the hypocrisy of a government that refuses to countenance things like the redistribution of income for the provisional of health care. Bridges to nowhere? Fine. Money for mega farms (the bulk of which subsidy cheques are cashed by corporations in New York and elsewhere)? Cool. Affordable housing, education, health care? Crazy talk.

Ethos water – wasted shipping vs. saved plastic?

Email from my wife (who is wonderful, and I say that with no suggestion from said wife, whatsoever):

So Ethos, the Starbucks’d brand of ethical water, has a new bottle! And a very fetching one, at that. I like Ethos water. I like the idea (I prefer the taste of Evian – in general I try my best to keep my plastic bottle purchasing down, though). I’ve bitched insensedly about Fiji water, of course.

So to this development, and my reaction was negative: this is an attractive shape, yes, but picture many such bottles in a box. See how there will be empty space between them? Shipping Ethos water bottles means shipping empty space: it’s a waste of nearly everything (I think I first came across this argument many years ago, with respect to Coca Cola bottles). This is unless – and I haven’t been able to find any information on this – Ethos is following the lead of Poland Spring (click the image for the link):

Their new bottle uses 30% less plastic, recycled plastic, etc. It is also more easily crushed – all of which new attributes mean the new design (presumably for purposes of holding the bottle up at all). So Poland Spring gives us a trade-off: wasted space for the shipping – meaning, over the course of every bottle of Poland Spring, more trucks, more fuel, more boxes, etc. – but 30% less plastic in the bottles, less plastic/ink in the labels, you name it. Probably a trade-off that I’d accept.

For Ethos? A similar search yields nothing like the sort of eco-friendly-we information dissemination that I’d expect, had they taken a similar path:

So perhaps there isn’t that trade-off, with Ethos’ new bottle. Just the wasted space, fuel, etc. But their water business does help get clean water to developing/under-developed regions, so another trade-off still exists. Do you help keep down the environmental degredation that will wipe out the bottom first, or help get the water to them while contributing to the problem?

Alternatively, just go buy a Sigg water bottle, keep chemicals from leaking into the water you drink, and just donate the money you save by using tap-water to a water-providing charity of your choice.

Macro catch-phrases for 2008/9: “excess liquidity”, “co-ordinating” Fiscal and Monetary policy

Reading Bloomberg, I noticed (to my surprise) that China appears to be breaking away from the peloton on this one – although, being an over-heating economy, they have the advantage. It also struck me that these were issues that would be buzzing around the economics and financial pages by mid-year.

China plans to better coordinate fiscal and monetary policies in 2008 to help reduce its trade surplus and mop up excessive liquidity, Vice Finance Minister Li Yong said today.

China’s money supply grew at the slowest pace in seven months in December, the central bank said yesterday, after it took measures to cool inflation and prevent the economy from overheating. China may face pressure from Europe and the U.S. to allow faster gains by its currency after the nation’s trade surplus surged 48 percent to a record $262.2 billion last year.

This harks back (like, two days) to the report by the United Nations’ Economic and Social Commission for Asia and the Pacific (UNESCAP), Key Economic Developments and Prospects in the Asia-Pacific Region 2008. As well as all the cool stuff I mentioned in the previous post, the report had this contribution, vis. inflation-via-money-supply-growth:

Increasing liquidity has led to growing inflation concerns in a number of countries as discussed above. China is witnessing its highest level of inflation in 10 years. India recently experienced inflation at a two-year high in January before aggressive tightening measures dampened prices.

Other than general increases in consumer price inflation, liquidity has been funnelled into purchases of particular assets driving up their prices rapidly. Some asset prices may be considered unrealistic in view of underlying valuations. The price-earnings ratio for the equity market in China stands at 59 times 2007 earnings, by far the highest such ratio in Asia. India is the only country in the region where housing prices have risen faster than real incomes over the past four years.

Major urban centres of India such as Bangalore and Mumbai have seen a doubling of housing prices in 2005 and 2006. Viet Nam has recently witnessed dramatic increases in equity and property prices. The Republic of Korea has also seen a substantial rise in property prices in some urban areas.

Managing currency appreciation has also led to fiscal costs for Governments. Foreign exchange reserves have been invested mainly in low-yielding United States government bonds. In terms of liabilities, Governments have had to pay higher rates of interest on the bonds that they have issued for the purpose of monetary sterilization.

The result has been significant costs for central banks throughout the region. The level of impact varies across countries depending on the spread between local and United States interest rates. It has been estimated that India, which has comparatively high interest rates, would face a cost in fiscal year 2007 of 2 per cent of GDP.

Another cost has been the loss in the capital value of foreign reserve holdings as the value of the dollar has steadily declined over the year. For example, China currently would suffer a capital loss on its reserves of around $50 billion as a result of a 5 per cent dollar depreciation.

With apologies to the report’s authors, I broke up the paragraphs and removed footnotes/references (page 21 of the report, if you’re interested).

The statement also mentions the use of “administrative” tools to fight inflation (due to be set at a targeted 4.6% for the year 2008), about which the Vice Finance Minister was not specific. Should be interesting: we’ve seen China’s administrative responses to inflation, already. This sounds like more of the same: price controls/ceilings (meaning shortages and more runs on goods), and/or capital controls (meaning less foreign investment – perhaps they’ll have to arrest journalists without Yahoo’s help?).

Pulling back a bit. We’ve seen the risks of all this money being pumped into our economies, here. I figure that – given the sheer amount of it all – will become a problem fairly quickly. Perhaps. The advantage of debt-backed money is that it can disappear pretty quickly, as well. The question is what becomes of all the money being pumped into the economy? Does it fill in the holes left by all the debt dropping off the face of the earth (no real net effect), or does it generate yet more Greenspanian over-investment, later in the year?