Free Lunch Program - Detroit

This government funded meal of pizza, cherry pie, fruit bar, lettuce and chocolate milk is supposed to help children whose parents cannot afford to pay for their meals.

Let’s take a closer look at what goes into this government funded meal.

• The iceberg lettuce was most likely grown on a megafarm, assisted with herbicides and pesticides.  Large scale factory farms lobby heavily to push small farms and “unregulated” farmers out of business via burdensome regulations or unnecessary licensing.

• The meat, milk and cheese in the lunch are all likely from dairy cows that are housed in a Concentrated Animal Feeding Operation and fed an unnatural diet of grains to make the animal gain weight as fast as possible.  The cow might potentially be fed with growth hormones.  The hormones, in one fashion or another, pass through the child’s body.

• The packaging, dessert wrapping, and utensils are all likely produced by a factory in China. There is a good chance the factory waste will not be disposed of properly. The revenues from the sale of these goods, in some fashion, support the Communist party, which routinely suppresses free speech, civil liberties and opinions critical of the government. The shipping voyage from China burned through finite resources such as oil and gas before reaching their final destination.

• The corn that produced the high fructose corn syrup in the flavored milk, “fruit bar” and cherry pie most likely came from federally subsidized agribusiness enterprises.  The cycle of farm subsidies, campaign contributions and re-electing those who approve farm subsidies allows the cycle of market distortion to continue.  Government chooses to support certain, favored industries which hurts other producers and industries that do not receive those same subsidies.

• The government worker handing out this meal will potentially collect overtime for summer work and, eventually, a pension, which the city receiving this assistance has probably not fully funded. The employee, most likely a union member, will vote for whichever candidate their union has financially supported with tax dollars from the community. The government employee handing out this meal cannot provide the care, attention, and atmosphere of a loving household.

• The child, eating this meal, begins the slow march towards diabetes, cancer and other ailments from eating a lifetime of nutrient-devoid, heavily processed food. Having a diet so high in sugar at such a young age will likely make them less likely to choose healthier food in the long run.

• The wasted food and packaging will finally head to a landfill where it will rot.  The annual cost to simply dispose of wasted food is around $1bn per year.

• To fund this program, the federal government had to borrow the money, tax its citizens or print the money. All monetary costs will most likely be paid by persons other than the beneficiaries of this program.

The producers of this meal will continue to fund the production of unhealthy, environmentally damaging food. They will continue to reinvest their revenues, in some fashion, to expand their enterprise and keep this cycle going.

The consumers of this meal, poor schoolchildren, will learn that free food is a right, provided for by others and not worth enjoying, savoring or preparing.

The parent, absolved of their most basic responsibilities as an adult human, is shielded from the feedback loop of sacrifice, self-reliance, and caring for their young.  They will not have to approach friends, family, a church, or a charitable organization to deal with their realities of being unwilling or unable to feed their own children.

Every decision has consequences, both explicit and implicit. All that matters in life are our decisions.

The consequences of supporting these priorities are profound. Constructive outcomes are totally avoided and destructive choices are encouraged.

The cycle continues.

Attempting to help “feed poor schoolchildren” is making our world poorer, in every possible sense of the word.

Senate Majority Leader Harry Reid plans to win final passage by Dec. 24 now that he secured the vote of his party’s last holdout, Nebraska Senator Ben Nelson.

He finally struck a deal that satisfied his demand to keep U.S. subsidies from being used for abortion and won an agreement for more aid to help Nebraska provide coverage for the uninsured.

Nelson said the language satisfied him, though it drew criticism from antiabortion groups. The Nebraska lawmaker also won another prize, with additional Medicaid costs to his state being absorbed by the federal government.

The agreement came late on Dec. 18 over a handshake.

“It was a pretty powerful moment,” said Reid, a Nevada Democrat. “That’s what this place is built on, handshakes legalized bribery.” (emphasis Inthon)

Upon closer inspection of its “accomplishments”, we discover our government is a transparent kickback machine; something which is manipulated and used to advance one’s career and line one’s pocket.

Governments disintegrate when citizens and lawmakers reject individual, familial and community responsibility and instead believe in the goodness of “free money” (printed up or borrowed, of course) and citizens and lawmakers feel no sense of self-ownership.

What hope remains for the future when there is no incentive to encourage individual responsibility and self-ownership?

Governments stop functioning and cannibalize themselves when politicians shift from representing an informed group of constituents to becoming professional raiders for their financial backers (unions, other politicians or corporate interests).

Takeaway: Have no faith in national politics or national politicians.  Self-reliance and community reliance are more robust and sustainable.

One of the biggest beneficiaries of corporate welfare is Citigroup.  Aside from TARP funds and asset buybacks (taxpayer buying their lousy loans at full value), there are even more nefarious examples of how Citigroup is ripping off the taxpayer.

Below you will find the Standard and Poor’s and Moody’s credit ratings for Citigroup.

Further down, you can see how these rating agencies gave Citigroup very safe ratings days before Citigroup would have gone bankrupt and gone out of business if not for the bailout.

In other words, these rating agencies, Moody’s and S&P, gave Citigroup ratings of AA- and Aa3, respectively, while Citigroup was days away from dying.

In their own words…

Obligations rated Aa are judged to be of high quality and are subject to very low credit risk, but “their susceptibility to long-term risks appears somewhat greater – Moody’s

An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong. – S&P

Current Citigroup ratings - click for a larger view

Moody's ratings for Citigroup - note that the October 2008 bailout just put them on Credit Watch negative until December 2008

S&P's ratings for Citigroup - again, only a slight downgrade before the 10/2008 bailout

You’ll notice that Citigroup’s ratings have never fallen below investment grade.  So, despite needing and continuing to need your tax money to operate, these credit rating agencies never saw the need to downgrade them significantly.

Normally an incompetent credit rating is nothing to get worked up about, however, Citigroup’s bogus credit ratings have consequences that ripple all across the capital markets, which subsequently affect the taxpayer.

Here is how:  With an artificially high credit rating and numerous government handouts, Citigroup’s cost of capital (the rate at which it borrows money), is artificially low. This allows Citigroup to borrow money at artificially low interest rates.

Since its credit rating and government handouts allow it to borrow money very cheaply, it sucks up productive capital from other enterprises competing for capital. This is called “crowding out“.

This means healthier companies and local governments have to pay higher rates of interest to borrow when they issue corporate bonds and municipal bonds, respectively.

Guess who pays the artificially higher interest payments on municipal debt?

The taxpayer.

So, in a sad way, Citigroup gets two forms of corporate welfare.  One is explicit, the other implicit.

Explicitly, your federal taxes pay to keep alive Citigroup via asset buybacks and other federal programs to “save the (inherently flawed!) financial system”

Implicitly, bogus credit ratings and government handouts give Citigroup a facade of safety, allowing it let it borrow cheaply, which force other, legitimate debt issuers (companies and municipalities) to pay more in interest to receive funding.

Even if the federal government were scared of a run on all the banks, they could have easily unwound Citigroup in a reasonable fashion.  They could have zeroed out all the equity (stockholders) and, in an orderly way, liquidated the firm to other institutions which could buy up productive assets cheaply and let the creditors take losses on the parts which no one wanted.

Since Washington is afraid to say no to the financial bozos that own Citigroup stock, this strategy was not employed.  Instead, they are flooding Citigroup with cheap money and hoping the money will be lent out or miraculously make Citigroup solvent.

A free market efficiently allocates capital and provides price transparency which allows individuals to make accurate decisions on how to best maximize their resources.  Government intervention is permanently damaging our economy by obscuring these valuable pricing mechanisms with bailouts, “liquidity facilities” and other forms of corporate welfare.

Intervention via corporate welfare all in the name of helping the little guy is a gross form of statism and market distortion.

Takeaway:  Government intervention to save banks is not a Democrat/Republican issue, it is a right/wrong issue.  More intervention, bailouts and stimuli are not the answer.