Sunday, April 17, 2005

Welfare Queens demand continued handouts.

And I guarantee you that these welfare queens really do drive Cadillacs, and not old ones, either. Unless they are driving Mercedes and BMWs.

This is from last Thursday but the story is as timeless as welfare for the undeserving rich. Paul Blustein has the story in the Washington Post:
The Central American Free Trade Agreement, or CAFTA, drew objections from members of the Senate Finance Committee at the first hearing on the accord. The pact, which would largely eliminate barriers to trade between the United States and five Central American nations and the Dominican Republic, is one of President Bush's top legislative priorities this year and is shaping up as a crucial test of the United States' willingness to strike new trade agreements.

The criticism came not only from Democrats, who have grown increasingly hostile toward free trade in recent years, but from Republicans, especially those worried about the agreement's impact on U.S. sugar producers...

The industry has been protected for decades by quotas that limit sugar imports and keep U.S. sugar prices at more than twice world levels. It enjoys significant clout partly because large cane-growing companies in the South shower campaign contributions on politicians of both parties
I wonder how much Hawaiian mortgage lenders shower on them as well: imagine the effect on the price of residential land there if hundreds of thousands of acres of sugar cane land went resoundingly bankrupt because American were allowed to pay the world market price instead of double that.

People in Hawaii could afford to own homes, homes much more closely comparable than now to Mainland houses at any given price range if sugar land was available for housing. As it is, the Welfare Queens who own the land may well prefer to sell a lot, but as long as subsidies keep it more or less profitable the politicians will have little reason to stand up to the other ppl who demand that the land be kept in beautiful agricultural splendor: Damn the ppl who can't afford houses, and to hell with all of the professors who the colleges can't afford to hire because the profs can't afford housing out there. The students are the ones who will suffer, and with them the state for decades to come.

Profitable sugar is screwing Hawaii's future: stupid housing costs are no benefit to anyone except those who own residential land and those mortgage lenders who have a lot of money tied up in artificially expensive real estate.

In the long run, one of the best things which could happen to the state is for Bush to succeed in eliminating sugar subsidies: The price of standard housing would fall dramatically, colleges could afford better professors from more diverse backgrounds, and children raised there could reasonably hope to afford to own their own homes after they are employed adults.

2 Comments:

Anonymous Anonymous said...

Tom...

Thanks for the rant, but sugar, even with all the subsidies, has in fact been declining for years and is now only 11% of Hawaii agriculture. Most of that is on the outer islands, while demand for housing is mostly on Oahu. The gradual reduction in sugar acreage has not resulted in a gradual reduction in housing prices.

-- Dan

Reference: http://www.ers.usda.gov/StateFacts/HI.htm#TCEC

Sunday, April 17, 2005 at 11:19:00 PM HST  
Blogger TTB said...

In a message dated 4/18/2005 4:19:55 AM Central Standard Time, anonymous-comment@blogger.com writes:
>>sugar, even with all the subsidies, has in fact been declining for years and is now only 11% of Hawaii agriculture. Most of that is on the outer islands, while demand for housing is mostly on Oahu. The gradual reduction in sugar acreage has not resulted in a gradual reduction in housing prices. <<

Hi Dan, Thanks for the comment, and the link.

While the USDA fact sheet doesn't break down Honolulu County (Oahu) agricultural production by crop, dollar value ag production seems awfully hi compared to the other counties when you look at the demand for residential/commercial real estate:


Top 5 counties in agricultural sales 2002

Percent of state total receipts Million $
1. Hawaii County 35.2 187.7
2. Honolulu County 33.6 179.3
3. Maui County 23.3 124.5
4. Kauai County 7.8 41.9
5.

State total 533.4


Setting aside the real world politics of farmland preservation, it seems like it would be a far more efficient use of resources to develop quite a bit of that ag land.

Perhaps sugar isn't so big on Oahu as I thought, but something is and I suspect it is very heavily subsidized. Perhaps pineapple is the real culprit (but my guess is it's a combination):
Top 5 agriculture commodities, 2003
Value of receipts
thousand $ Percent of state total
farm receipts Percent of US value
1. Pineapples 102,849 18.7 100.0
2. Greenhouse/nursery 97,686 17.8 0.6
3. Cane for sugar 62,035 11.3 6.2


In any case, is there any real doubt that Hawaii, or even specificly Oahu, real estate prices are radically impacted by local politics expressed both in federal ag subsidies and locally thru ag zoning of land which would not be economicly viable as ag land without those subsidies?

As I think we touched on while I was out there, Hawaii real estate may well be an unusual case in which there is a nearly unlimited demand from foreigners. It's a great destination for vacationers and for ppl who want to get capital out of their own countries and into a politically stable one. Even a fairly big increase in the supply might produce a relatively small decrease in prices.

Nonetheless, to the extent that subsidies keep farmland viable, the pressure from farmers to change zoning and bring housing onto the market is reduced.

Between farmers who want to maintain their rural lifestyle and others who want to maintain Oahu's rural character, there is a meaningful political block opposed to development. So long as the land is kept viable thru subsidies the price of housing will be not simply higher than need be, but a lot higher.

That of course is a political issue on which many ppl obviously are satisfied to maintain status quo. As a result, they have one more reason to dislike free trade, the Republicans, and George Bush. But they do not only pay the price in an artificially high cost of housing, they cause all others to pay that same price.

One of the related costs is the difficulty for the university and colleges to attract hi quality professors from the Mainland: the schools can't afford to pay enuf to compensate for the cost of housing. And a lot of ppl who grow up on Oahu will never be able to afford to own homes.

Again, those are political decisions, but I think it would be useful for the voters to understand what their insistance on maintaining ag land costs them. To the extent they don't make the connection between subsidies and restrictive zoning on one hand and nutty residential prices on the other, they will continue policies which they might otherwise modify.

Also, it is one thing for Hawaii voters to force each other to pay hi prices, and another for them to force the rest of the country to pay the costs in the form of doubled sugar prices, and I suspect more expensive pineapple prices. That is one of the costs of democracy, but I don't think it is a feature. It's a bug.

Tom

Monday, April 18, 2005 at 4:35:00 AM HST  

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