One of the major areas in which the government intervenes is in the agricultural sector of the economy. The government has three ways it can intervene and help its producers. These ways include price policies, direct payments, and input policies. Price policies have the largest effect on producers. Tariffs, quotas, and taxes are just a few examples of price policies. While these policies bring revenue into the government, in the end they hurt consumers. Each of these policies raise the prices of both imported and native goods. They are designed to help stabilize prices and give the native producers a chance to compete with foreign goods. Under the doctrine of laissez-faire, the government would not interfere with prices and the native producers would be forced to lower their prices, giving the nation's citizens a better deal in the market.
The use of taxes is one of the government's favorite ways to make its presence known in the economy. While this method seems blatantly obvious, many of the ways the government uses the money collected by taxation is not. Some of the money it takes is used to fund other programs designed to "protect" consumers and to "create" jobs. Because of the money taken away from the consumer through taxes, there is less money movement in the economy. This money movement is what creates jobs in the economy. "So, each person's money lost to taxes helps fail to create their part of a job" (Kaz).
Direct payments are another way in which the government attempts to help its producers. Deficiency payments, diversion payments, disaster payments, and marketing loans are all types of direct payments. Deficiency payments are payments based on the difference between the legislatively set target price and the lower national average market price during a specified time. Diversion payments are payments made to farmers who voluntarily reduce their planted acreage of a program crop and devote the land to a conservation use. Disaster payments are payments made to a producer when a disaster, such as a flood or drought, occurs and the producer's crop is either destroyed or severely damaged. Marketing loans allow producers to repay nonrecourse loans at less than the announced loan rates whenever the world price or loan repayment rate for the commodity is less than the loan rate(Arthur & Mabbs-Zeno, 2).
There are many different types of input payments implemented by the government. They range from below-market grazing fees and below-cost rural electrification to fertilizer and irrigation subsidies to loan interest rebates. These input policies are designed to give the nation's native producers an edge by making various commodities more accessible to them. Many of these input payment tactics are implemented to lower costs and maximize output for producers. These...