Food Follies And Economic Silliness

The New York Sun has a nice run down of the way in which our promotion of biofuels is now causing world wide food shortages. 

“I don’t think anybody knows precisely how much ethanol contributes to the run-up in food prices, but the contribution is clearly substantial,” a professor of applied economics and law at the University of Minnesota, C. Ford Runge, said. A study by a Washington think tank, the International Food Policy Research Institute, indicated that between a quarter and a third of the recent hike in commodities prices is attributable to biofuels.

Last year, Mr. Runge and a colleague, Benjamin Senauer, wrote an article in Foreign Affairs, “How Biofuels Could Starve the Poor.”

“We were criticized for being alarmist at the time,” Mr. Runge said. “I think our views, looking back a year, were probably too conservative.”

Meanwhile the U.N. Secretary General is proclaiming a world food crisis. This crisis, if we want to use that term, exists not because we are unable to feed the world but because right now we choose not to.

In economic news, President Bush expects great things from the "rebate" checks the government will begin mailing out in a little over a week. 

Bush's emphasis on fuel and food prices differed from other comments he's made since signing the economic stimulus legislation, intended to aid the economy by boosting overall consumer spending—which accounts for roughly two-thirds of the nation's economic activity.

Bush suggested the rebates could trigger a spending spree. "When the money reaches the American people, we expect they will use it to boost consumer spending," he said last month.

By saying expressly that people could use these one-time checks to pay for such necessities as food and gas, Bush underscored the deepening challenges facing the economy.

It's hard to know where to begin here.  First, this is akin to Bush's plea after 9-11 that Americans needed to go out and shop.  Now, I think any fair minded person knows that what Bush meant is that we should not let the terrorists make us change our way of life, which is certainly a defensible position.  But Bush seemed unwilling to ask Americans to make any sacrifice or to make any change for the sake of a national purpose.  Here once again Bush is boldly telling the American people to buy stuff rather than prudently planning for the future by saving that money.  There apparently is no problem that cannot be solved by the American people buying more crap.  So we borrow more money from the Chinese so we can give it to ourselves so we can go buy more crap made by the Chinese.  In what universe is this sound policy? 

And apparently we are all Keynesians now.  We need an influx of government spending to "prime the pump" to make up for the old "demand deficit," the Keynesians argue.  What happened to Republicans being supply-siders and monetarists?  What we need is a cut in the corporate tax and in the capital gains tax to stimulate capital investment and help business profitability.  In addition, and here I spit firmly into the wind, we need tighter monetary policy to assuage any inflationary concerns.  Finally, we could use a good dose of belt tightening.  Many of our economic problems are spurred by large public and private debt.  The tax rebate giveaway only makes matters worse. 

Really finally, am I the only one who finds it odd that just last week I wrote a check to the federal government and now the federal government is going to write one to me?  Here's an idea: don't take my damn money in the first place!  Not that I have strong feelings on this matter.