Legislators are currently trying
to overhaul two of the most bizarre and costly regulatory regimes in the
United States — the price support systems for milk and sugar. Unfortunately
a true free market in milk and sugar is unlikely anytime soon.
Milk prices are set by a complex
set of regional bureaucracies that regulate the price suppliers can pay
to farmers and that suppliers can charge the public. Since Wisconsin was
the center of the dairy industry when the current regulatory regimen was
enacted, the system is designed so the price of milk increases the further
away dairy producers are from Eau Claire, Wisconsin (imagine a regulatory
scheme for computers that cost PC prices to increase the further away
one went from Silicone Valley!)
Even with this system, however,
milk prices have been falling dramatically over the past few years, so
some politicians are finally talking about overhauling the system, albeit
at an extremely slow pace. Agricultural Secretary Dan Glickman earned
the wrath of Midwestern politicians when he suggested slightly lowering
the disparity of milk prices between the Midwest and the rest of the country.
Similarly, states outside
the Midwest are encountering opposition in their attempts to expand the
compact system which, convoluted as it is, would allow states outside
the Midwest to lower milk prices significantly.
What is not likely to go away
is the government price support programs that purchase excess milk and
dairy products from farmers. Although the program expires on December
31 it will almost certainly be reauthorized and perhaps find its funding
increased to compensate for the recent decline in milk prices.
Breaking the power of the
sugar lobby is even less likely but Rep. Dan Miller (R-Florida) and Sen.
Charles Schumer (D-New York) introduced bill in the House and Senate respectively
to phase out the federal price support program for sugar.
While sugar sells for about
5 cents a pound on the world market, in the United States sugar costs
22 cents a pound thanks to the government-imposed price floor. The total
cost to American consumers from the higher sugar prices is about $1.2
billion each year according to Tom Schatz of the Council for Citizens
Against Government Waste.
Jack Ramey of the American
Sugar Alliance had a different take on the proposed phase out, arguing
that “what they’re doing is kicking American farmers when they’re down”
— as opposed to the sugar industry which kicks the American consumer
in both good times and bad.
The sugar price support system
should be phased out and the sooner the better.