Those primarily from the Right, who are decrying the $700 billion federal bailout proposed by President Bush for bad mortgage loans, need to talk to their rural brothers: this is nothing new, with primarily drought or excessive moisture as an excuse, low interest loans and outright grants have been funneled to farmers and ranchers for decades.
Subsidies on crops like peanuts, tobacco and cotton, as well as corn, wheat, oats and barley--have repeatedly distorted free markets, leading to all kinds of twisted and contorted results. Corn subsidies are the most obvious ag subsidy to convolute the market: such federal largesse is why ethanol from corn ever made sense in the first place, and why corn in recent years has jumped from a dollar or two a bushel to over $7--with consumers paying the bill in high gas and food prices.
Peanuts and tobacco are marginal crops, kept in business by federal acreage allotments and subsidies. That why these products are so expensive on the consumer market, and you have the odd spectacle of the government subsidizing farmers to grow them on one hand, and spending lavishly to urge consumers not to buy them on the other.
We don't know yet how the markets will react to the federal bailout of bad mortgage loans. But almost certainly, some market distorting effects will result.
The economists Chuck Murray and George Gilder have written "that whatever you subsidize, you get more of." They were referring to welfare, and its bad effects on work, personal responsibility, character and morals.
Presumably, just as in agriculture, we'll see more lenders that need bailing out from under bad loans, rather than fewer--and more lax lending standards, once its clear the government will save you from yourself.
Farmers are a great example.
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