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Last week, while the Fiscal Cliff blamefest was dominating the headlines, another January 1, 2013 crisis was revealed - the so-called Milk Cliff.
As explained at Breitbart.com,
If Congress fails to pass the Farm Bill before January 1st, milk prices could rise to $8 a gallon.
America could go over the “milk cliff” because of an arcane 1949 provision that could more than double the price of milk:
At the heart of the trouble is an old provision designed to create a floor for how much dairy farmers are paid for milk — a kind of minimum wage. The formula for calculating that price, however, is based on assumptions that are a century old, predating the improvements in dairy farming. That old formula, if not replaced by a new farm bill, would push prices higher.
The dusty law was implemented “as a poison pill to get Congress to pass a farm bill by scaring lawmakers with the prospect of higher support prices for milk and other agriculture products,” says Montana University Professor Vincent Smith.
As of late Sunday evening, it appears that an extension of the Farm Bill has been negotiated and will be voted on Monday, December 31:
Farm-state lawmakers have agreed to a one-year extension of the expiring U.S. farm law that, if enacted, would head off a possible doubling of retail milk prices to $7 or more a gallon in early 2013.
The extension would end a 32-month attempt to update farm subsidies dating from the Depression era, when farmers were crushed by low prices and huge crop surpluses, to meet today's high-wire challenges of tight food supplies, high operating costs and volatile markets.
The Reuters report explained that, "Traditionally, the dairy program sets a minimum price for milk through government purchase of butter, cheese and dry milk. If Congress does not act, the dairy support price will revert on Tuesday to the level dictated by an outmoded 1949 law and which is roughly double the price now paid to farmers."
If you're wondering why the 1949 law can't just be repealed so that we can move on our merry way to a freer agriculture market, we've come to the part of the story that makes most people's eyes glaze over. Again, from Reuters:
While dairy producers generally support the so-called margin-protection program as the answer to high feed costs, processors and foodmakers oppose it. They say it is wrong-minded in its premise of curtailing production when prices are low, and it will destroy a healthy export market for dairy products.
The rejuvenated disaster programs would cover losses from this year's widespread drought, especially for livestock producers, although tree farmers, honey bees and farm-raised fish are also covered. Maximum payment would be $100,000.
Senators passed a farm bill in June estimated to save $23 billion over 10 years, with most of the cuts in crop subsidies and conservation programs. The House Agriculture Committee approved a bill with $35 billion in cuts in July, half of it in food stamps for the poor - the biggest cut in food stamps in a generation.
Fiscally conservative House Republicans have called for larger cuts in farm subsidies and food stamps while some House Democrats opposed any food stamp cuts.
I'm reminded of the debate over the ever growing Obamacare Act, that bill eventually grew to over 2,700 pages. The more these laws intertwine, the more they grow. And the more the laws grow, the more government grows. And the more government grows, the less freedom we have in our free market, and the less individual liberty we all enjoy.
And that, ladies and gentlemen, is how we end up with $8 per gallon milk.