Thursday, July 25, 2019

What did Donald Trump do today?

He tried to pick up some of the pieces of his trade war.

Trump's Department of Agriculture today unveiled the specifics of the second taxpayer bailout of farms made necessary by his trade war with China. It has $14.5 billion in tax dollars being doled out to farm businesses—not all of them Americans or real farmers—through a Great Depression-era emergency program still on the books.

The bailouts are unpopular with farmers, whose businesses are more stable and valuable when they sell their goods on an international market than when they are forced to rely on handouts. The longer American farmers are shut out of Chinese-dominated markets, the less likely they are to be able to re-enter them as competitors. 

Trump appears to be deliberately overpaying farmers, relative to the market value of their crops, in an attempt to stave off political disaster. But setting prices artificially high affects the stability of agricultural markets (and wastes money). 

It also means that the total revenue increase from all of Trump's new tariffs isn't even enough to pay for the bailout of just the agriculture sector. (Tariffs are taxes paid through increased prices by American consumers when they buy foreign goods.)

Meanwhile, Trump insists whenever the subject comes up that farmers support his trade war and have told him so personally. In reality, many (manymany, many, many, many) farmers have been openly calling for Trump to end his trade war immediately.

A spokesperson for Trump admitted that the trade war had "persisted longer than we expected." Where Trump is concerned, this is at least true: he insisted more than a year ago that "trade wars are good and easy to win."

Why does this matter?

  • The stability of American agriculture is much, much, much more important than Donald Trump's re-election campaign.
  • Generally speaking, if your policy hinges on paying big political bribes, it might not be the best policy.
  • It's really bad if the president can't understand basic economic principles.