The dairy industry really wants to keep its special treatment in the farm bill

Congressional negotiators are pretty pumped about what looks like the emergence of a long overdue farm-bill deal that can finally be sent back to Congress for passage (they hope) after last summer’s legislative throwdown; as I mentioned last week, the lawmakers think they’ve finally found a food-stamp compromise that settles on a $9 billion cut to SNAP benefits over ten years (but, just to be clear about the breadth of that compromise: Senate Democrats wanted a cut totting up at $4 billion/10 years, while House Republicans were originally looking for something more along the lines of almost $40 billion/10 years. Since, you know, the federal food stamp program will spend more than $70 billion every year in that time frame, and the Republicans’ proposal would have amounted to a barely five percent cut to a program whose enrollment has nearly doubled in just the past five years — weird how all of that “stimulus” hasn’t worked for the Obama economy, huh? But I digress.)

Whether Congress at large will accept said “compromise” remains to be seen, but the items holding up the farm bill most recently included a battle over what to do about price supports for the dairy industry; the Washington Post (!) aptly captured the absurdity of the industry’s vociferous demands for continued special treatment in an editorial yesterday:

The conflict pits the Democratic-majority Senate, which wants to boost dairy farm incomes in part by limiting milk supplies, against the Republican-led House, whose leader, Speaker John A. Boehner of Ohio, calls the Senate approach “Soviet-style.” This story of partisan bickering — true enough as far as it goes — does not quite do justice to the wasteful absurdity of the entire dairy-subsidy effort.

Start with the fact that dairy farmers are beseeching Congress now to undo damage that Congress did through past efforts to aid corn farmers — specifically, mandating the addition of vast quantities of corn-based ethanol to the nation’s fuel supply. This forced dairy farmers to compete with ethanol producers for grain to feed their cows. Grain prices have shot up over the past half-decade or so and become more volatile. With their operating margins shrinking, dairy farmers ran to Capitol Hill — even though the government already had helped them to the tune of $5.3 billion between 1995 and 2012, according to the Environmental Working Group.

Read on, the gist being that there is enough long-established, rent-sought, ultimately damaging market intervention and covering-the-tracks-of-your-own-unintended-consequences in the mix to make your head spin, but Congressional negotiators think they’re finally coming together on a “solution” for this latest farm-bill iteration, via the WSJ:

Rep. Collin Peterson of Minnesota, the top Democrat on the House Agriculture Committee, said he and House Speaker John Boehner (R., Ohio) had talked Wednesday and agreed on the contours of a compromise ending their impasse over how to refashion government support for the dairy industry. …

One of four lawmakers working to merge farm bills passed by the House and Senate, Mr. Peterson said the compromise proposal would not include a controversial “supply management” program fiercely opposed by Mr. Boehner, which could curb federal assistance to farms producing more milk at times when there is an oversupply of milk.

Instead, there would be some tweaks to a new program approved by both chambers that would send dairy farmers payments at times of need, based on a formula that weighs the price of milk and the cost of their expenses. To prod the market into producing less milk if the government is sending out payments, farmers’ premiums might go up or the payments might be altered, Mr. Peterson said.

“It’s sending the right kind of market signals, but I’m not sure it’s strong enough,” said Mr. Peterson, who had been working throughout January with House Agriculture Committee Chairman Frank Lucas (R., Okla.) and Mr. Boehner to resolve their deep differences on the issue.

And the federal government should be in the business of not merely sending out market signals, but deeming what the “right kind of market signals” are, because…?