California Perspective – Political Climate


Originally Published in The Jacobsen on February 28, 2017
California Biodiesel Industry Commentary

Much like the planet’s climate, the American political climate is heating up. As has often been the case in recent years, California is at the epicenter of this climate fight. Most recently a battle is brewing over whether the president can defund California’s federal subsidies over immigration. Specifically, if California votes to declare itself a sanctuary state can Trump withhold federal funds from the Golden State?

He told Fox News host Bill O’Reilly, “We give tremendous amounts of money to California,” but he’s apparently not aware of how much California contributes to the rest of the country. Dollar-for-dollar, California gives more than it gets from the federal government. It’s the 6th largest economy in the world and could be the 5th largest after the Brexit dust settles. Based on GDP alone California is 50% larger than it’s nearest rival state, Texas.

But lest anyone forget that we still live in a representative democracy with 3 distinct and equal branches of government with a time-tested system of checks and balances, the courts have restricted a president’s ability to hold back funds from state and local governments. There must be a connection between the federal funds and the local program that’s being deprived. For example, federal healthcare dollars can’t be withheld over immigration disputes. The same goes for FEMA dollars that might come to California to address the failing spillway at the Oroville dam. Also, executive orders are not statutes, which are laws that can only be passed by Congress. And Congress has the exclusive power to appropriate money.

But that’s just California! In general it seems as if the Trump administration has decided to shake things up on all fronts, which is admittedly why he was elected. I wonder how sustainable his adversarial position is, however. It’s important to keep in mind that we do live in a globalized world. The train left that station decades ago, for better or worse.

Trade wars would hurt American farmers and other commodity suppliers. Keep in mind that roughly 20% of farm revenue comes from foreign customers. President Trump may have demonstrated his real estate acumen throughout his career prior to being elected to the highest office in the land, but I wonder if he understands how commodity markets function. Perhaps it’s time for our Ag industry to school him.

This reminds me of a story from my childhood. When I was about 8 years old I asked my mom if I could take apart the kitchen radio. She listened to the news every morning on that radio while preparing breakfast for our family and lunches for us kids to take to school every day. She was hesitant but didn’t want to stifle her youngest son’s creative and budding technical curiosity, so she relented. I promised that I would put it all back together just as I had found it so it would function reliably. Can you guess how this story ends? That’s correct. My weekly allowance was docked for several months until I could pay for a new radio for my mom. The lesson here is, don’t try and dismantle something you don’t know how to fix, or improve. We cannot afford to have our markets tinkered with.