Uncle Sam will help buy you an alpaca
By John Stossel, Creators
Syndicate
Friday, December 24, 2010
I often bash government. I say it
can’t do anything better than people in a free market.
But the government is unequalled in
producing one thing: negative unintended consequences. Show me a government
activity, and I will show you bad results that even the program’s advocates
probably don’t like. Here’s one example.
Congressmen say our government should
“support and strengthen family-based agriculture.”
Abstractly, supporting family-based
agriculture sounds good. Government policies often harm small farms by favoring
corporate agribusinesses. Government could help family farms by ending the
subsidies that mostly go to the big guys. But that doesn’t interest the
politicians. They prefer to do things like creating tax breaks to encourage
livestock breeding.
The tax breaks have led to a boom in
alpaca breeding. Twenty-five years ago, there were 150 alpacas in America. Now,
there are 150,000.
One website even advertises: “Have
Uncle Sam Help You Buy Your Alpacas.”
Rose Mogerman raises alpacas in New
Jersey, the most densely populated state. “I fell in love with them,” she said.
But she fell in love with the tax
break first.
“Yes. I have to be honest,” she said.
“I might have had two. I wouldn’t have had 100. ... I was looking for a tax
shelter.”
The Alpaca Breeders Association asked
its members, on a scale of 1 to 10, what motivated them to get into alpaca
breeding. More than half rated “tax benefits” a 10.
Yes, alpacas are cute. They are also
valued for the fiber made from their fleece. But selling the fleece doesn’t
explain the growth in alpaca raising. At auctions, prices have gotten absurdly
high. Half-ownership of one male alpaca sold for $750,000.
This is not necessarily a good thing.
Economists at the University of California, Davis warn that the industry is in
a speculative bubble. “Alpacas sold today as breeding stock have values wildly
in excess of even the most optimistic scenarios based upon current fiber prices
and production costs,” Tina L. Saitone and Richard J. Sexton write.
“(C)urrent prices are not supportable
by economic fundamentals and, thus, are not sustainable,” the UC Davis
economists write. Their paper was originally published in the Review of Agricultural
Economics in 2007 with the great title “Alpaca Lies? Speculative Bubbles in
Agriculture.”
In other words, people have
overinvested, bid up input prices and produced too many animals given expected
future demand for their fleece. As a result, I bet lots of people will lose
money. Tax policy is surely a big reason for the overinvestment, and an
unintended consequence will be bankruptcy for some alpaca breeders.
I’m using “bubble” in a nontechnical
sense because, strictly speaking, a bubble is an unsustainable inflation of
asset prices inconsistent with economic reality. However, even a wrongheaded
tax preference is real and sustainable. So if the tax break is the reason for
the alpaca boom, there’s really no bubble.
The Alpaca Owners and Breeders Association
says the UC Davis study is “seriously flawed (and) full of misinformation,” but
offered no evidence for that bald assertion. The authors stand by their study,
saying that no conflicting studies have been published and that their research
is confirmed by a recent price decline.
Government is good at inflating
bubbles. The housing bubble was fueled by low interest rates, tax breaks and
subsidies.
Last year, I reported how Congress’
ridiculous tax credits stimulated demand for electric golf-carts. Electric
vehicles are touted these days as “green” technology and so were given special
tax treatment. Unfortunately, the plug-in carts are ultimately connected to
coal-fired plants. The National Research Council says electric cars may be
worse for the environment than gas-powered cars. That didn’t matter to the
policy-makers.
As a result of the tax benefit,
golf-cart dealers had a field day. One advertised that his $6,000 carts were
“free” because of the $6,000 tax credit. Gov. Mike Huckabee got one. His friend
got seven. I got one, too.
The deal sure helped the golf-cart
industry. My dealer sold 10,000 of them.
At least the golf-cart credit
expired. Most government giveaways never go away.
Get ready for the bust of the alpaca
bubble. Sadly, Congress will then probably bail out bankrupt alpaca farmers.
John Stossel is host of “Stossel”
on the Fox Business Network. Visit his website at johnstossel.com.
Check this out http://www.peruwool.com/Alpaca-Scam.cfmx and this http://tnalpacafarm.com/the-view-alpaca-farming
IT IS HARD TO BELIEVE ANYONE WOULD FALL FOR THIS BUT SEE MOONSHINE STABLES