The new budget super-committee is appointed and should start trying to negotiate soon. I’m guessing that little will come of it but, right now, I’d like to nominate a target for its actions: the crop insurance program.
By any account, the program—which costs $6.5 billion a year—is a mess. It subsidizes environmentally harmful agricultural activities to an enormous extent, offers enormous profits for agents (who provide few real services to farmers), and isn’t in the public interest by any obvious definition of the term. In many cases, crop insurance encourages farmers to plant crops that are inappropriate for the areas where the live. The United States grows water-intensive rice crops in the desert and flood-sensitive wheat crops on river banks.
Indeed, crop insurance is a narrow, economic benefit to a small, politically advantaged group (farmers) paid for by the entire rest of the population. Unlike the flood insurance program, which would cost money to eliminate right away since its subsidies are implicit ones offered via rates, the crop insurance program has explicit subsidies that could be saved in the short term. Eliminating it entirely right away would be difficult and could cause some economic disruptions.
So what about this as an outline? Phase crop insurance down in the short term by reducing the subsidy over a period of five to ten years and barring people who begin farming from claiming any subsidy at all. To encourage farmers to transition to crops that will lead less (or no) insurance, furthermore, let farmers willing to give up crop insurance right away to claim a temporary special tax credit (or even receive a grant) for capital costs implicit in switching production.
Perfect? No. Would it probably hurt some farmers? Yup. But getting rid of crop insurance subsidies is surely in the national interest.
In recent months, I’ve stumbled across more and more articles about “underground” restaurants and have eaten at one in the D.C. area myself. (Indeed, my favorite carryout spot, D.C.’s quirky C.F. Folks, has a certain underground vibe although it’s not secret.)
Because underground restaurants tend to operate on a “donation” basis rather than actually setting prices outright, regulators, thankfully, tend to consider them dinner parties and leave them alone. If it hasn’t happened already, however, I’m sure that some busybody will eventually shut someone down and arrest the proprietor.
And this is where questions of risk and insurance come in. It strikes me as highly likely that homeowners’ insurers would deny many claims arising from the operation of such a underground restaurant. Although many may technically be hobbies, they sure look a lot like businesses and most insurers would probably claim just that.
Some places that I’ve heard about, furthermore, serve foods like unpasteurized milk that can’t ordinarily be sold in grocery stores and may be dangerous.
I’m sure that if people were to get sick in large numbers from eating at any underground restaurant, that regulators would quickly shut all of them down. In addition to violating the idea of being “underground,” actually regulating these restaurants in any formal way—say licensing them, getting their owners to obtain business owners policies and so forth—would be akin to outlawing them as they currently exist. In fact, any law that required them to register (the way other food service establishments must) could be a problem because neighbors might well protest anyone who decided to open one.
So what about this as a way to “legalize” underground restaurant while letting them keep their underground vibe: create a very limited tort shield for people who pass a standard food safety course (an exam costing a little over $100 that requires about 15 hours of prep) and operate a sole proprietorship selling food or beverages that doesn’t maintain regular premises or surpass some very low revenue threshold. If this were done, short of obvious negligence–which, sorry crazies, would probably include selling unpasteurized milk–people who operate underground restaurants couldn’t then be sued.
With a much lower possibility of lawsuits, there would be little need to obtain extra insurance. And underground restaurants could safely flourish.
Aol finance has a pretty good article (quoting me) about online payday loans.
Let me be honest: while I’d defend their right to operate, I do not think that payday loan operations are a net contributor to social welfare. They charge much higher prices for a good (credit) that most of their customers could get for far less elsewhere. For all intents and purposes, they offer a premium priced product to people who shouldn’t be paying for one. As they aren’t criminal enterprises and a market demand exists, of course, people ought to be able to choose them for much the same reason they should also be able to pay $300 for a cheap bottle of wine at a “bottle service” night club or purchase a Barry Manilow CD.
For most people who use them, payday loan/check cashing operations’ main advantage over other sources of credit isn’t that they can’t get credit elsewhere but, rather, that they have less paperwork and faster turn around than other sources of credit. (They wouldn’t advertise this if it weren’t an important advantage.) But if the typical person using one has a lower income, then he or she should, in theory, place a smaller premium of their time and be willing to do more paperwork to get a loan.
The best explanation for their continued existence I can find is Edward Banfield’s conception of social class. Banfield argues, briefly, that social class is best defined by “time horizon” rather than income or values as such. People in lower classes, as Banfield defines them, tend to prize immediate gratification rather over long term investment in the future. Thus, by his definition, a single mother who scrimps and saves so her children can go to a better school and attend college so that her grandchildren can live better than she does is “upper class” while an Ivy-educated former colleague of mine who typically drank away his entire paycheck the weekend after he got it was “lower class.”
Does it explain everything? Nope. There are other problems including access to conventional banking services in some areas and the inability of people with truly awful credit to open bank accounts in some places. But Banfield explains them a lot better than anything else I know of.
Until next week,
Eli Lehrer, vice president for Washington, D.C. operations