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NTU has repeatedly advocated for an end to the dairy price-fixing scheme – most notably with our friends at Council for Citizens Against Government Waste via our joint “Save Your Milk Money” website.
At Reason.com, pundit extraordinaire John Stossel writes a compelling argument for getting government out of the dairy business altogether. He explains what many have been arguing all along -- that there’s nothing intrinsically different about farming or dairy production that requires government price-fixing, subsidies, or heavy-handed regulations:
Prices should be decided by buyers and sellers.
Prices are not just money. They're information. Rising prices tell farmers to produce more; that increases supply and prices go back down. Falling prices tell producers to invest in other products. This system works well for plums, peaches, cars and most everything we buy.
But bureaucrats and lobbyists say milk is "special."
[Rob] Vandenheuvel [of California’s Milk Producers Council] says cows can't be subject to market demand because "there are several years of lead time between when you decide to buy a cow and when that cow produces milk."
The [California Department of Food and Agriculture] agrees because: "Milk is a perishable product and must be harvested daily," and "Milk continues to be viewed as a necessary food item, particularly for children."
I say, so what? It's not "lead time" or being "perishable" or even being "necessary" that makes milk unique. Plums and newspapers are perishable and harvested daily. It takes long lead times to build assembly lines to make cars. No entrepreneur has a guarantee of market demand once the factory is complete. All business is risky.
Read the whole thing here.
The current milk price-fixing scheme is born out of the same New Deal-era laws that gave rise to the raisin and other marketing orders NTU highlighted only a few weeks ago. In sum, the dairy marketing order restricts supply and hikes prices for consumers.
Even worse, a new Dairy Market Stabilization Program (DMSP) enshrined in the farm bill working its way slowly through Congress would impose a new set of top-down Soviet-style supply controls on top of already onerous dairy regulations. DMSP’s manipulative provisions are designed to increase prices for consumers on everything from a half gallon of two-percent to yogurt and ice cream. Similar plans have undermined the dairy market in other countries and hurt consumers, especially those with low incomes. However, Congress rarely lets that kind of reasoning get in the way of bad policy.
Technologies such as milk reconstitution and shelf-stable “boxed” milk make calls for supply controls and other government regulation, on the basis that dairy is uniquely “perishable,” sound more and more dated. Today, asceptic packaging keeps milk fresh at room temperature for months at a time without extra preservatives, providing an affordable way to transport and preserve dairy products in greater and greater quantities. Widely available and consumed in Europe for decades, boxed milk is gaining traction in the U.S. as well as other countries in the Western hemisphere.
Now that science has trumped these industry challenges, it’s difficult to see why the federal government should continue interfering in the milk market to the detriment of consumers and farmers alike. Even worse, Congress shouldn’t be pursuing a plan that could inflict an even higher cost.
Stossel says it best when he concludes, “Milk isn’t ‘special.’ Almost no product is. Let competition set the price.”
Click here to tell your Congressman to oppose new dairy regulations.0 Comments | Post a Comment | Sign up for NTU Action Alerts
New Report: Taxpayers Still Backing Contradictory Federal Food Policy
Free-marketers are well aware of “nanny state” encroachment on consumers’ food choices; many of them probably celebrated when a second court in New York recently held against Mayor Michael Bloomberg’s ban on larger-sized “sugary” drinks (even though New York City keeps contesting the rulings). What they may not realize is that nannies, especially government ones, often have an arbitrary way of exercising discipline.
We were reminded of this “do as I say, not as I do” phenomenon again thanks to an intriguing new report from the Union of Concerned Scientists on how U.S. agricultural policy is working at cross-purposes – often to the detriment of taxpayers and the economy. Among the findings of the study:
Reality-check time – NTU and UCS do not see eye-to-eye on every issue, though we have joined forces on causes such as protections for government whistleblowers and wasteful nuclear weapons spending. Nor will conservatives necessarily support every conclusion in the latest UCS report, which calls for steps such as grants to develop infrastructure for farmers’ markets or putting more money into federal research.
Still, many of the report’s assertions are quite valid, and should appeal to all taxpayers. Using respected sources, UCS calculates that in 2012, Medicare and Medicaid likely spent $172 billion total to treat cardiovascular diseases. If even a fraction of these costs could be preventable, the implications for the future of these programs would not be trifling. Combined with more aggressive action on improper payments, the savings could buy some additional vitally-needed time while we undertake the task of completely restructuring entitlements (through premium support, personal accounts, and other pro-taxpayer reforms). In any case, repealing or dramatically restricting current farm subsidies could more than offset UCS’s recommendations for new federal initiatives, thereby providing much-needed deficit reduction.
Another UCS conclusion worth considering is that USDA’s insurance program “is oriented toward farmers who grow a handful of subsidized commodity crops, including corn, soybeans, and cotton.” The adverse result is that farmers are disincentivized to diversify their crops into fruits and vegetables. Simplifying insurance to cover all livestock and crop revenue on a given farm (plus reducing the taxpayer subsidy for the insurance premiums, as NTU recommends), might make sense. In fact, diversification would help mitigate the risk of variability in crop yields and prices, thus enabling farmers to self-insure their crops and making healthy products more affordable to consumers.
Subsidizing processed food ingredients is all the more bizarre since the government is simultaneously spending whopping amounts of taxpayer money on educating Americans to eat healthy. For instance, in 2011, the United States Department of Agriculture (USDA) expended $2 million on the initial development and promotion of its most recent food logo, MyPlate, which aims to teach the population what to consume.
A serious problem here is that the USDA and the lawmakers who fund it often fail to see the connection between the agency’s two tasks of administering both farm subsidies and educational programs for healthy eating.
It wouldn’t be the first time. A previous post on Government Bytes recounted findings from a U.S. Public Interest Research Group that corn- and soy-derived food ingredients have received $19.2 billion in federal subsidies since 1995, as revealed by a recent U.S. Public Interest Research Group (USPIRG) report. This amount would allow the government to buy 52 million Twinkies (fortunately, that proposal is not on the table … yet). By contrast, the only significantly-subsidized fruit or vegetable, apples, received about $689 million in subsidies over the same period. This means that, for every half an apple, each taxpayer has subsidized 20 Twinkies per year.
Another problem is that neither strategy seems to be working. In regards to nutrition education, studies have shown that Americans followed MyPlate recommendations in only 2 percent of days in 2011. As for subsidies, they artificially influence consumers’ eating decisions.
Both UCS and USPIRG’s calls for action show why so many voices on various parts of the political spectrum are arguing that farm subsidies should be completely eliminated or curtailed. This chorus for reform, among taxpayer groups, government transparency advocates, international aid societies, and others, will only grow more vocal if or when lawmakers attempt to cobble together yet another flawed Farm Bill this fall. And why not? After all, since farming came before subsidies, it should be more than able to outlive politicians’ manipulations.1 Comments | Post a Comment | Sign up for NTU Action Alerts
In early June the Supreme Court issued a unanimous decision allowing a Constitutional challenge to a New Deal agriculture law go forward. The Washington Post tells the story of embattled raisin farmer, Marvin Horne, who is fighting for the right to keep what he grows:
Horne, a raisin farmer, has been breaking the law for 11 solid years. He now owes the U.S. government at least $650,000 in unpaid fines. And 1.2 million pounds of unpaid raisins, roughly equal to his entire harvest for four years.
His crime? Horne defied one of the strangest arms of the federal bureaucracy — a farm program created to solve a problem during the Truman administration, and never turned off.
He said no to the national raisin reserve.
The whole article is well worth your read.
What could compel growers to hand over the goods they have produced for little or no compensation?
The Raisin Marketing Order.
One of 27 Marketing Orders enshrined in the Agricultural Marketing Agreement of 1937, this Depression-era law created a government-sponsored cartel that authorizes the “Raisin Administrative Committee” to seize a portion of the annual raisin crop in order to collectively influence supply, demand, and ultimately price. The Post goes on to offer a sanitized explanation:
It works like this: In a given year, the government may decide that farmers are growing more raisins than Americans will want to eat. That would cause supply to outstrip demand. Raisin prices would drop. And raisin farmers might go out of business.
To prevent that, the government does something drastic. It takes away a percentage of every farmer’s raisins. Often, without paying for them.
These seized raisins are put into a government-controlled “reserve” and kept off U.S. markets. In theory, that lowers the available supply of raisins and thereby increases the price for farmers’ raisin crops. Or, at least, the part of their crops that the government didn’t just take.
Where do those raisins go? The Raisin Administrative Committee stores them until such a time as it deems it permissible to let more raisins go on the market. Some are distributed for free to the School Lunch and other government programs, others are auctioned off. Profits are used to pay for storage and “raisin promotion.” Farmers, who have been forced to turn over up to 47 percent of their crop in the past, get nothing or next to nothing in return. Nothing, that is, except the “privilege” to pursue their chosen vocation.
Adding insult to injury, because the Raisin Administrative Committee is enforced by the Department of Agriculture, ultimately taxpayers are paying for a program that increases prices for consumers and robs farmers.
Raisins are only one of many products that must adhere to the government’s price-fixing schemes. Marketing Orders are also in place for almonds, apricots, avocados, cherries, citrus fruits, cranberries, dates, grapes, hazelnuts, kiwifruit, nectarines, olives, onions, peaches, pears, pistachios, plums, potatoes, spearmint oil, tomatoes, and walnuts. And, lest we soon forget, dairy has its very own onerous marketing order that restricts supply and hikes prices for consumers.
While Mr. Horne’s case still has a long way to go as it once again wends its way through the lower courts, in the eyes of most taxpayers the outdated Marketing Orders should be a clear violation of the Takings Clause (the Fifth Amendment of the Bill of Rights). Rather than wait for the courts to unravel the red tape, Representative Trey Radel (R-FL) has introduced H.R. 2840, the Raisin Farmer Freedom Act, a bill that would exempt raisins from Agricultural Marketing Orders.
This is a good first step for raisin farmers eager to get out from under the oppressive Raisin Marketing Order. However, the bill falls short of what the agriculture industry needs to thrive in the 21st century. Instead of exempting only one crop, Congress should be working hard to dismantle the entire regime of Marketing Orders, a relic of outdated agriculture policies more akin to the U.S.S. R.’s top-down central planning.
The “invisible hand” described by Adam Smith is no less present in agriculture than it is in any other sector of the economy. Simply put, the government doesn’t have and never will have the information necessary to efficiently manage a market from on high. The fact that a “national raisin reserve” exists is proof positive of that fact.
Exempting raisin farmers from Marketing Orders would help Mr. Horne and his friends today. But Congress should go farther and level the playing field by completely eliminating these types of “admission fees” to the marketplace. Doing so would be a boon to both producers and consumers alike.3 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: April 23, 2013
Today’s Taxpayer News!
Today NTU urged the Senate to support eight different amendments to the Farm Bill that save taxpayers money and reform the crop insurance program.
Apple’s Senate hearing earlier this week has awoken a debate about how best to reform the tax code. One proposal, as illustrated in this Bloomberg opinion piece, would be to abolish corporate taxes all together.0 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: May 22, 2013
Today’s Taxpayer News!
The latest Farm Bill to hit the Senate for a vote is still going to cost a whopping $955 billion or more, as Pete Sepp pointed out earlier this week, making it a very bad deal for taxpayers. You can take action here, and urge your Senator to vote it down.
NTU’s Manzanita McMahon offers context on Tuesday’s Senate hearing where Apple’s tax practices were examined.0 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: May 20, 2013
Today’s Taxpayer News!
Pete Sepp’s US News op-ed hammers the Farm Bill, which is once again making its way through the U.S. Senate but remains nearly as saddled with unnecessary spending as last year’s version.
A senior White House Official has said Obama’s chief White House lawyer knew about the IRS’s targeting of conservative groups weeks ago. Read the full story from the New York Times.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Bipartisan Team Leads the Charge for Crop Insurance Reform
Representatives Ron Kind (D-WI) and Tom Petri (R-WI) teamed up to introduce the Assisting Farmers through Insurance Reform Measures or AFFIRM Act today. Packed with much-needed reforms for federal crop insurance, the bill could save taxpayers billions of dollars.
The current federal crop insurance program is rife with problems. Extremely generous subsidies that pay for 60 percent of a farmer’s premium and 100 percent of the administrative and operating costs of the PRIVATE insurance companies that provide coverage have turned the program into less of a safety net and more of a “farm income support program” as agricultural economist Bruce Babcock explains in this study. In 2011, the Environmental Working Group found that the top 10 percent of policyholders went home with 54 percent of the premium subsidy dollars. With taxpayers footing the bill for insurance costs – essentially guaranteeing profits regardless of market, weather, or other conditions – farmers have become less and less risk-averse, plowing under what would typically be unprofitable land that shouldn’t be tilled for environmental reasons.
The federal crop insurance program lacks caps, means testing, or transparency - all commonsense modifications that would bring it in line with other federal agriculture programs and help to prevent costly fraud, like that uncovered just this March:
Federal investigators have unraveled a massive scheme among dozens of insurance agents, claims adjusters, brokers and farmers in eastern North Carolina to steal at least $100 million from the government-backed program that insures crops.
Forty-one defendants have either pleaded guilty or reached plea agreements after profiting from false insurance claims for losses of tobacco, soybeans, wheat and corn. Often, the crops weren't damaged at all, with farmers using aliases to sell their written-off harvests for cash.
With taxpayers, not farmers or insurance companies, on the hook for losses, it’s no surprise that that the program’s price tag for 2012 is a staggering $14 billion and growing – more than quadruple what taxpayers paid just ten years ago. Considered within the context of out-of-control spending and a looming debt crisis, it’s obvious real change is needed to protect taxpayers and help to end the perverse incentives caused by this upside-down insurance scheme.
In a press release this morning, the bill’s sponsors explained:
The AFFIRM Act limits the total value of crop insurance subsidies to $40,000 per person each year, eliminates crop insurance premium subsidies for individuals with an adjusted gross income (AGI) of more than $250,000, and requires more of the administrative and operating (A&O) costs to be shared by the private companies that offer coverage. It also limits renegotiation of the Standard Reinsurance Agreement (SRA) and lowers the “target rate of return” that USDA builds into premiums in order to guarantee long-term profitability for crop insurance companies.
These reforms would be put in place while bringing more transparency into the crop insurance program by requiring the reporting of all parties that receive federally subsidized crop insurance.
Together, these important reforms will save taxpayers an estimated $11 billion over the next ten years.
Reps. Kind and Petri should be applauded for leading the bipartisan charge for federal crop insurance reform. The measures imposed by the AFFIRM Act will help get taxpayers out of the crop insurance business and encourage increased privatization of agricultural risk – just as other industries deal with their own hazards. Given that farmers continue to enjoy record-high profits that are expected to continue rising over the next decade even as other sectors of the economy struggle to recover, the time has never been better to undertake these fundamental changes in agribusiness.
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The Late Edition: April 29, 2013
Today’s Taxpayer News!
NTU’s Pete Sepp weighs in on the complications of collecting “back taxes” as a possible part of immigration reform in this USA Today article.
The International Dairy Foods Association recently threw its support behind the “Dairy Freedom Act”, which NTU supports. Read more from the Dairy Herd.0 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: December 18, 2012
NTU’s Brandon Arnold weighs in on the latest Farm Bill debate.
The President’s most recent Fiscal Cliff proposal involves tying Social Security to the Consumer Price Index to reduce costs, but the plan has his own party less than enthused.1 Comments | Post a Comment | Sign up for NTU Action Alerts
Americans Overwhelmingly Declare: Let the Market Decide Milk Prices
74 percent of Americans believe that milk prices should be determined by the marketplace as opposed to set artificially by government, according to a new poll of 2,094 adults conducted by Harris Interactive for the International Dairy Foods Association.
While the Harris poll did find that 52 percent of Americans support providing subsidized insurance to protect farmers from unforeseen losses, a mere 8 percent back federal policies to keep milk prices above market value. It is clear that the vast majority of Americans favor the market determining dairy production and prices over the federal government setting arbitrary limits on production to drive up costs.
However, the Dairy Market Stabilization Program (DMSP), a provision buried deep within the massive trillion-dollar “Farm Bill” lumbering through Congress, would buck the preferences of consumers and producers and enforce caps on the amount of milk farmers produce in a misguided attempt to increase demand.
This intrusive insertion of the federal government into the milk marketplace would result in higher dairy prices as well as a whole host of new regulatory complications, adversely affecting both consumers and producers. In addition, farmers would likely face stiff penalties for exceeding the federal “cap” on production, and with reductions to the amount of milk farmers are permitted to produce, jobs within the dairy industry could be eliminated as well.
It is clear that the DMSP is bad news for all Americans, and this is why NTU has joined with Citizens Against Government Waste to oppose the DMSP and help involve concerned citizens.
Visit YourMilkMoney.org to learn more about the destructive consequences of the DMSP, watch informative videos, and take action to tell Congress that the market, not the government, should set the price of milk.
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