Case Against Republican Deregulation

(And a case for oversight that will lead to wealth and job creation in Iowa. - promoted by desmoinesdem)

Iowa Deregulation Hearings:  Cedar Rapids & Burlington
Written full version of my oral testimony in Burlington.
I’m Brad Wilson, a Springville area farmer, and I sell local food.  I’m the representative from Iowa CCI to the board and executive committee of the National Family Farm Coalition.
I’m a big fan of Norman Rockwell’s painting “Freedom of Speech,” and I appreciate the opportunity to testify orally.  
I’m for balanced regulation.  Some regulations create tremendous wealth and jobs.  Some regulations destroy wealth and jobs.  
Bad Over-Regulation of Iowa’s Republican Deregulation Hearings
Thanks for listening.  That’s good wealth creation.  We must win the learning race.  That’s a hot idea in management consulting circles these days. The corporation that learns from customers much more deeply and quickly wins a crucial competitive advantage.
This morning in Cedar Rapids however, your state regulations, the regulations that guide how you run these meetings, prevented 9 of your customers from sharing knowledge, including my testimony on wealth creation, economic multipliers, and jobs multipliers. (Here, I hope your regulations will not prevent me from testifying about the overregulation of these very deregulation hearings.)
You knew how many people wanted to speak, fewer than 30.  You knew how much time had been allotted, 2 hours. Several years ago at a federal hearing run by US Senator Tom Harkin, he adjusted speaking times as needed to allow everyone to speak. In Cedar Rapids you stated that you could not allow the 9 people to speak for even 30 seconds to a minute.  
Additionally, we were skipped over because of a tiny regulatory technicality.  We hadn’t filled out one single short line on the form which asked for our topics.  I did not see the line.  (Note, when filled out, you then used this information to decide who got to speak first, which seemed to be people with Republican points of view, and who was vulnerable to being left out, including 3 members of Iowa CCI and others with similar perspectives).
All of this strikes me as just the kind of burdensome red tape that you have claimed is the purpose of these hearings.  I think your own regulations, where you said specifically that you couldn’t even let we 9 people speak for 10 seconds each are bad regulations. Your regulations allowed you to speak for 90 seconds telling 9 people that we couldn’t speak for even 10 seconds each. In order to have the right to fulfill Norman Rockwell’s ideal, under your regulations, I had to drive to Burlington, an extra 150 miles (round trip).
I see three levels where certain kinds of deregulation is anti-business, killing Iowa job creation and wealth creation, killing wealth multipliers.  I bring data from more than 300 research studies related to Iowa wealth an. d jobs creation.
State Deregulation and Bad Regulations VS. Iowa Wealth Creation
First, here in state government we have deregulation regulations, like House File 519, the hog factory bill.  That and other legislation from the former Branstad era, much of it based upon the North Carolina model of factory farm welfare, has paved the way for Iowa farm businesses to lose their main value added enterprises, livestock farming.   Most hog farming enterprises have gone out of business.  Today, with Branstad back in office, new policies are taking this even farther.  Proposed legislation along the same lines includes:  HSB 148, SSB 1126, HB 500, HB 558, HF550, and HF430.
In an article, “CAFOs VS. Rural Communities, John Ikerd, professor emeritus in economics from the University of Missouri, referred to various studies of factory livestock farming.  Ikerd wrote: “Virtually every study done on the subject in the past 20 years has confirmed the inevitable negative community impacts of CAFOs. Research consistently shows that the … economic quality of life is better in communities characterized by small, diversified family farms.”
 
Among the findings were that “The rich got richer and the communities got more poor people. The economic benefits went to a few wealthy investors, the new jobs were lower-paying than existing jobs, and communities were left with fewer middleincome taxpayers to support the community..”  Beyond this, Ikerd wrote that “A 2006 study commissioned by the North Dakota  attorney general’s office reviewed 56 socioeconomic studies concerning the impacts of industrial agriculture on rural communities. It concluded: ‘Based on the evidence generated by social science research, we conclude that public concern about the detrimental community impacts of industrialized farming is warranted. In brief, this conclusion rests on five decades of government and academic concern with this topic, a concern that has not abetted, but that has grown more intense in recent years,…’”  
Both groups of studies also found important environmental and social (ie. damage to small town social structure and civic life, the kinds of things that attract businesses to settle here,) damage caused by CAFOs, as other members of Iowa CCI have testified to here today.   This damage is also economically costly to Iowa.  The same is true for damage to our health.  On this latter point, Ikerd stated that,  “In calling for a nationwide moratorium on CAFOs, the American Public Health Association cited more than 40 scientific reports indicating health concerns related to CAFOs.” 
On the direct economic question, elsewhere Ikerd found that for each 1 hog factory job created, 3 independent hog farmers were lost.  Iowa’s wealth stimulating family livestock farmers lost this value multiplied wealth creation to low valued CAFOs, as Iowa and similar states slumped deeper and deeper into the “lagoons” of economic inefficiency and decline.  
Federal Deregulation VS. Iowa Wealth Creation
Irrationally designed federal deregulations (which were accompanyied by bad new corporate welfare overregulation, have also contributed in major ways to the devastation of Iowa’s farm business wealth creation system.  You need to know the research on farm commodity deregulation.  Farm commodities like corn and soybeans do not self correct in free markets.  They’re inelastic, especially for the groups of commodities grown in the various regions, such as corn and soybeans here, the addition of more wheat, oats, barley and grain sorghum farther west and north, and rice, cotton and peanuts farther south, for example.  Farm commodities lack “price responsiveness” on both supply and demand sides.  People don’t eat 4, 5, and 6 meals per day when wheat, corn, and rice are cheap, and farmers don’t stop planting their whole farms. There is abundant economic research data proving this point.  The plain fact is that crops like Iowa corn and soybeans do not self correct very much or very quickly under most market conditions, (ie. for the major commodities I’ve listed, over the past 140 years,) in deregulated, free markets and free trade.  As a result, prices are usually low, below the cost of production.   We had 7¢ corn at the elevator in Central City during the Great Depression, and lost our farm.  
Then we had the New Deal farm bill, which was a major, private sector, economic stimulus to pull us out of the great depression.  Then the banking committees in Congress put through the Steagall Amendment of 1941 as a private sector economic stimulus to enable us to fight World War II.  They didn’t write a stimulus check on the government credit card.  They raised the market price of farm commodities like corn, wheat, cotton and rice.  They argued at the time that 1 dollar produced on a diversified family farm generates 7 more dollars throughout the economy. 
In the New Deal and the Steagall Amendment, they gave balanced regulatory price floors ans ceilings, plus supply management, including reserve supplies. It fixed inelasticity.  Iowa corn, soybeans and other commodities were sold out of the state at living wage, fair trade prices for 11 years straight, 1942-1952.
But then agribusiness input corporations called for deregulation so that they could get Iowa grain cheap. The Agribusiness output complex called for an end to the balancing of supply and demand, so that they could sell more inputs.  In 1962, in “An Adaptive Program for Agriculture,” the 200 corporations of the Committee for Economic Development called for drastic deregulation, a major lowering of price floors, for the stated purpose of running farmers off of the land, “one third in a period of not more than five years,” and that was just the goal for one decade.  They called for a situation where Iowa got less income from agriculture, and then split it between fewer farmers. They even called for programs to get our rural youth to move away, for a deliberate Iowa (etc.) brain drain.  These corporate anti-stimulus programs were implemented inceasingly, from 1953 to today.  We then saw the farm crisis of the 1980s.  Early on, Governor Branstad said that Reagan was correct, that there was no farm crisis. Later he was forced to declare a moratorium on farm foreclosures.  We know now that under these deregulatory programs, farm return on equity was below zero throughout that period and that prices for a sum of 8 major farm commodities (corn, soybeans, wheat, rice, cotton, oats, barley, grain sorghum) were below full costs, by billions of dollars, every year 1981-2006, except 1996, as 208 USDA Economic Research Studies of Commodity Costs and Returns for these crops show. 
Later corporate CAFOs joined in lobbying for full deregulation, and price floors were reduced to zero in the 1996 Republican Freedom to Farm Act, with zero Commodity Title acreage reduction programs, zero emergency reserve programs, and zero price ceilings to protect consumers.  
As the failure of deregulation increased, government failed to self-correct itself.  They didn’t listen to the 10,000 farmers of the NFO who angrily threw up a huge mound of Sears Mail Order Catalogs outside of Veterans Coliseum in Des Moines in 1967, in protest against the leadership of a representative from Sears in producing the CED report.  They didn’t listen to those who camped out on the Mall in Washington during the 1970s, and who testified in hearings.  They didn’t self correct in response to similar protests throughout the 1980s farm crisis.  We know from the massive research data I’ve summarized here that all of these farmers and other activists were correct, but the politicians didn’t listen to them. Instead we heard the politicians like Reagan’s budget director, David Stockman, piggybacking onto the devastation of the CED report, describing the farm crisis as an economic goal of the administration. Reagan himself quipped that we should “keep the grain and export the farmers,” much as the CED called for a rural brain drain to our cities. 
Instead, the politicians, especially republicans, called for the government to simply write out checks to farmers for the increasing market failures, like Nixon’s deficiency payment program.  The Reagan era “Food Security Act of 1985” more than doubled corn and other subsidies, but reduced price floors even more, reducing US income from farm exports, even as the quantity of exports increased.  In 1996, the Republican “Freedom to Farm” combined deregulation to zero price floors, with massive new subsidies, then scheduled elimination of the subsidies.  It failed massively, bringing bankers to Washington to lobby with Iowa farmers against the impending farm crisis.  Again self correction was rejected.  Corn prices fell to where we had 8 of the lowest 10 years in history between 1998 and 2005, inclusive.  Meanwhile, from 1997 to 2005 2 CAFO corporations, Tyson and Smithfield, received more than $2.5 billion each in “implicit subsidies,” five times the amount of the largest entity in the Farm Subsidy Database (where, over a longer time period, a Rice cooperative, with 9,000 members, received $0.5 billion). 
On the bad overregulations that have been paired with federal deregulation, consider the case of wheat.  In today’s dollars, wheat subsidies for domestic consumption over the years add up to $40 billion in unneeded taxpayer costs.  Meanwhile, under these programs where America lost money massively on farm exports, U.S. taxpayers also shelled out another $50 billion so that foreign countries could get midwestern wheat at far below fair trade, living wage prices, even below our full costs of production for 27 years in a row (1980-2006).
We see, then, that federal deregulations, the massive failure of which was covered up by massive new corporate welfare regulations, also contributed to the destruction of Iowa’s best wealth and jobs generating, diversified (crop and livestock) family farmers.  
International Deregulation vs Wealth Creation
A third category of deregulation that damages wealth and jobs creation in Iowa is in the area of free trade agreements such as WTO, NAFTA, and various AFTAs, including the Korean Free Trade Agreement, that is now being discussed.  As I’ve already shown and documented in my paperwork, free markets and free trade do not work for farm commodities like corn and soybeans.  Free trade is another example of the kind of bad deregulation that has devastated wealth multipliers and jobs multipliers in Iowa.  
Today I did not bring along a copy of one of these free trade agreements to document my case.  You need to know that free trade isn’t just a simple paper saying you’re free to do what you want, not at all. Instead, free trade regulations are massive. The stack of papers for the larger agreements is 3-4 feet tall!  This “deregulation” is in fact, massive regulation, reams of it, prohibiting Iowa and the United States Government from passing balanced regulations. I sell local food.  Cedar Rapids and other governments are considering simple regulations to support Iowa’s own local food versus, for example, Chinese imports. Unfortunately, that’s just the kind of regulation that is illegal under these massive international deregulation regulations like the Korean Free Trade Agreement, which is massively supported by corporate agribusiness. China, even more than out of state American businesses, has a right to take Iowa to court, to the secret WTO courts, over just these kinds of pro-Iowa, economic development initiatives.  
A major impact of free trade agreements, is that it’s opened up markets in the US and in other countries to exploitation by the giant grain exporters and foreign countries.  Experts on agricultural concentration, estimate that just three agribusiness corporations, Cargill, ADM and Bunge, handle about 80% of the world’s farm commodity trade. Based upon Cargill’s corn exports alone, I estimate that, for all commodities, and including their processors and CAFOs, these three have long received annual “implicit subsidies”  (below cost gains,) from deregulation that amount to multibillions annually.  
You can’t keep inelastic farm prices up under conditions of free trade.  You can’t stop grain leaving the US (or Iowa,) from being priced far below our costs, when such enormous corporations can so easily drive down our world prices.
Cranking Up Wealth Multipliers:  A Better Alternative
Iowa needs balanced and sensible government oversight to protect value creation here.  In today’s highly competitive economic culture, Iowa must not merely “add value” for special interests, at the expense of overall jobs creation and wealth multiplication, and at the expense of massive “externalized” costs in areas such as damage to our health, environment and culture.  Instead we must reconcile a wide range of values related to matters such as macro and micro economics, ecology, technology, animal husbandry, energy, health, politics and community.  Up front we must win the learning race, learning especially from the exceptionally well educated grassroots citizens of Iowa. Paradoxically, we must balance and optimize these values in order to then maximize our well being as “Iowa, the beautiful land,” the rich land, the diverse land that our brightest children, along with like-minded and similarly hard working new “immigrants,” from other states and lands, will cherish, renew and preserve.  
  • Export the farmers

    That Reagan quote is seldom repeated these days.  I can’t even find it in the Reagan book Tear Down This Myth.

    What is the source of the claim that eight of the ten lowest corn prices were 1998 to 2005?  What were the other two lowest years?

  • I use USDA data

    I am “the source of the claim that eight of the ten lowest corn prices were 1998 to 2005” based upon USDA data (and similar claims: ie. google my name and “food price index”). The other two lowest years for corn were 1992 and 1986. I haven’t seen figures (ie. adjusted for inflation) used in any discussion of recent “skyrocketing” “record” farm prices.

    The USDA data I used (ie. for corn prices going back to 1866) can be found in “Crop Production: Historical Track Records,”  (http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1593).  I’ve used a GDP deflator to adjust for inflation.  These figures can be found here:

    http://www.ers.usda.gov/Data/F… (scroll down to the link) or use the online calculator here:  http://www.measuringworth.com/…  

    The first GDP deflator uses figures that must be reversed to calculate the corn prices for past years (ie. prices in 1929 were lower, so multiply them by a higher number).  There are fairly easy ways to do that if you’re interested.  There are also tricks to getting data out of the Track Records book and onto spreadsheets.

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