Blog post

December 19, 2006 [LINK / comment]

Big milk and big subsidies

This is an item that I have been meaning to get to for the past week or more. Everyone complains about the price of gasoline, but not many people realize that milk prices are kept artificially high thanks to the Federal government's system of subsidies and price supports. Last week the Washington Post had a background article on the economic distortions created by the massive subsidies to U.S. dairy farmers. It notes that "The watchdog group Citizens Against Government Waste estimates that the programs cost U.S. consumers at least $1.5 billion a year." The article focused on a "maverick" dairy farmer from Arizona named Hein Hettinga, who opted out of the Federal system and started selling milk to local retail stores for 20 or more cents a gallon less than the competition. That was too much for the established producers belonging to the United Dairymen of Arizona to bear, however. So, they lobbied Sen. Harry Reid (soon to be Senate Majority Leader?) and others to pass a new law aimed at thwarting independent milk producers, and Hettinga responded by lobbying House Appropriations Committee Chairman Jerry Lewis (R-CA) to stop the measure. Hettinga was vastly outspent by Big Milk lobbysists, however.

To my surprise, the measure was supported by some of the most rock-solid conservative Republicans. Retiring Republican Sen. Jon Kyl played a key role early on, and outgoing Agriculture Committee chairman Bob Goodlatte, who represents us here in the Shenandoah Valley and points south, helped as well. (There are lots of big dairy farms in these parts, and boy do some of them stink!) John A. Boehner (R-Ohio) used a parliamentary maneuver to smooth the bill's passage, and Congress did enact such a measure last March. Free enterprise? Not! Mr. Hettinga, who lives in Yuma, just north of the border, quipped in a good-natured way: "I still think this is a great country. In Mexico, they would have just shot me."

Orthodox libertarians would cringe, but there really are some unique problems particular to agriculture that makes strict adherence to market economic principles difficult. The problem is that government remedies often create inefficiencies and perverse incentives. As with welfare, public health, and other well-meaning government programs, there is an inherent tendency toward dependency and corruption with guaranteed handouts. Obviously, both parties are closely tied to Big Milk interests. For farmers, I think the solution lies not in manipulating prices to guarantee them a "decent living," whatever that is, but rather making sure that enough financing is available to help them survive in lean years.