Most of you reading this are already aware of how bad our farm subsidies in this country are. This is a very brief recounting of that fact and hopefully sheds some light on exactly how dairy subsidies work so you can explain it to your friends.
So the Agriculture Bill is one of the worst, if not the worst, bill Congress passes every year. It’s billions and billions of taxpayer dollars to subsidize various farm products including corn (ethanol), sugar, cotton, and dairy. These subsidies not only cost us a pretty penny, they raise the cost of our foodstuffs so we feel it again. We are paying to make our food more expensive. It’s ludicrous. Anyway, the main thing that prompted this not was hearing about dairy subsidies and how they work. Here we go.
Here is how the federal government subsidizes dairy products. It acts as an unlimited consumer. Here’s what I mean by that. The government promises to buy as much milk as dairies are willing to sell at a set price. So let’s say that price is $3.25. The price of milk will never drop below that price because if it were to, the dairy farmers would sell it to the government at that price rather than to grocery stores. Of course, equilibrium is below this price, so the federal government is stimulating milk production beyond consumer demand and artificially raises prices. “Now”, one might ask, “what does the federal government need all that milk for? In fact, what do they do with it?”
Well, that’s a good question. The federal government doesn’t need that milk, so it does a variety of things. Often it dehydrates the milk to powder form because it is much easier to store that way. They sometimes drive trucks into poor parts of cities and just unload milk and cheese (not very high quality, of course) for anyone to come and get. They will also send powdered milk as part of foreign aid programs as well. Of course, that doesn’t always use up all the milk they bought. So, where does it go but the local landfill. It’s like the Great Depression and the AAA all over again. I’ll end with a quote you can tell all your liberal friends who “care” so much about the poor.
“A governmental system that spends every year billions of dollars of the taxpayers’ money to make essential foodstuffs, cotton and many other articles more expensive should certainly have the decency not to boast of an alleged war against poverty.”
-Ludwig von Mises “Some Observations on Current Economic Methods and Policies”