At the National Taxpayers Union, the nation's oldest taxpayer advocacy group, we're delving into South Carolina's agricultural landscape to uncover the implications of a bill speedily making its way through the state legislature.
H. 5169, dubbed the “Farmers Protection Act,” aims to shield farmers who use methods powered by fossil fuels that produce greenhouse gasses from financial discrimination by banks. It is not precisely clear this discrimination is taking place across South Carolina now, given that many banks accused of being “woke” actually invest heavily in fossil fuels. Nonetheless, this bill has considerable momentum and broad support across the political aisle. However, questions are rising like weeds in a field. Could this legislation harvest unintended consequences for the people it claims to protect?
One question lawmakers should have is the potential for increased financial risk. For one, banks have an interest in offering financing that lures customers away from their competitors. If those banks must price in what they perceive to be more risk – or decide that restrictions on their investment policies are too costly to do business anymore – this competition could diminish. The result could, ironically, be higher financing costs for farmers, more loan defaults, or economic losses, posing a significant and immediate risk to the agricultural sector that the legislation hopes to help. Legislators should be wary of the long-term impact this could have on farmers’ and their communities’ bottom lines.
Questions also have sprung up about the bill’s effect on future innovation. Will government micromanagement of private lending decisions to protect traditional farming practices stunt the growth of more cost-efficient methods needed for local producers to stay competitive in a global market? Like a tractor stuck in the mud, could this bill hinder the farmers’ and bankers’ abilities to adapt in a changing environment?
Moreover, there’s a big question that all legislators should consider: Should the government even be plowing through the practices of private businesses with new regulations about who they must conduct business with? This bill could set a dangerous precedent for government overreach in the free market by dictating whom banks — and potentially other industries — can, cannot, and must do business with based on the political whims of the day.
Taxpayers are already wrestling with these costly consequences in states such as California, Massachusetts, Arizona, and Texas. Various laws restricting state government contracts and investments based on liberal or conservative ideologies (rather than clear-eyed cost-benefit analyses) are making taxpayers’ business more expensive than it should be. The Farmers Protection Act is confined to private agricultural lending, but South Carolina’s leaders should consider whether it will build pressure to follow California or Texas.
This intrusion would provide uncertainty for farmers already struggling with Mother Nature's unpredictability. Trying to navigate the political winds shouldn't be an added burden our financial institutions and farmers carry.
In recent days, the South Carolina Senate has begun making a few sensible changes to the Farmers Protection Act, suggesting that there is still time for lawmakers to give thoughtful consideration to the consequences these policies will have for their constituents. While the authors of this bill are working to protect traditional farmers and help them find economic security, the National Taxpayers Union strongly urges legislators to continue to unearth its potential consequences before imposing these new regulations on those who work in our finance and farming industries.
Policymakers must ensure that while preserving the past, they also plant the seeds for agriculture's future.