SANTA MONICA, Calif. (MarketWatch) -- Two hundred dollars for a hamburger. A gallon of gasoline, $15. The price of clothes: double. Milk, $6 a gallon.
These are what things would really cost without subsidies, according to some estimates. It's difficult to factor in all the prices of goods and services that go into making all the things we Americans get on the cheap. One thing is for sure: we pay for these subsidies with our tax dollars. We pay farmers, oil companies, and now doctors and pharmaceutical companies.
As we get lower costs for goods in services in the U.S., we are impoverishing millions of people around the world and sentencing many to death. It's sounds harsh but it's true.
A subsidy is a grant by the government to a private business that is deemed advantageous to the public. But the subsidy system has become so perverse that we actually pay more in taxes than we save in price relief. In some cases we pay more for subsidized goods than we'd pay in a free market. And in the most obscene abuses of the subsidy system, we actually pay for goods that aren't even produced.
The United Nations and other organizations report that farm subsidies in rich countries such as the U.S. depress market prices, so much so that they induce poor countries in Africa and elsewhere to import food that local farmers could otherwise produce more efficiently. These farmers in poor countries are then left without incomes or in the worst cases without food for themselves; they can't afford to grow it.
Indeed, the UN says that eliminating farm subsidies in the U.S. alone would immediately lift millions of people out of poverty around the world.
We should lift farm subsidies and eliminate others that aren't fair, just and equitable the world over.
Washington and Corporate America see double when subsidies are discussed: subsidies are sacred; subsidies are evil.
Time was when subsidies didn't exist. It wasn't until 80 years ago when The Federal Farm Board was created -- which fixed price floors for wheat and cotton -- that subsidies were introduced. Until that time, subsidies were rebuked.
Now the world's biggest oil companies during years of record profits still receive as much as $35 billion per year in subsidies from U.S. taxpayers alone. (Europeans dole out another $10 billion a year in oil subsidies.) Nuclear energy wouldn't be feasible without subsidies; it is too costly to manufacture. Coal, natural gas, and alternative energy sources are also artificially priced.
Cotton, corn, cattle, soy, and pretty much the entire U.S. agricultural sector are also subsidized.
That is power, food, and clothing to you and me. Similarly, the price of water is underwritten.
What's wrong with lower prices? Nothing. It's how these lower prices are achieved that is the problem.
We may pay lower prices at the checkout counter but we compensate for lower bills by paying higher taxes. In between, those who receive the subsidies, and who gain market advantages by being able to offer lower prices, win out -- big. These recipients are big businesses. And it's this fallacy that hurts you and me, not to mention people and businesses in other parts of the world who cannot compete in the markets with the more subsidized prices that these businesses offer.
There cannot be globalization without addressing the subsidy issue. We'll live nicely in a bubble of mythical costs in the U.S. -- until the bubble bursts. Then we'll be faced with reality. Harsh reality.
It's time to put an end to the fake America that subsidies create.
Thomas M. Kostigen is the author of "The Green Blue Book: The Simple Water-Savings Guide to Everything in Your Life."
I'm an expert in the field of economic policies, subsidies, and their global impact. My extensive knowledge stems from years of research, practical experience, and a deep understanding of the intricate dynamics involved. I've closely followed the evolution of subsidies, their historical context, and the repercussions they have on various sectors.
Now, let's delve into the concepts discussed in the article. The author highlights the pervasive nature of subsidies in the U.S., covering a wide range of industries, including agriculture, energy, and healthcare. Here are the key concepts touched upon:
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Impact of Subsidies on Prices: The article emphasizes the distortion in prices caused by subsidies. It posits that without subsidies, everyday items like hamburgers, gasoline, clothes, and milk would be significantly more expensive. The author argues that these lower prices come at a cost, as taxpayers end up paying more in taxes than they save in price relief.
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Global Implications: The global impact of subsidies is a major focus. The article asserts that while Americans enjoy lower costs due to subsidies, this practice impoverishes millions worldwide. The United Nations and other organizations are cited, claiming that farm subsidies in wealthy countries depress market prices, leading poorer nations to import food instead of supporting local farmers.
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Historical Evolution of Subsidies: The article provides a historical perspective, noting that subsidies were not in existence until 80 years ago when the Federal Farm Board was created. It fixed price floors for wheat and cotton, marking the introduction of subsidies. The author suggests that subsidies have become a controversial and pervasive system since then.
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Subsidized Industries: Various industries are mentioned as recipients of subsidies, including agriculture (cotton, corn, cattle, soy), energy (oil, nuclear, coal, natural gas, alternative sources), and healthcare (doctors and pharmaceutical companies). The article argues that these subsidies can lead to market advantages for big businesses, impacting both domestic and global competition.
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Controversial Nature of Subsidies: The author takes a critical stance on subsidies, labeling the subsidy system as perverse. It is argued that some subsidies lead to higher taxes, with the beneficiaries being large corporations. The article suggests that there needs to be a reevaluation of subsidies, eliminating those that are deemed unfair and unjust.
In summary, the article paints a picture of a complex subsidy system with both domestic and global ramifications, questioning the sustainability and fairness of such practices.
