This year, federal subsidies to famers is predicted to hit $46 billion, more than any other industry. In fact, this is the largest contribution to the farm sector in over 15 years. While the economic slowdown caused by Covid has impacted American farmers, one reason for such a huge influx in spending is to help President Trump secure the rural base in the South and Midwest ahead of this weeks election. Opponents have gone so far as to say these subsidies are a "power grab used to buy political support." Despite the criticism, this strategy seems to be working, as his approval rating among this group is 10 points higher than the national average.
While this politically motivated act may be shocking and upsetting to many people, I think it makes total sense when looked at through the view of Stigler's Theory of Economic Regulation. In Stigler's model, Trump is a representative seeking job security through re-election. Because the average voter displays rational ignorance and no incentive to vote, politicians will focus on winning support from special interest groups. Stigler says that if an incumbent denies large interest groups their subsidies, they will likely lose their seat ("the stakes are that important"). In this case, agricultural and related industries account for 5.2% of the GDP and 10.9% of American jobs. Clearly, this is an important industry to have support from, so if Trump has to secure a few billion in additional subsidies to win their support, then he is willing to do that to protect his job.
Perhaps if Trump really wanted to secure the support from agriculture, he would push legislation that would create more barriers to entry in the industry. According to Stigler, this is what interest groups want most, as it is the most effective way to get long term economic profit. If Trump is attempting to fully win the agricultural sectors vote, he should give them the policy that will benefit their profit the most.
1 comment:
This is really good analysis. To add another example of this type of behavior, consider the topic of black reparations. The Democratic party has promised to support reparations for Black Americans in order to secure the Black vote. As we have seen in this election (along with every election in our country's recent history), the black populace has voted about 90% for the Democrats while voting less than 10% for the Republicans. Although Republicans have touted low Black unemployment rates and worked to reform the criminal justice system, it is tough to compete against a party that promises to send out reparations. The promise of a tangible good, like cash, incentivizes voters to vote for candidates more than an abstract rate of employment. This is simply rational behavior guided by the voter's self-interest.
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