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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Kitchen-Table Issues: As the Feds Bail Out Wall Street, Here's a Food-Related Fix for Main Street
  • Date: Sat, 29 Mar 2008 09:09:38 -0600


Kitchen-Table Issues: As the Feds Bail Out Wall Street, Here's a Food-Related
Fix for Main Street
http://www.organicconsumers.org/articles/article_11013.cfm
March 21, 2008 By Tom Philpott

"The current financial crisis in the U.S. is likely to be judged in
retrospect as the most wrenching since the end of the Second World War." --
Former Federal Reserve Chair Alan Greenspan, Financial Times, March 17, 2008

Drawing on past-life experience as a financial reporter, I have been trying
to make sense of the crisis now spreading through the U.S. economy -- a
debacle brewed up on Wall Street that's affecting us all. These are critical
issues for the environment, because economic crises rarely lead to more
ecologically benign policies.

Look, for example, at the biofuel boom -- our government's major response to
the recent surge in oil prices. Biofuels have not significantly reduced oil
prices or our carbon footprint, but they have led to an ongoing surge in
agrichemical use. The biofuel policy has also ramped up food prices at a
particularly precarious time for consumers. In this column, I sketch out a
plan that would ease food prices while also lessening food's impact on the
environment.

Why is such a plan necessary? Because while U.S. Federal Reserve officials
shuffle around Wall Street with suitcases full of cash trying to assure
finance execs that everything's all right, things are turning tense on Main
Street. Grocery bills are climbing, gasoline prices set record after record,
and credit cards are maxed out. Meanwhile, recession looms, signaling
stagnant wages and job cuts. According to BusinessWeek, consumers carry a
stunning $740 billion worth of credit card debt, up 15 percent from five
years ago. One of the few engines of job growth, The New York Times reports,
is consumer-debt collection. Ouch.

So what is the federal government doing to ease the burden on consumers?
Beyond the Bush administration's one-off tax rebate -- equal to less than
most people's monthly mortgage or rent payment -- not much. Recent spikes in
food prices can be tied directly to the biofuel boom engineered by the Bush
administration (and supported, to be fair, by Congressional Democrats,
including the leading presidential contenders). President Bush was recently
heard muttering that "we got to do something" about the spike in food prices
caused by the ethanol boom he engineered. But he has done ... nothing.

The Poor Get Poorer ... Nutrition

While ethanol producers suck in as much corn as they can, cheered on by the
politicians, consumers are getting squeezed at the grocery line. Over the
past year, we're paying significantly more for staples like eggs (up 25
percent), milk (17 percent), cheese (15 percent), bread (12 percent), and
rice (13 percent), The New York Times reports.

Meanwhile, Federal Reserve Chair Ben Bernanke has used his bully pulpit to
cajole banks to be kind to debt-distressed homeowners, but he's actually
opened his checkbook to ease the plight of banks themselves. Awash in debt
and ravaged by its dubious mortgage investments, the once-mighty investment
bank Bear Stearns recently flirted with ignominious collapse. But in a
dramatic and unprecedented intervention, the Fed nudged it into the waiting
arms of megabank JP Morgan Chase at a fire-sale price. The Federal Reserve
had to agree to take on as much as $30 billion of Bear's debt if things sour.
That means we taxpayers take on most of the deal's risks, while JP Morgan
Chase shareholders stand to rake in any gains.

Bernanke's other high-profile activity has been to repeatedly slash interest
rates. Low rates ordinarily benefit consumers, but only if they embolden
banks to lend, businesses to invest, and the economy to expand. As it is,
banks remain way too skittish about the mortgage mess to lend. The Fed's rate
cuts have merely inspired foreign investors to dump U.S. assets, causing the
dollar to plunge. For consumers, a weaker dollar means higher prices for the
imported goods on which we've come to depend -- including our biggest import
of all, crude oil.

In green circles, rising gasoline prices sometimes cause celebration. But
absent public policies that give people alternatives to the car, high oil
prices do little to curb consumption. Instead, they merely act as a
regressive tax on people trying to get to work -- taking money out of the
pockets of people who can afford it the least.

As I've written before, a similar logic holds true for industrial food.
Surging corn and soy prices aren't likely inspiring cash-strapped people to
trade up and shop at the farmers' market. Rather, food-price hikes are likely
sending most people down the food chain, looking for the cheapest -- and too
often least healthy -- food possible.

Meanwhile, Bernanke's tortured quest to save Wall Street from itself is
likely far from over. Not only are untold tainted subprime mortgage assets
still festering on banks' balance sheets, but that above-mentioned $740
billion in credit card debt is also haunting the Street. As with subprime
mortgages, the banks spent much of the last decade essentially bundling
credit-card debt into packages and selling it to each other and to hedge
funds at great profit, BusinessWeek reports. If cash-strapped consumers start
to default, expect more shrieks from Wall Street -- and more Rescue 911 acts
from Bernanke.

But there are other ways to respond to these mounting crises than merely
bailing out the banks and letting consumers twist in the wind.

Beyond Bailouts

The first thing I'd do is end the government's absurd, expensive, and myriad
biofuel subsidies, which are jacking up food prices while providing little if
any environmental benefit. According to one reckoning, the federal government
has committed $92 billion between 2006 and 2012 to prop up biofuel
production. Attracted by this government-guaranteed market, the very same
investment banks and hedge funds that brought us the mortgage debacle are now
buying and selling corn and soy futures, snatching profits while consumers
gape at the price of grocery staples.

Pulling the plug would cause grain and soy prices to drop, bringing down food
prices but hurting farmers. To limit the latter effect, the government could
step in and buy excess grain and hold it, replenishing stocks that have
fallen to all-time lows. That would keep farmers in business while also
improving food security.

With the massive savings that would result, the government should invest in
local and regional food-production infrastructure, which has been
systematically dismantled by agribusiness over the past half-century. Such a
program would not only provide consumers with a ready alternative to
industrial food, but would also re-establish food as an engine for building
wealth within communities -- and lessen its ecological footprint.

Finally, the government has to figure out a feasible way to slash demand for
oil, to both shield consumers from rising prices and, well, avoid climate
disaster. The obvious way is to reinvest in an efficient, functioning
national and regional mass transit system. Common wisdom holds that Americans
are too in love with their cars to embrace trains and buses. As gas prices
gallop toward $4 per gallon, that idea looks increasingly frayed. A recent
poll in North Carolina, a state marked by sprawl and heavy car reliance,
showed large majorities favor public investment in mass transit.

Meanwhile, an American Public Transportation Association study [PDF] shows
that Americans are increasingly using what little public transportation they
have access to. The problem, it seems, is not consumer desire but rather
political will. According to an extraordinary recent article in The
Washington Post, the Bush administration's Department of Transportation has
systemically gutted federal funding for mass transit in favor of
highway-privatization schemes that favor business cronies.

"The number of major new rail and bus projects on track for federal funding
dropped from 48 in 2001 to 17 in 2007, even as transit ridership hit a
50-year high last year and demand for new service is soaring," the Post
writes.

That's imbecilic. In the context of early 21st century U.S. politics, gutting
harmful biofuel subsidies, reinvesting in local food, and rebuilding the
public-transit system count as radical ideas. They're almost completely iced
out of the national debate, even during a highly contested presidential
election. Meanwhile, heroic and pricy efforts to bail out Wall Street seem,
for some reason, are perfectly natural.





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