What is the "Milk Cliff" ?

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In the middle of the "fiscal cliff" stand-off, there are stories about a "milk cliff". If Congress does not act, milk prices might rise substantially -- potentially doubling.

Price support programs have been around for decades. Herbert Hoover desperately tried to keep prices from falling, and was fairly successful at doing so (prolonging the great depression). The intellectual root comes from monetarist economists who want the government to ensure the stability of prices, in order to fight deflation. [Today, some of these are cheering Japan's new Prime Minister Abe who says he wants prices to rise at least by 2% per year.] Roosevelt doubled down on the madness. In 1933, millions of pigs were slaughtered. They were not handed out to the hungry poor struggling to get by. Instead, they were buried in mass graves. Posterity will not believe this.

The Dairy Product Price Support Program makes the government buy milk. The current program dates from 1949. Under the rules of the program, the government would be buying milk at very high rates. So, along the way, in various farm bills, the amount of the subsidy has been lowered. Instead of removing the subsidy entirely, only the calculation has been modified, and only temporarily.

Farm bill: If we do not get another Farm Bill, we will go back to 1949 subsidies and the government would have to pay so much for milk that the price might double. The government is not allowed to resell the milk at a lower price. It is not allowed to give it to charitable organizations. The whole idea behind the program is to keep milk-prices up. Farmers don't want the price to rise that high, because they know voters will wake up and might cancel the program altogether.

Don't patch it, Kill it: We do not need a new farm bill full of subsidies. We do not need a farm bill that will reduce the milk subsidy once again. We need a bill that will kill these farm subsidies forever.




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