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BF. Well it is still early in the election cycle. We still haven’t had the first presidential debate. But that is the purpose of political campaigns. An informed electorate must become informed on the marketplace of ideas being presented by the candidates. All stripes of political rhetoric are welcome, but money and popularity will soon start sorting the litter. The media decided that they or the public cannot process more than 10 presidential candidates in one debate. So polls will determine who is in the first debate.
ME. On the money front, I fell out of my chair reading what CNN said Wichita-based Charlie Koch told his network of 450 donors and politicians in California. At $43 billion in net worth, most politicians listen — regardless of whether they agree or disagree. In a nutshell, Koch told his network to focus their campaigns against “corporate welfare” and “irresponsible spending.” He said, “We’re headed toward a two-tiered society—a society that’s destroying opportunities for the disadvantaged and creating welfare for the rich. Misguided policies are creating a permanent underclass, crippling our economy and corrupting the business community.” Koch’s statements almost sound like something Warren Buffet might have said in the last election. Barry, if I remember correctly you used to like to stir things up in Kansas by comparing the Koch's and Buffet.
BF. Some recent libertarian rhetoric may have improved this election cycle. After two decades of confrontation, pushing tax limitations, shutting down government, and spewing anti-government rhetoric, maybe it is time for a different tone in political rhetoric and in Washington. But don’t confuse rhetoric with action. I do recall Warren Buffet commenting that something was wrong with our tax system when his secretary had a higher tax rate than he did. Buffet has $72 billion in estimated net worth, behind his friend Bill Gates at $79 billion. On the surface, maybe a conversation about taxes would appear to be entertaining among billionaires, but I doubt that the visions would coincide on the principles or preferred actions to be used in organizing a “fair and equitable” tax code.
ME. Koch did say that short term, taking a principled path would cause some companies some problems, as it will Koch Industries. But longer term, he thought it will allow business people to continue to own and run their businesses - perhaps in a manner more consistent with free enterprise. Sounds good for business in a society where the top 10 percent account for 45% of the income and rely disproportionately on business assets for retirement income. Terms like “fair and equitable” are nice value judgment terms like “beauty and prettiness” that are often in the eyes of the beholder. What is “fair and equitable” for one person is not “fair and equitable” for the next. To some, the “most fair and equitable” tax system is the one that “shifts” the tax burden from them to others. And then the policy discussion becomes a process of identifying who the “shifters” and “shiftees” will be. Suggesting that folks discuss the principles might be an important starting point to discover upon which principles people can agree as well as identification on the areas of disagreement. At 80, perhaps Charlie wants to see something happen, as the clock is ticking on all of us. Do you agree?
BF. Mark, you must have been awake many moons ago in my ag policy class. Many people can identify with a part of the tea party rhetoric. It is when you get down to the details that problems arise over the size and role of government. Buffett and Gates have taken a different approach by starting the Philanthropy Challenge in 2010 and asking the nation’s 400 wealthiest people to pledge to give at least half their net worth to charity in their lifetime or at death. Buffett has pledged more than 99% of his wealth to charitable causes and together with Gates has focused on improving global food production capacity for poor nations, creating educational opportunities for the underclass, improving access to health care, and eradicating of polio globally. The Koch Brothers have contributed to some worthy philanthropic causes such as health care, cancer research, educational institutions, and think tanks. However, the main Koch focus appears to have been on mainstreaming libertarian philosophies into the political process. Remember, one brother was a VP candidate on the Libertarian ticket in 1980 against the Ronald Reagan and Jimmy Carter tickets.
ME. One does get a sense that policy for agriculture, agribusiness, ethanol and the environment might experience an abrupt and dramatic change if Koch libertarian philosophies were put in place. In spite of recent heroic efforts, it is likely that the RFS would be gone. Maybe that is the pain Charlie was talking about since margins for Koch's Flint Hills Resources would be impacted along with other ethanol plants. However ethanol is only a fraction of the Koch Brothers portfolio in oil, chemicals, and other industries. Spending on food programs would likely be curtailed. Crop insurance subsidies would likely be reduced, giving pause to farmers in higher risk production areas. You don’t hear as much about the tax preferences for the oil industry going away, but if we follow principles, then oil tax preferences would need to be on the chopping block agenda. And, bailouts for the “big banks” would be gone. At his recent meeting, Koch singled out “big banks” for making big political contributions and accepted massive bailouts and money at almost free costs from the Fed to maintain their status quo.
BF. How soon we forget. Had the Treasury and Federal Reserve System not worked fast to expand the money supply and take leadership in bailing out selected mortgage banks, insurance, and auto companies during the 2008 recession, the global economy would likely have spiraled down into a deeper global depression. At the same time, there is an element of wisdom now in requiring larger reserves for the “too big to fail” banks and insurance companies so that they and the global economy are in better position to weather the next wave of defaults, perhaps in Greece or elsewhere. Or, we could go back to the Teddy Roosevelt anti-trust era. As a candidate with the anti-Koch philosophy, Bernie Sanders, says, “if they are to big too fail they are too big too exist."About the authors: Edelman is a professor of Economics at Iowa State University and Flinchbaugh is emeritus professor of Agricultural Economics at Kansas State University.
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