Question

The United States has subsidies for farmers in the United States which drives down the cost of food. Proponents of free trade argue that these subsidies are a form of government waste and that allowing the free market to work will produce greater competition to help keep food prices low. They also argue that the system had loopholes that contribute to excessive waste.

Proponents of market intervention argue that subsidies are needed to keep farmers competitive with the rest of the world which also subsidizes their farmers. They also argue that lower food prices benefits outweigh the increase in tax to subsidize food.

Identify groups that are impacted both positively and negatively from this policy (please cite the website used)

Answer 1

The farmers of USA are impacted positively. They receive subsidy. Further they can compete with foreign producers. The consumers in usa are impacted negatively because while giving subsidies the govt doesnt fully allow imports from developing countries which are cheaper than produced in usa through subsidies. One thing should be here kept into mind. This affects usa citizens in other way also. They have to bear taxes to subsidies domestic farmers and at the same time they are not allowed to consume products of other countries which could be purchased at low costs without subsidies. Farmers of developing countries which produce at low cost are also negatively impacted since they have to compete with usa farmers who receive massive subsidies. Govt needs higher taxes to finance subsidies which result in burden on other sections of society and usa doesn't remain as competitive as it would be with low taxes. This also indirectly raises investment costs as govt even borrows for increased expenditure