Farm Bill Update: Dairy Wars

Oct 11, 2012

The legislative battle to thwart the nearly $1 trillion food and farm welfare bill is on hold as lawmakers hit the campaign trail, but the fight is far from over and far from won. Nevertheless, conservatives have seen remarkable progress thus far. As evinced by a recent op-ed from Heritage Action CEO Michael Needham and Representative Marlin Stutzman (R-IN), support for separating food stamps from the farm bill has reached new heights this year.

The arguments that proponents of the farm bill put forth continually changed both before and after the September 30 expiration. First, they touted the drought as a rationale for bringing the farm bill to the floor. When it was rightly pointed out that only 0.2% of the proposed bill dealt with disaster assistance for livestock owners, the argument was defused and a separate drought bailout package was passed. Few believed the argument that a $2 billion problem deserved a $1 trillion "solution."

Next, proponents of the farm bill insisted that farmers' certainty about the coming crop season was totally dependent upon the government's actions and that farmers would be incapacitated without a new farm bill. Whatever the merits of that argument, it does not outweigh the fact that 80% of the proposed bill is food stamps. As Heritage experts Robert Rector and Katherine Bradley have pointed out, the food stamp program has exploded in recent years, from some $19.8 billion per year in 2000 to $84.6 billion per year in 2011.

Now, proponents of this monstrosity are using expired dairy programs to press for its passage. But again, that is a pointless argument, as many farm bill programs are still funded following the passage of the six-month continuing resolution last month. Among these are food stamps, crop insurance, and conservation programs.

One of the few programs that did come to an immediate end, however, was the Milk Income Loss Contract (MILC) program. This subsidy program was implemented in 2002 and like many of these market-distorting federal programs, MILC was intended to be a "temporary" measure to help dairy farmers cope with sustained low milk prices.

Secretary of Agriculture Tom Vilsack recently spoke at the World Dairy Expo inMadison,Wisconsin. There he stated that, "Prices have rebounded a bit, but we're still confronted with high feed costs...what we really need is a five-year farm bill." Thus, once again, the supporters of the food and farm welfare bill are arguing that a relatively smaller problem is in need of a gargantuan solution.

Both the House Agriculture Committee-passed and Senate-passed farm bills have two new dairy subsidy programs that are being foisted on the backs of U.S. taxpayers. Both of these new programs, the Dairy Production Margin Protection Program (DPMPP) and Dairy Market Stabilization Program (DMSP), implement yet another price support and further production limitations for milk in order to help dairy farmers deal with the rising cost of feed.

But would these new dairy subsidies even be necessary if the ethanol mandate were rescinded or eliminated altogether.

The skyrocketing price of feed can be attributed in part to this year's drought (something outside of anyone's control), but also to the widespread effects of the ethanol mandate. It has been shown that the mandate greatly increases the price of food. This has a direct impact on the profitability of dairy farmers as nearly 80% of their operational costs come from the price of feed.

As proponents of the outrageously expensive food and farm welfare bill gear up for a lame-duck battle, it is important to remind them that their rationale for passing the bill has repeatedly changed. And more to the point, their arguments simply aren't persuasive, especially in light of record farm profits. Furthermore, the specific argument by Secretary Vilsack to pass this $1 trillion bill to alleviate the diminished subsidization of dairy farmers is laughable.

The problem that he and farm bill supporters are seeking to address is in part one of their own making. Subsidy programs created to offset the disastrous effects of other subsidy programs is a nonsensical way to govern.

The best solution is often the simplest one. Eliminate these programs, get the government out of the way, and allow the market to decide.