Power & Market

In the Aftermath of Hurricane Michael, Civil Society and Voluntary Action Saved Lives

25 min agoTho Bishop

Last week my hometown of Panama City was devastated by Hurricane Michael, the most powerful storm to make landfall in over 50 years. The aftermath on the ground is impossible to comprehend without seeing first hand: buildings destroyed, trees scattered, basic infrastructure like water and power remain down for most of the county. To the east, the city of Mexico Beach has few structures that remain standing after receiving the brunt of wind and storm surge. Residents of rural areas such as Chipley and Marianna are forced to navigate around roads still impassable due to the considerable debris that remains.

I was able to visit Bay County this past weekend to bring supplies to friends and family. For all the horror the storm brought, it’s also demonstrated the best of what society has to offer. In the face of incomprehensible hardship is a community that has rallied around each other for strength, comfort, and survival.

While Federal, state, and local governments have been quick to respond to the storm's aftermath, much of this work has been the spontaneous action of residents both in and outside of the impacted areas. The aftermath of Hurricane Michael is the perfect illustration of the importance of civil society and voluntary action given the inherent limits of state action.

As soon as Michael made landfall, the first priority for anyone with loved ones in the path of the storm was trying to find a way to check on their wellbeing. Immediately the limitations of traditional emergency services to offer assistance help became clear. With 9-1-1 simply unable to handle the volume of requests coming in, social media became an invaluable tool for organizing rescue efforts. In many cases complete strangers stepped up to report on the wellbeing of residents thorough out the area, an immeasurable relief to friends and family who had no other option.

Of course social media requires internet access, and here too competition in cellular infrastructure has proved invaluable for recovery efforts. Damage done to Verizon’s network not only took away cell service for tens of thousands of customers, but took away the main service provider for Bay County emergency personnel. Access to AT&T’s network or other hot spots managed to provide semi-reliable means of communication, which became the backbone of continuing volunteer efforts.

Another vital means of communication has been commercial radio stations, particularly the network of stations under the umbrella of iHeartRadio. Not only did these stations provide a constant stream of information throughout the affected areas, but provided an outlet for requests far beyond anyone’s individual social network. Lives have literally been saved as callers have had requests for oxygen, medicine, water, and other necessities met within minutes after being shared on air. It’s also helped direct a legion of volunteers armed with chainsaws – now dubbed the Chainsaw Army – to help clear out parts of the city that are too isolated to be priorities for government-led rescue efforts.

Businesses, churches, and other organizations have also stepped up to feed, assist, and shelter thousands of those in severe need as well. Restaurants, bars, and even “illegal” Facebook food groups quickly emerged as pop-up soup kitchens, clearing out freezers to give hot meals to those that have lost anything.  Food trucks and other groups from around the country have stepped up as well, truckloads of food, water, tarps, and other vital supplies making their way into the area for distribution.

Another way we’ve seen voluntary cooperation emerge is the reaction to the darker side of human nature that comes out in a time of crisis. Reports of looting began just hours after the hurricane hit, and quickly spread well beyond those “salvaging” resources from stores devastated by Michael. With law enforcement faced with higher priorities than property protection, it’s been up to citizens to protect themselves – with many banding together to help look after their neighborhoods.

It’s also worth re-emphasizing that this praise of voluntary coordination in the aftermath of crisis is not at the expense of what government officials have been able to accomplish in the area. All parties involved, from first responders to state organized shelters to power companies have done incredible work over the past week. What we see, however, is the basic limitations of what a government can do for the public in a time for crisis – even when motivated with the best of intentions – and the importance of community beyond the state. The fact the community has been, for the most part, freed of heavy handed government management is precisely what has allowed for such a quick and vibrant response to the storm.

This becomes all the more clear when contrasted to a very different sort of catastrophe that hit the gulf coast: the Deep Horizon Oil Spill. In that case, efforts made by outside entities to assist with clean up were frequently turned down by the Federal government which claimed total control over the situation. Labor to help deal with the fall out on land was tightly regulated by OSHA requirements. Road block after road block emerged to stall the very sort of spontaneous order that a civil society offers. If such a centralized and bureaucratic response to a disaster was replicated this past week, many more lives would have been lost and far more even worse off than they are today.

Hurricane Michael brought destruction that the Florida panhandle has never seen before, but it failed to break the community it impacted. Thanks to the incredible and voluntary actions of countless number of residents, lives have been saved and the steps to recovery have already begun.

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US Taxpayers Are Paying to Train Mercenaries Who Then Work for Mideast Dictators

55 min agoRyan McMaken

Aram Roston reports on how Mideast dictatorships now hire former US military personnel to form what are essentially death squads designed to eliminate the regimes' enemies:

The revelations that a Middle East monarchy [UAE] hired Americans to carry out assassinations comes at a moment when the world is focused on the alleged murder of dissident journalist Jamal Khashoggi by Saudi Arabia, an autocratic regime that has close ties to both the US and the UAE. (The Saudi Embassy in the US did not respond to a request for comment. Riyadh has denied it killed Khashoggi, though news reports suggest it is considering blaming his death on a botched interrogation.)

Golan said that during his company’s months-long engagement in Yemen, his team was responsible for a number of the war’s high-profile assassinations, though he declined to specify which ones.

Where do these kill teams come from and where do they get their training and experience? They get it from the US military and the US taxpayer.

Last month, I wrote on how the US military is becoming increasingly reliant on mercenaries to staff military operations. This makes it easier for the Pentagon to ratchet up military conflicts while still claiming that it is reducing boots on the ground. It can do this because the Pentagon doesn't report details on how many mercenaries it's using or where they are. Essentially, mercenary forces are a sort of human slush fund which allows the Defense Department more leeway in doing whatever it wants, while sharing precious little information about it with Congress or the taxpayers.

Thus, the US treasury subsidizes the creation of these mercenary forces that then become adjuncts of foreign governments. Roston concludes:

The long US wars in Afghanistan and Iraq have relied heavily on elite special forces, producing tens of thousands of highly trained American commandos who can demand high private-sector salaries for defense contracting or outright mercenary work.

He's right about that, but then makes a rookie mistake: he refers to the movement toward mercenaries as a "privatization" of war, saying, "War has become increasingly privatized, with many nations outsourcing most military support services to private contractors, leaving frontline combat as virtually the only function that the US and many other militaries have not contracted out to for-profit ventures."

I see this mistake made over and over, and everyone needs to stop calling this sort of thing "privatization." When the government hires a construction firm to build a government highway, is that "privatization" of the highway system? No one thinks that, and for good reason. Similarly, it is not privatization when a state — whether its the US government or the UAE — hires a private firm to execute some aspects of the government's wars. These wars are state-on-state wars. There may be some truly private organization at play, but they're on the receiving end of the mercenaries' violence.

Historically, we call private military forces "irregulars" or "guerrilla" forces. There's gray area there, but, broadly speaking, truly private military forces don't have a legally enforceable contract with an officially-recognized regime. They're often not loyal to any extant state, and they often don't even get paid by any organization recognized as a state.  Clearly, this doesn't describe these American mercenaries who likely have a signed contract with the UAE dictators, and money is paid in return for certain killings.

This is government money, spend on a private firm to carry out a government agenda. This is not privatization.

As the number of experienced American mercenaries continues to grow — thanks to 18 years of non-stop American wars, it will be interesting to see how many Americans military contractors have their hands in various assassinations, bombings, and other killings carried out on enemies of far off regimes.

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Great Social Media Purge of 2018

4 hours agoAlan Mosley

Back in the ancient news cycle of August 6, 2018, Alex Jones, host of The Alex Jones Show and curator of Infowars.com, was deplatformed in a coordinated effort by multiple social media and content streaming services. The list of companies, whose simultaneity was surely a coincidence, is quite impressive: Facebook, Apple, YouTube, Spotify, Vimeo, Pinterest, MailChimp, and LinkedIn. The debate on free speech versus hate speech raged on for the customary week or two as the news cycle dictated, with many libertarians and conservatives willing to leave Jones to the proverbial wolves. Perhaps Alex Jones wasn’t an attractive enough martyr for the cause. But to those who stood on principle against these social media giants, this was a sign of things to come. Editors for the Free Thought Project spoke out against such censorship on the grounds that it may only be Alex Jones today, but FTP would be next.

How right they were.

At thefreethoughtproject.com, Matt Agorist wrote, “What makes this recent purge from Facebook and Twitter so egregious is that the pages like the Free Thought Project, the Anti-Media, Press for Truth, and dozens of others, did not fit the hate speech narrative these same companies used to wipe out Alex Jones. Instead, these pages were dedicated to spreading peace, bridging the divide, bringing humanity together and holding government accountable.”

It’s true that Jones has made more than his share of controversial statements, including claiming that the Sandy Hook Elementary School shooting in 2012 was a hoax, but this kind of controversy does not follow sites such as the Free Thought Project; Facebook even admitted they were not targeted for promoting violence or spreading “fake news.”

So what were the determining factors that led to this round of deplatformings? According to a statement co-authored by Facebook’s Head of Cybersecurity Nathaniel Gleicher, the 559 pages and 251 accounts purged had, “consistently broken our rules against spam and coordinated inauthentic behavior.” The statement continues, “This inauthentic behavior consists of sensational political content, regardless of its political slant, to build an audience and drive traffic to their websites…posting in dozens of Facebook Groups, often hundreds of times in a short period, to drum up traffic for their websites.”

As Caitlin Johnstone wrote at Medium.com, Nathaniel Gleicher is also the former White House National Security Council Director of Cybersecurity Policy.

What a small world!

Is there any truth to Facebook’s claims about “inauthentic activity”? It’s easy to become instantly enraged by the censorship, considering that it appears to be punishing alternative media groups for “driving traffic to their websites.”

This hardly seems like an egregious sin. And if consistently applied, would this standard not also include major news outlets such as CNN, MSNBC, and Fox News?

Additionally, the deplatformings seem conspicuously coordinated, as a number of affected organizations found their accounts suspended all at once, one the same day, on multiple social media sites.

There is some logic to Gleicher’s explanation, but Facebook’s application of its rules has been wildly inconsistent. People rushed to share tales of the purge, showing account holder screenshots with multiple banned pages and profiles. Unfortunately, it’s the operation of so many pages and accounts by the same individuals that possibly got them caught in this little sting operation. When users were identified as sharing their clickbait in “dozens of groups, hundreds of times over a short period,” they were attempting to game the system by boosting likes and shares in an attempt to drive themselves higher in news feeds. An issue with consistency notwithstanding, this sort of activity is considered spam and inauthentic behavior by Facebook. They are hardly the first to adhere to such a policy. Reddit.com bans users who are found to operate multiple accounts in order to up-vote the submissions by their primary account.

To be clear, I am not criticizing indie media for doing everything they can to spread their message. Those of us in the liberty community will remember Congressman Ron Paul and his foreign policy warnings against “blowback,” — the CIA-coined term for the unintended retaliation for U.S. foreign interventions. But blowback is not limited to the world of foreign policy; it’s also a social phenomenon. When Facebook made drastic changes to its algorithm crippling the reach of alternative media and independent content creators, it prompted these same creators to find ways to circumvent the algorithms. This kind of “throttling” is nothing new. The Gold Standard with Alan Mosley once enjoyed a reach of over 70,000 for its updates and episodes, even without any budget for Facebook Ads. These numbers were common as recently as May, but even with the purchase of Facebook Ads, results have been catastrophically lower since June. Now The Gold Standard is fortunate to receive a quarter of the reach, even though it sports all-time highs in likes and follows.

So what will the community-at-large do in response to this latest social media purge?

Sure, there were some that rushed to defend Alex Jones, but many more decided to put their momentary e-safety far above the principle of defending free speech. But those of us who believe in the free market should put our money where our mouths are. There is more than just circumstantial evidence to suggest that many of the major media outlets are coordinated, both with each other and Big Brother, to silence dissenting voices. When you read an article, listen to a podcast, or watch a video, make sure to like/share/subscribe to the original feed in order to keep them in the public view despite the reproach of the elite. Better yet, follow these content creators to their new destinations, and prepare to unplug from outlets that don’t respect your freedom to choose what information to consume.

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Ten Years After the Last Meltdown: Is Another One Around the Corner?

10/16/2018Ron Paul

September marked a decade since the bursting of the housing bubble, which was followed by the stock market meltdown and the government bailout of the big banks and Wall Street. Last week’s frantic stock market sell-off indicates the failure to learn the lesson of 2008 makes another meltdown inevitable.

In 2001-2002 the Federal Reserve responded to the economic downturn caused by the bursting of the technology bubble by pumping money into the economy. This new money ended up in the housing market. This was because the so-called conservative Bush administration, like the “liberal” Clinton administration before it, was using the Community Reinvestment Act and government-sponsored enterprises Fannie Mae and Freddie Mac to make mortgages available to anyone who wanted one — regardless of income or credit history.

Banks and other lenders eagerly embraced this “ownership society”’ agenda with a “lend first, ask questions when foreclosing” policy. The result was the growth of subprime mortgages, the rush to invest in housing, and millions of Americans finding themselves in homes they could not afford.

When the housing bubble burst, the government should have let the downturn run its course in order to correct the malinvestments made during the phony, Fed-created boom. This may have caused some short-term pain, but it would have ensured the recovery would be based on a solid foundation rather than a bubble of fiat currency.

Of course Congress did exactly the opposite, bailing out Wall Street and the big banks. The Federal Reserve cut interest rates to historic lows and embarked on a desperate attempt to inflate the economy via QE 1, 2, and 3.

Low interest rates and quantitative easing have left the Fed with a dilemma. In order to avoid a return to 1970s-era inflation — or worse, it must raise interest rates and draw down its balance sheet. However, raising rates too much risks popping what financial writer Graham Summers calls the “everything bubble.”

Today credit card debt is over a trillion dollars, student loan debt is at 1.5 trillion dollars, there is a bubble in auto loans, and there is even a new housing bubble. But the biggest part of the everything bubble is the government bubble. Federal debt is over 21 trillion dollars and expanding by tens of thousands of dollars per second.

The Fed is unlikely to significantly raise interest rates because doing so would cause large increases in federal government debt interest payments. Instead, the Fed will continue making small Increases while moving slowly to unwind its balance sheet, hoping to gradually return to a “normal” monetary policy without bursting the “everything bubble.”

The Fed will be unsuccessful in keeping the everything bubble from exploding. When the bubble bursts, America will experience an economic crisis much greater than the 2008 meltdown or the Great Depression.

This crisis is rooted in the failure to learn the lessons of 2008 and of every other recession since the Fed’s creation: A secretive central bank should not be allowed to manipulate interest rates and distort economic signals regarding market conditions. Such action leads to malinvestment and an explosion of individual, business, and government debt. This may cause a temporary boom, but the boom soon will be followed by a bust. The only way this cycle can be broken without a major crisis is for Congress both to restore people’s right to use the currency of their choice and to audit and then end the Fed.

Reprinted with permission.

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How Two Venezuelans View American Socialists

Democratic socialists in America are trying to introduce their ideology as something new, when in fact, they are only retreading old-fashioned ideas that history has already disproven. They are ideas that have led to the economic devastation of every country in which they have been implemented.

Having seen the effects of this ideology on our home communities in Venezuela, we feel compelled to warn Americans that if they allow socialism to spread in the United States — as it has done in Venezuela — they will condemn their country to a future of misery.

We know that young people, sometimes, grow enamored with utopian ideals. The movements that cater to them are often labeled as many different movements, whether “social democrats,” “ social Christians ,” or “progressives.” These movements work hard to address their speeches and campaigns to the youth.

There’s nothing new about this. Even Friedrich Hayek admitted he believed once in this system as a young man, noting “Socialism promised to fulfill our hopes for a more rational, more just world… we have been looking for improvement in the wrong direction.”

Now young Americans are hearing and believing in promises similar to what Venezuelans did in the 50’s, and well into the period of Chavismo, that began in 1998 . The promises include “free healthcare,” “free education,” “a right to a job,” “free housing,” “gun control,” and, of course, that old-fashioned socialist motto “a state that works for you” (which really means, “ supports you”)

It is evident that a new generation of politicians want to be elected on this basis, and they have found a way to win by mobilizing people who agree with their ideas. So, they will continue promoting a climate of confrontation and division because they have no interest in convincing others who do not already think like them.

As with Hugo Chávez in his moment , this new generation of American politicians has the support of almost all mainstream media, some economic elite, and the academic world. They have been invited to appear on many of the most important TV shows, which gives them an excellent platform and increase their media presence, and generally they are treated with a soft and delicate indulgence. While other politicians have to fight for open their own spaces in the media and handle rude and non-friendly interviewers, these socialism-friendly politicians have had everything, as we say in Venezuela “served on a silver platter.” It is a true that second-hand dealers of ideas still do their work, as Hayek stated.

Finally, Americans have to be sure of something. The devastation that comes with a socialist political victory will not occur immediately. In our country, 40 years of progressive eradication of our economic freedom — before the Chavismo — were needed to reverse the great economic success of the “Economic Miracle” we enjoyed from 1950 to 1958. The problem is that the groundwork of this movement in the United States is sowing the seeds of a cultural and educational change — as was done from 1958 to 1998 in Venezuela. It won’t happen immediately, but eventually, the idea of getting something for nothing could come to dominate and in that moment — as is currently in Venezuela — it will be almost impossible to recover the freedom through a democratic system. At that point, it would become necessary replicate the Singapore experience.

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The Purge Is Growing: More Anti-Establishment Web Sites Purged from Social Media

10/12/2018Ryan McMaken

ZeroHedge reports:

Just in time for midterms, Facebook has removed 559 pages and 251 accounts they claim have been spreading misinformation and spam. Several of the pages however - some with millions of followers, were pro-Trump conservatives who had spent years cultivating their followings.

Caitlin Johnstone explains a bit more:

Facebook has purged more dissident political media pages today, this time under the pretense of protecting its users from “inauthentic activity”. In a statement co-authored by Facebook Head of Cybersecurity Nathaniel Gleicher (who also happens to be the former White House National Security Council Director of Cybersecurity Policy), the massive social media platform explained that it has removed “559 Pages and 251 accounts that have consistently broken our rules against spam and coordinated inauthentic behavior.”

This “inauthentic behavior”, according to Facebook, consists of using “sensational political content — regardless of its political slant — to build an audience and drive traffic to their websites,” which is the same as saying they write about controversial things, and posting those political articles “in dozens of Facebook Groups, often hundreds of times in a short period, to drum up traffic for their websites.”

In other words, the pages were removed for publishing controversial political content and trying to get people to read it. Not for writing “fake news”, but for doing what they could to get legitimate indie media news stories viewed by people who might want to view it. The practice of sharing your material around in Facebook groups is common practice for most independent media content creators; I did it myself a lot in late 2016 and early 2017, and pretty much all my indie media peers at the time did too.

Among the sites banned are government accountability sites, as explained by Radley Balko:

As part of its purge, Facebook has removed the pages of several police accountability/watchdog/critic groups, including Cop Block, the Free Thought Project, and Police the Police. They've also apparently severely restricted activity for the Photography Is Not a Crime page.

The purge has clearly been coordinated between both Facebook and Twitter, which have banned many of the same sites at the same time.

Notable this time, however, many of the sites being banned are left-wing sites devoted to anti-war causes, or in calling the government out on abuses of power. In this purge and in previous purges, however, many of the banned sites, whether right or left have one thing in common: they are anti-establishment.

So, media outlets that call for the mass murder or Yemenis or Syrians or Iranians, or which look the other way as domestic agencies violate the civil rights of Americans, will be perfectly find. But if you draw attention to these abuses of power? Then, it's "propaganda" and must be banned. 

It's impossible to predict who the next purge will target, but now is a good time to remind everyone that the best way to ensure you receive mises.org's content every day is to sign up for our daily email. Simply click on the "subscribe" button on the main page.

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Using this Inflation Measure, Wage Growth Isn't Keeping Up with Inflation

10/11/2018Ryan McMaken

As we've noted here in the past, the Federal reserve in recent months has begun publishing its " Underlying Inflation Gauge " which takes into account a broader measure of inflation than the more-often used CPI measure.

When we say "inflation" in this context, of course, we mean price inflation, and not money-supply inflation. And it may prove to be a useful measure when comparing if we wish to compare price-inflation growth to wage or income growth.

After all, if incomes and wages aren't keeping up with price growth, then it may be that the cost of living is outpacing incomes — and thus real incomes are going down.

One simple way of looking at this is simply to compare growth rates in price-inflation measures against average hourly earnings.

Using the BLS's measure of " Average Hourly Earnings of Production and Nonsupervisory Employees " we can compare the year-over-year growth in earnings to the year-over-year growth in the CPI and the UIG:

uig_earnings.JPG
 

In this case, we see that earnings in recent months have tended to outpace the CPI, but have not outpaced the UIG measure.

In fact, in the last 24 months, the CPI has outpaced earnings growth in only 5 months out of the 24. Thus, by t his measure, at least, it looks like real wages are growing.

However, if we compare earnings growth to the UIG measure, we find that price inflation as measured by the UIG has outpaced earnings growth in 16 out of the last 24 months.

Indeed, since 2011, the UIG has either been equal to or higher than earnings growth nearly half the time (in 42 out of 89 months).

In this graph, any time the green line is below zero, that's a month in which UIG price inflation was higher than earnings growth:

earnings_growth.JPG
 

Using this measure, we could conclude that earnings aren't keeping up with price inflation a significant share of the time. Naturally, if wages aren't keeping up with inflation, this would point to declining real wages.

Most of the time, however, we adjust income and wage data to the CPI only — and in that case, incomes tends to grow faster than price inflation more often.

In the last two years, we've finally begun to see income and wage growth climb above the old 2007-2008 peak levels. But that's using CPI numbers. Wage growth may not stack up nearly as well if other, broader measures of price inflation are used.

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Fed: "Underlying Inflation" Climbs to 13-Year High

10/11/2018Ryan McMaken

According to the Federal Reserve's Underlying Inflation Gauge, the 12-month inflation growth in June (the most recent month reported) was at 3.33 percent. That's the highest rate recorded in 158 months, or more than 13 years. The last time the UIG measure was as high was in April 2005, when it was at 3.36 percent. 

The Fed began publicly reporting on new measure in December of last year, and takes into account a broader measure of inflation than the more-often used CPI measure.

uig.JPG

Not shockingly, the UIG has shown a higher rate of inflation than the CPI, most of the time in recent years, although this gap has narrowed in recent months.

For both CPI and UIG, the general trend has been upward since 2014. The UIG, however, stands out because it shows a sizable amount of price inflation compared to the recent past. the CPI growth rate, for example, remains below where it was in 2011, while we must go all the way back to 2004 to find a UIG growth rate comparable to what we're seeing now.

Moreover, the UIG holds promise as a better indicator of an approaching recession. For example, we know that the economy was already softening in 2006 and into 2007 before the last financial crisis. And yet the CPI shows continued and sizable growth right up until late 2008 even though the Great Recession had started in late 2007 — at least according to the NBER. The UIG, however, shows weakening prices before both of the two most recent recessions.

The most recent UIG data, however, is fairly old — being June data — so it remains to be seen if there is any sign, by this measure, of a weakening economy in late 2018.

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Tom Woods on Reason TV: The Making of an Anti-War Libertarian

Tom Woods joined Matt Welch of Reason TV for a wide ranging interview with topics including his transformation from a pro-war Republican to a passionately anti-war libertarian, the impact of Ron Paul on the liberty movement, and politics in the age of Donald Trump. 

Tom Woods: The Making of an Anti-War Libertarian

 

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Trump's Corny New Farm Bailout May Ruin Your Car

10/09/2018Tho Bishop

This week the Trump administration announced it will giving a major gift to American corn farmers by expanding the sale of ethanol in the US.

As Eric Wolff of Politico reports:

Trump, a vocal supporter of corn ethanol, will order EPA to allow year-round sales of gasoline with 15 percent ethanol content, an increase over the 10 percent blends that are sold at most gas stations around the nation. The sale of the blends, known as "E15," is currently prohibited during the summer months in several states because of Clean Air Act restrictions, and corn growers have long sought to expand sales of the higher concentrations.

"This is a big deal," said Jeff Navin, a Democratic former aide to ex-Senate Majority Leader Tom Daschle of South Dakota and former chief of staff in the Obama administration's Energy Department. "It's not something that makes a front page of East and West Coast newspapers, but it's something that farmers watch closely. I’m sure the political team and elected officials in Iowa told [Trump] he has to do something to staunch bleeding."

The “bleeding” in this case is the hit the farm industry has taken as a result of Trump’s trade policies. While last week’s agreements with Mexico and Canada offered Trump “winning” headlines, the changes to NAFTA will do little to offset the hit farmers have taken as a result of the administration's antagonistic approach to China and other foreign markets. The timing, a month away from mid-terms, is likely not a coincidence as Trump seeks to bolster his standing with one of his key bases of support in 2016.

Though the legality of the EPA’s waiver is likely to be challenged by Big Oil, this move is a major victory for ethanol special interest groups. As Emily Skor, the CEO of a prominent ethanol trade association, boasted after the announcement:

We’re very excited to hear the president’s upcoming announcement. He knows farmers are hurting and they want action on E15 in time for the next summer driving season. Year-round sales of E15 nationwide could deliver demand for two billion bushels of American corn and help restore growth in rural communities.

Unfortunately this win for farmers is another example of how the public are the ones that inevitably pay the cost for Trump’s trade battles.

First of all, ethanol never made much sense as a form of fuel. It’s “success” was a direct result of political subsidies – in no small part aided by Iowa’s coveted position as the first presidential contest every four years. For years the industry was reliant upon tax credits that made the price of ethanol profitable. Even though those tax credits were finally allowed to expire in 2012, ethanol has continued to be propped up due to the EPA’s Renewable Fuel Standards. As the name suggests, the Bush-era policy is a mandate that fuel sold in the United States much contain a certain percentage of “renewable fuel.” In the words of Aaron Smith of AEI, “Removing the tax credit but keeping the RFS is like scraping a little frosting from the ethanol-boondoggle cake.”

The result has been government-driven demand for corn-based ethanol. The consequences of this policy include rising food prices, as it not only directly drives up the price of corn but also incentivizes farmers to grow corn at the expense of other crops.

As Randy Holcombe tried to calculate the costs for tax payers in a 2015 Mises Wire article:

The U.S. Department of Agriculture says in 2011 the total value of the corn crop was $63.9 billion, and that there were 400,000 corn farms in the United States. Because the price of corn has doubled due to the mandate, half of that revenue, or $31.95 billion, is a transfer from consumers to corn farmers in the form of higher prices.

Dividing that $31.95 billion cost among 319 million Americans, the cost to each American from the ethanol mandate is just about $100 a year. That includes not only the price of ethanol, but the higher price of corn in all its other uses.

That $31.95 billion is shared among the 400,000 corn farmers, so the average benefit to each farmer is $79,875.

Of course, there is another downside to government ethanol mandates – it’s not particularly good for automobiles.

As Eric Peters noted earlier this year:

The reason the ethanol content of mainstream “gas” has so far been limited to 10 percent is because higher ethanol content will damage engines (and fuel storage/delivery systems) not specifically designed to handle it. The stuff accelerates rusting of gas tanks and fuel lines and can damage rubber seals and gaskets not designed to withstand it – the latter potentially leading to fuel leaks and fires....

Very few cars of any vintage – including most new/recent-model cars – are designed to handle “gas” that is more than 10 percent ethanol. Owners of these vehicles are specifically warned not to use “gas” with more than 10 percent ethanol unless specifically told it’s okay. Advised that using more than E10 if not specifically okay’d will void the warranty and leave them holding the bag for any damage done to the engine and related components, such as the fuel tank, fuel pump and fuel lines.

So here we have a great illustration of the heavy hand of government at work:

  • Government hurts farmers by increasing the cost of doing business overseas.
  • Government creates a new government policy to help farmers.
  • Costs of the policy are passed on to consumers, with the added collateral damage of hurting our cars.

“I’m from the government and I’m here to help.”

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