Domino's Pizza: The Bailout You Didn't Hear About

OK, not to beat a dead horse (as there are not any more tobacco "bail-outs" anyways), but there never were tobacco "subsidies."

The government wanted to cut tobacco tonnage grown & sold, so they came up with maximum amounts any farmer could grow. Partly to get farmers to go along, there was a "guarantee" with that that the farmers would be assured of making $XXX in any given year. If prices were above that level, then no additional money changed hands. If the prices were below, then the government loaned additional funds to the farmers. In a following year, if prices again rose, then the government would be repaid from this price rise; if prices did not rise, then the tobacco companies reimbursed the government in a complicated formula based on volume, profits, and types and tonnage of various tobacco varieties.

Sort of like how the economic incentives of last year during an election suddenly are termed a "bailout", so back then in an election year these loans (all of which were repaid) were termed "subsidies."

Over-simplification, but the overall idea holds true.

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We have a cousin in Texas who lives in a gated community with around 50 homes. In the common area of the community, there are two longhorn steers. By having those two steers, the entire community is termed a "ranch", and property taxes are around 10% of what neighboring developments pay.

There must be some way to conivince the Asians to eat mo cheese...

" In the early 1930s, the Great Depression threatened farm livelihood and with it the nation's food supplies. The federal government had to act. The Agricultural Adjustment Act of 1933, the first commodity price support legislation, included tobacco. Tested, its problems were addressed in the 1938 version of the bill which then stood until 2004. "

http://www.thedailypage.com/isthmus/article.php?article=30630

" In the early 1930s, the Great Depression threatened farm livelihood and with it the nation's food supplies. The federal government had to act. The Agricultural Adjustment Act of 1933, the first commodity price support legislation, included tobacco. Tested, its problems were addressed in the 1938 version of the bill which then stood until 2004. "

http://www.thedailypage.com/isthmus/article.php?article=30630

Exactly! The headline is "how tobacco subsidies work," and in the article itself they are always termed "no-cost loan program." It seems that there were two years from 1938 to 2004 when the loans were so great they were forgiven; while totally true, it does not mention that in those years the tobacco companies faced stiffer taxes, which coincidentally almost exactly matched the forgiven amounts! Over the 66 years of the program, there was virtually no cost to the taxpayer.

As the article states, "If the price to the farmer didn't meet that set by the FSA, the Commodity Credit Corporation made up the difference, and arranged to store the crop as collateral. When it was finally sold the money was paid back to the CCC, with interest.

In any given year, the impact of the loan program on the federal budget was the difference between new loans made and old loans repaid. There were some good years and some bad, but in 2004, the last year of the program, loan activities were expected to net revenue in excess if $100 million.

In 1982, Congress had passed the No-Net-Cost Tobacco Program Act, which added an assessment on sellers and buyers to reimburse the CCC for any losses from the tobacco loan activities"

(Those "buyers" who had to reimburse the CCC were the tobacco companies)