US Drought: an untold tax story
We've been told most grain producers have crop insurance to cover their losses during catastrophes like drought. And that might lead some to believe all's well in the heartland. But it's not good news.
Even if farmers are made whole by their insurance policies, the grain shortages are going to ripple through food and fuels markets in ways we can't imagine. And nobody's talking about it.
Many of us rightly believe the drought will increase food and fuel prices at a time when unemployment is at its highest level since the Great Depression -- and those that do have jobs have seen their wages stagnate at generational lows. That is indeed difficult to swallow.
But that's not the scary part. Did you know that taxpayers, not insurance companies, hold the lion's share of the exposure to crop insurance liabilities?
Iowa State University economics professor Bruce Babcock has said that 50 percent to 80 percent of underwriting losses will be shouldered by the federal government through a federal backstop ag subsidy program.
This is yet another alarm bell sounding for the wage earners of America.
We can have the debate about whether it's economically feasible to produce ethanol, that the energy expended to create the gasoline additive is a wash in relationship to the energy it can produce when combusted in car engines, but the facts tell us that the price of gas at the pump does not reflect the true cost to the people.
It's not enough to know that with all the layers of government subsidies and road use taxes added on, the actual price for a gallon of petro could be closer to $15 or more.
There's much more to this story.
My paranoia tells me there's dark chapter in this downturn story. Between ponzi schemes and accounting fraud we learned we'd been tricked into thinking government regulated financial instruments were adequately capitalized to endure the kinds of catastrophes we're seeing today, and likewise my fear was that insurance companies are not ready for the havoc this drought will wreak on their financial standing.
I'm sure that's another shoe bound to drop, but after realizing it's the government whose underwriting most of these policies, my fear has turned to panic. There is no taxpayer money in the federal coffers, not to mention funds to cover crop insurance payouts. Zip. Zero. There's only debt for as far as the eye can see -- more than wage earners can ever hope "grow our way out of".
Our worst nightmare comes when it becomes fashionable to admit our money has no value. That's anarchy. That's when the grocery store, gas station and utility company closes its doors because the workers have all been let go. No electricity, no water and the sewer's backed up. Infrastructure quickly crumbles. Police are gone, so crime is ramped; whatever food and gas is left will be a target for theft, and those that would try to stop it are in grave jeopardy. For a decade or longer we'll live in squaller, much like the conditions witnessed in public service commercials of third-world poverty.
You could say we'll all be -- in a word -- fu__ed.
Even if farmers are made whole by their insurance policies, the grain shortages are going to ripple through food and fuels markets in ways we can't imagine. And nobody's talking about it.
Many of us rightly believe the drought will increase food and fuel prices at a time when unemployment is at its highest level since the Great Depression -- and those that do have jobs have seen their wages stagnate at generational lows. That is indeed difficult to swallow.
But that's not the scary part. Did you know that taxpayers, not insurance companies, hold the lion's share of the exposure to crop insurance liabilities?
Iowa State University economics professor Bruce Babcock has said that 50 percent to 80 percent of underwriting losses will be shouldered by the federal government through a federal backstop ag subsidy program.
This is yet another alarm bell sounding for the wage earners of America.
We can have the debate about whether it's economically feasible to produce ethanol, that the energy expended to create the gasoline additive is a wash in relationship to the energy it can produce when combusted in car engines, but the facts tell us that the price of gas at the pump does not reflect the true cost to the people.
It's not enough to know that with all the layers of government subsidies and road use taxes added on, the actual price for a gallon of petro could be closer to $15 or more.
There's much more to this story.
My paranoia tells me there's dark chapter in this downturn story. Between ponzi schemes and accounting fraud we learned we'd been tricked into thinking government regulated financial instruments were adequately capitalized to endure the kinds of catastrophes we're seeing today, and likewise my fear was that insurance companies are not ready for the havoc this drought will wreak on their financial standing.
I'm sure that's another shoe bound to drop, but after realizing it's the government whose underwriting most of these policies, my fear has turned to panic. There is no taxpayer money in the federal coffers, not to mention funds to cover crop insurance payouts. Zip. Zero. There's only debt for as far as the eye can see -- more than wage earners can ever hope "grow our way out of".
Our worst nightmare comes when it becomes fashionable to admit our money has no value. That's anarchy. That's when the grocery store, gas station and utility company closes its doors because the workers have all been let go. No electricity, no water and the sewer's backed up. Infrastructure quickly crumbles. Police are gone, so crime is ramped; whatever food and gas is left will be a target for theft, and those that would try to stop it are in grave jeopardy. For a decade or longer we'll live in squaller, much like the conditions witnessed in public service commercials of third-world poverty.
You could say we'll all be -- in a word -- fu__ed.
