Published: Apr 9, 2010 12:01 a.m. ET


Commentary: Subsidies skew our reality and impoverish others



SANTA MONICA, Calif. (MarketWatch) -- Two hundred dollars for a hamburger. A gallon of gasoline, $15. The price of clothes: double. Milk, $6 a gallon.

These are what things would really cost without subsidies, according to some estimates. It's difficult to factor in all the prices of goods and services that go into making all the things we Americans get on the cheap. One thing is for sure: we pay for these subsidies with our tax dollars. We pay farmers, oil companies, and now doctors and pharmaceutical companies.

As we get lower costs for goods in services in the U.S., we are impoverishing millions of people around the world and sentencing many to death. It's sounds harsh but it's true.

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A subsidy is a grant by the government to a private business that is deemed advantageous to the public. But the subsidy system has become so perverse that we actually pay more in taxes than we save in price relief. In some cases we pay more for subsidized goods than we'd pay in a free market. And in the most obscene abuses of the subsidy system, we actually pay for goods that aren't even produced.

The United Nations and other organizations report that farm subsidies in rich countries such as the U.S. depress market prices, so much so that they induce poor countries in Africa and elsewhere to import food that local farmers could otherwise produce more efficiently. These farmers in poor countries are then left without incomes or in the worst cases without food for themselves; they can't afford to grow it.

Indeed, the UN says that eliminating farm subsidies in the U.S. alone would immediately lift millions of people out of poverty around the world.

We should lift farm subsidies and eliminate others that aren't fair, just and equitable the world over.

Washington and Corporate America see double when subsidies are discussed: subsidies are sacred; subsidies are evil.

Time was when subsidies didn't exist. It wasn't until 80 years ago when The Federal Farm Board was created -- which fixed price floors for wheat and cotton -- that subsidies were introduced. Until that time, subsidies were rebuked.

Now the world's biggest oil companies during years of record profits still receive as much as $35 billion per year in subsidies from U.S. taxpayers alone. (Europeans dole out another $10 billion a year in oil subsidies.) Nuclear energy wouldn't be feasible without subsidies; it is too costly to manufacture. Coal, natural gas, and alternative energy sources are also artificially priced.

Cotton, corn, cattle, soy, and pretty much the entire U.S. agricultural sector are also subsidized.

That is power, food, and clothing to you and me. Similarly, the price of water is underwritten.

What's wrong with lower prices? Nothing. It's how these lower prices are achieved that is the problem.

We may pay lower prices at the checkout counter but we compensate for lower bills by paying higher taxes. In between, those who receive the subsidies, and who gain market advantages by being able to offer lower prices, win out -- big. These recipients are big businesses. And it's this fallacy that hurts you and me, not to mention people and businesses in other parts of the world who cannot compete in the markets with the more subsidized prices that these businesses offer.

There cannot be globalization without addressing the subsidy issue. We'll live nicely in a bubble of mythical costs in the U.S. -- until the bubble bursts. Then we'll be faced with reality. Harsh reality.

It's time to put an end to the fake America that subsidies create.

Thomas M. Kostigen is the author of "The Green Blue Book: The Simple Water-Savings Guide to Everything in Your Life."

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