The other, other cliff: With no farm bill, milk prices set to soar

posted at 2:01 pm on December 28, 2012 by Erika Johnsen

A few weeks back, Department of Agriculture Secretary Vilsack lamented the declining influence of rural America and the agricultural lobby’s inability to push next year’s farm bill through Congress. What he conspicuously failed to mention, of course, is that the farm bill and the USDA’s many decades-old agricultural programs in general (numbering in the hundreds and ranging from direct cash payouts to trade barriers) primarily benefit large agribusinesses and hardly ever the small, struggling family farms they claim they are trying to “protect.” In reality, all of these subsidies only help special niche interests, distort free-market signals, provide rent-seeking channels to industries that neither need nor merit it, create virtual taxpayer-sponsored rackets, and come at the cost of a net drain on our economy.

The dairy industry is just one example of the utter convolution perpetuated by the federal government deigning to award market-distorting special treatment, on behalf of what they deem to be ‘fairness’ and at taxpayers’ expense. Sorry to throw another “cliff” metaphor at you, but this is happening:

Distracted by dealing with the Bush tax cuts, lawmakers are running out of time to pass the latest version of the country’s sweeping farm bill and avoid what’s become known as the “dairy cliff.” If Congress misses the Jan. 1 deadline, the price of milk could rise significantly — some say by more than $3 a gallon — as the country’s farm policy reverts back to laws dating from 1949. …

At the heart of the trouble is an old provision designed to create a floor for how much dairy farmers are paid for milk — a kind of minimum wage. The formula for calculating that price, however, is based on assumptions that are a century old, predating the improvements in dairy farming. That old formula, if not replaced by a new farm bill, would push prices higher.

How much higher is difficult to determine because of the complexity of milk pricing. There are middlemen who help determine the price of the supermarket gallon, including processors and companies such as Dean Foods that market dairy products to consumers.

Hmm — perhaps it would have been better if the federal government had never made it their personal business to spend our resources coddling their politically-preferred industries in the first place, no?

I think I’m with Krauthammer on this one; maybe it would be better for us to go over the “dairy cliff.” Few things could as immediately and effectively drive home the costs of federal encumbrance like a sudden spike in the price of that previously innocuous half-gallon. Maybe Americans need to be hit where it hurts before they’ll finally stop supporting backwards and interfering policies like the ones sustained by the USDA. Everybody wants to eliminate expensive subsidies, just not their subsidies:

I do think if we went over the milk cliff it would actually be a good idea. [If] people actually saw the milk price double, it would be less abstract than watching a debt clock. They would finally understand that we have the insane laws, that acquire barnacles over the decades. And the farm laws are the worst. They are all kind of pressure, special interest favors, pay offs which make no economic sense. I’d like to wipe them out and start all over again, and it would be good if the law expired. People would actually be awakened to how insane our system is and how much we really need tax reform. It wouldn’t be an abstraction, it would be real.


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