Whether you harbor a” cap and trade” or the “cap and tax” label for the carbon targeted by the activists in control now of governments, uncertainty is the prime result.  That uncertainty is followed, if not mixed, with a great deal of mistrust.  It’s not lost on those with lifetimes of work and investment in food production from land and soils and energy production harvested from the earth, that the cap-tax-trade thing as proposed is an economic earthquake with high magnitude implications.  The politicians and their minions are busily making the rounds selling special interests points to the constituencies that can pull in the votes to get the bill passed.

What that means is the presentations are about how your money is going to get to someone else.  Last week saw the Obama administration occupying the news with health care and the offices in the Senate with cap-tax-trade.   Its standard operating procedure, lead the press and media one way while the non-news public relations work go on out of sight.  Or almost, the Wall Street Journal and others have a non-headline mentality; they look for impending consequences kinds of stories.

That technique puts lots of players into the special interest camp.  When the topic is energy, the power for modern life itself, well, everyone is a special interest in one form or other and the ones getting the ‘taking” this time, again, are the consumers.  In the meantime lots of people and business are going to get a “giving” – the selling of which is what’s going on in the Congress now.

A quick read of Keith Johnson’s WSJ piece makes clear that Senate bill passage depends on getting the Senators lined up.  So the effort last week came from the USDA who, in the current draft of the bill will garner a giant increase in their empire, as they would administrate the passing out of the (your) money for carbon practices that are dreamed to reduce atmospheric CO2.  In other words, the activists are deep in backroom politics, buying off the votes with goodies, last week for farming practices.

Like every consumer the agricultural community will be hit with those big increases in materials such as fuels and fertilizers.  The USDA’s maximum projection is 7.2% – way out in 2048.  But farmers are way too experienced and historically minded to buy that.  Fertilizer has seen a double and tripling and more of fertilizer prices over the past few years so those bureaucrat’s projections come closer to insults than credible forecasting.   The political history has for food production programs, seen pendulum swings that devastate farm incomes downward for long periods cycling to a few years of outsized profits that has accelerated prices for land from those big price run ups, and killed small communities from years of low incomes.  The impact on the states is even more profound, the rural areas have massively depopulated and “investors” have replaced neighbors.  Rural America is, in much of the prime productivity areas, in a slum mode of upkeep and maintenance by those same absentee landlords.

Energy Cost Share of US Farm Commodity Crops.  Click image for a larger view.

Energy Cost Share of US Farm Commodity Crops. Click image for a larger view.

So when the Democrats roll out the other side of the cap-tax-trade on the payouts, the suspicions go into overdrive.  Farmer groups and those Senators are being sold the idea that they are standing on a gold mine, those carbon offsets in the cap-tax-trade bill.  Because farming and food production is a practice of cultivating biology for recapturing CO2 with plants that make food, modifying practices on the land can dramatically affect the relocking of atmospheric CO2 back into the ground.

But that experience and history is pretty clear.  What the cap-tax-trade bill proposes if passed will be up for grabs in the next Congress in less than two years.  And as everyone is aware two years in the economy is a very long time indeed.

It’s another classic example of the “figures never lie but liars figure” maxim. Just to add insult both to consumers and the farm and food constituency the new agricultural secretary Tom Vilsack offers that farmers will “make a fortune” off of other government policies such as ambitious mandates for renewable energy and biofuels.  Those mandates will create lucrative and mandatory markets for crops.  If “lucrative” isn’t a consumer’s nightmare word, just note its in the same sentence with “markets.”

Meanwhile out in the country if you can get a farmer to comment it’s a trust thing.  For almost 80 years the U.S. (and most other developed economies) have engaged in programs to be sure there is enough to eat at prices almost everyone can afford.  History applies to politics, too.  While the activists are busily selling the idea that CO2 is mankind’s ultimate nemesis, political people might remember a famous figure saying, “let them eat cake,” for which the payoff was beheading.  Not enough food to go around has devastating consequences.

The major point is that behind the scenes, off the news and media hysteria bubble there is an earthquake being set up for the consumer.  Much has been made of the idea that ethanol from corn drove prices high while the fact is taxpayers have saved billions because China has been in the corn and soybean market for years buying ever increasing amounts of farm commodities and is better off sending low costs goods and buying food, expertise, and a wide range of products and services as well as lending on the U.S. government’s debt.

The basic foodstuffs of corn, soy, wheat and the others are always at risk.  They depend on weather and there hasn’t been a really bad year worldwide for a long time.  This reality has lost its policy support at the USDA with its grain reserves program now fully disappeared.   Add to that a self imposed earthquake and the future looks very risky indeed.

Even if calamity based on weather is endlessly avoided, the cap-tax-trade scheme moves the wealth from disposable consumer income to the “chosen” others.  Last week the chosen buyoff try was pointed to agriculture where the trust level is rather low.  Farmers know that their security is based on consumers able and willing to buy their produce.  China knows this too, and so do state and local governments.  They also grasp that energy is the power for the economy, so they have grave concerns that debilitating their customers is going to come back to haunt them.  One wonders when the reality will catch up to the Democrats rush to legislate.

But the farmers don’t decide that fate; it’s those 100 Senators who are going to decide.  Today it seems they (55 to 60) are still tied to Obama’s popularity betting on the very short-term payoff.  But they need you to remind them that weather and economic earthquakes will have consequences, and when it comes to food and fuel, purposefully running up the prices for food and fuel is a certain positive RSVP for the guillotine.


1 Comment so far

  1. Matt on July 27, 2009 5:47 AM

    Why is it that energy policy always results in higher food costs?

    And, remember that although we are a rich country and will not go hungry – poor countries will.

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