Sour, Curdled, and Gross: How Congress got milk wrong
July 12, 1999
REPRINTED WITH PERMISSION by National Review
Of all the issues that Congress deals with, perhaps none is less glamourous to members than agriculture policy. As Senator Pat Roberts (R-KS) noted last year, some of his colleagues “don’t even know we passed a farm bill in 1996.” But that bill - commonly referred to as the “freedom-to-farm law” - is one of the boldest reforms effected by Congress since Republicans took control in 1995.
The Wall Street Journal editorialized, the farm bill was “the kind of change the 1994 election was supposed to be about.” The National Center for Policy Analysis called it a “success comparable to … welfare reform.” Even CNN News noticed that it was “the most far reaching agricultural policy reform since the 1930’s.”
Despite all it accomplished, however, there is one thing that the legislation failed do: make much progress in federal dairy policy. Instead, Congress deferred such decisions to this year. Even among the ag-policy wonkery, dairy policy remains a conundrum. A top aide to one of the Congressional agriculture committees recently confided that “there are maybe five” congressmen who understand the issue. It shows: Last year Congress cheerfully appropriated $200 million in “emergency disaster relief” to dairy farmers - in a year that saw record high income for dairymen.
Part of the 1996 bill’s temporizing on dairy was a provision known as the Northeast Interstate Dairy Compact. The compact a local commission of farmers and state bureaucrats to set the price that processors must pay farmers for raw milk. The commission even has the authority to raise the price on milk entering the region from outside the compact - which essentially keeps milk from places like Wisconsin and Minnesota out of New England. This is roughly equivalent to allowing Amish buggy-makers in Pennsylvania set the price of Detroit-made autos sold east of Pittsburgh.
The Northeast Compact was set to expire in April 1999, but Congress extended it until October. Congress is now considering not only whether to make the compact permanent, but whether to extend it to other states - establishing, for example, a Southern Dairy Compact. If that happens, Wisconsin farmers could lose about $64 million in annual milk sales according to a study by the University of Missouri.
After watching what the six New England states got away with, twelve other state legisaltures passed bills either to join the Northeast Compact of cast their fates with a southern one. Ten more states are now considering such a move. Compacts require both federal authorization and states legislative action and must be set up among contiguous states. So what started in New England may reach Oklahoma, as Republican principles have held up no better in state capitals than on Capitol Hill. Six of the nine governors to sign versions of the compact statute are Republicans: in New York, New Jersey, Virginia, Mississippi, Alabama and Oklahoma, The only governor to veto a compact bill was Democrat Zell Miller, then the governor of Georgia. He called it “counterproductive” and akin to a price fixing scheme.
In Congress, one of the most ardent proponents of the compact bill is Rep. Roy Blunt, a Republican from Missouri. He’s the GOP’s chief deputy whip and George W. Bush’s point man on the Hill. Bush is one governor who hasn’t made his position on compacts known. In mid-June, a compact bill passed both houses of the Texas legislature, but died a peculiar procedural death before reaching Bush’s desk. The governor may have dodged a bullet: Compacts may be popular among dairymen in New Hampshire, the first primary state, but they’d really put the screws to farmers in Iowa, the first caucus state. That, in a nutshell, is the politics of dairy compacts: They are a matter of raw regional power, philosophical principles be damned.
For example, Republican Representative Asa Hutchison of Arkansas (a propsective Southern Compact state) defends compacts as a “states rights” issue. But Hutchinson, a House manger in the Clinton trial, a former prosecutor, and something of a political intellectual, surely knows better. These regional “OPEC’s for milk,” as they have been dubbed, are clearly a barrier to interstate commerce, thus unconstitutional under the commerce clause. William Van Alstyne, a constitutional law expert at Duke Law school, has cited a 1994 Supreme Court comment that a “surprisingly large number of Commerce Clause cases arose out of attempts to protect local dairy farmers.”
While the Constitution does allow states to enter into compacts if authorized to do so by Congress, these arrangements traditionally have been for infrastructure projects such as airports and bridges. Some in the early part of the 20th century were to settle state boundary disputes. That GOP Congress is now the first in history to approve an interstate compact for the purpose of price-setting.
Moreover, for a Congressional majority elected on a platform of accountability and responsibility, this compact authorization was passed in a most unaccountable and irresponsible way. In the only vote either body of Congress ever took expressly on the Northeast Compact, the Senate defeated the measure. Nonetheless, it was revived in the House-Senate “conference committee” and added to the final statute largely under the maneuvering of two powerful Republicans: New York’s Gerald Solomon (now retired) and Louisiana’s Bob Livingston (then-Chairman of the Appropriations Committee, later Speaker for a second). So who is opposing these compacts? Wisconsin’s senators , naturally - Russell Feingold and Herb Kohl - as well as Minnesota’s, Paul Wellstone and Rod Grams. The first three are Democratic liberals. The last is a Republican conservative.
Their states’ dairymen - the most efficient producers - stand to lose big in this cartel scheme, which is why they’ve authored a bill to overturn the Northeast Compact. Another sharp critic is Massachusetts’ Barney Frank. His state has fewer than 350 dairy farmers, but the compact has cost Massachusetts - a member of that compact - nearly $25 million. Simple math reveals a mind-boggling fact: The higher prices consumers pay as a result of the compact amount to about $74,000 per dairy farmer. Yet, the average Massachusetts dairyman is getting only about $3,000 extra per year.
So where does the money go? Mostly to big dairy farms in Vermont, so far the going away winner under the scheme. Smaller New England aren’t doing so hot: The region’s dairy farms went out of business at a 25 percent faster rate in the first year of the compact than before it. The compact, by shielding big Vermont farms from outside competition, and boosting their cash flow with artificially high price levels, has turned these larger farms into predators that gobble up the smaller farms the compact was supposed to protect in the first place. To add insult to injury, this takeover rampage is supported by higher grocery bills and higher costs of school lunch programs - part of what has liberals like Wellstone and Frank up in arms.
Currently, dairy compact legislation has 39 co-sponsors in the Senate and more than 150 in the House. Approximately half of them are Republicans. If passed, this plan would take what was supposed to be a temporary deal to tide-over New England dairymen (who produce about three percent of the nation’s milk) and make it a permanent economic Rube Goldberg contraption that would govern about 40 percent of the nation’s milk production and about 60 percent of the nation’s milk consumption. Is this what the Republican “revolution” is about? Dairy compacts are the beginning of the end for freedom to farm - one of the GOP’s finest, if most unheralded, accomplishments. Wierdly enough, the task of preserving this signal Republican legacy lies in the hands of Paul Wellstone and Barney Frank. Who’d have thunk it?
Posted in Commentary |