If we all go over the fiscal cliff, what will be the effects on agriculture? That is an academic question I put to myself.
First, I had to clean up my thoughts about the cliff. Lately in coarse coffee club company, I have taken to calling it the “fecal cliff.” Kinda like falling into the outhouse pit up to your armpits. Laugh, but it has happened.
And that’s about what I think will happen to agriculture if we go over the side.
Without tinkering, the estate tax law reverts to an absolute nightmarish stealing by government of hard-won family farms.
That’s just for starters. Then you have the reversions of capital gains and dividend taxes to rates almost double today’s. Think of those high rates applied to land values of today inflated by investors seeking cover for their money.
Really, I tried to find some “cliff notes” (shoddy scholars will get a chuckle out of that one) on the subject.
Boiling down a few into less than a one-page outline yields this to what I already wrote above. And, I have blended harms from both cliff and bad deal to avoid cliff in some instances. But harm is harm and it rhymes with farm.
If, in some move to avoid the cliff, we do away with tax deductions and also raise the tax rates on income, farmers will suffer even more than the average person, because once the deductions are gone, more revenue will be exposed to higher tax rates, sort of a double shot of Obama legacy.
Things like accelerated depreciation and expensing will cease and that’s going to hurt not only farmers, but also the manufacturers and their union workers because farmers won’t be buying as much as often in any bad time.
Some economists are openly predicting if we don’t do something to bring down our debt, then interest rates will have to rise, inflation will set in, meaning our dollars will be reduced greatly in value.
Do you recall the last time that happened? It was in the Jimmy Carter era.
But back then we didn’t have 50 million people on food stamps and the baby boomers were really just starting to get a firm footing in their careers and we were paying a lot into Social Security and Medicare and retirement plans that are now vulnerable to higher taxes, as well as coping with 24 percent loans and inflation rates were about the same.
I was lucky because I had a fixed rate mortgage payment at the time. Each day I worked, I brought home less buying power.
Some people say government will have to reduce its spending.
But as of this writing, President Obama has not offered to cut down on entitlements, only things like the military, a real FC likelihood.
Some now think that both sides are willing to go over the cliff and into the dumper just to see what happens.
A really bad recession is what will happen in the view of many, many pundits in Washington and elsewhere.
Farm costs will rise, income will shrink, and the value of the money will go way down. The cost of operating money will skyrocket.
Once farm debt starts snowballing, equity to debt ratios can flip over in a hurry. It happened last time.
Farmers and ranchers will do no better than anyone else in a recession/depression, in the opinion of most I have talked to or read their comments.
I don’t look for Obama to cut food stamps or any other personalized welfare along those lines. I don’t look for him to cut welfare to wind turbine companies, but I certainly would not be surprised if he cut crop insurance and direct payments to farmers, conservation funds, federal funds to agricultural research colleges, and the like.
I do indeed expect him to tax carbon (a big hit on farmers who use lots of carbon based fuels, chemicals, plastics and fertilizers) and slap farmers with fines on violations of health care providing, as well as for violations of dust, nutrients, water and air management and quality rules.
I’d guess that the next four years or more will bring open warfare on conventional agriculture.
The fecal cliff might be just so much BS to some, but some of us think it already is stinking.