Dismantle the USDA’s Milk Marketing Order System | Citizens Against Government Waste

Dismantle the USDA’s Milk Marketing Order System

The WasteWatcher

Reports on the progress of Congress’s Joint Select Committee on Deficit Reduction in its quest to identify $1.2 trillion in savings by November 23, 2011 are decidedly mixed. An open hearing on October 26 yielded some hand-wringing, but little in the way of new information about the final outcome. An October 27, 2011 article in The Hill hints that the committee may be deadlocked.

One area of rampant waste that should be unanimously condemned by both sides of the aisle in the Super Committee is the U.S. Department of Agriculture’s (USDA) Federal Milk Marketing Order System (FMMO), the convoluted, Rube Goldberg process by which the USDA determines pricing for the country’s supply of fluid milk. The FMMO is just one feature of the country’s anti-competitive, antiquated, and command-and-control dairy pricing system.

A new International Dairy Foods Association (IDFA) study sheds light on the cost of the FMMOs and makes a strong case that the elimination of the FMMO would result in $5 billion in 10-year savings to other federal nutrition assistance programs, such as the Supplemental Nutrition Assistance Program (SNAP) program and Special Supplemental Nutrition Program for Women Infants and Children (WIC). According to the study, “In fiscal year 2009, the federal government purchased more than $360 million in dairy products for distribution through the nutrition assistance programs.” In addition to SNAP and WIC, the government manages the National School Lunch Program, National School Breakfast Program, Special Milk Program, and Temporary Emergency Food Assistance Program, to name a few. Cost savings would occur in all of them if the FMMO system could be eliminated.

The IDFA study’s author, agricultural economist Allen Rosenfeld, determined that if the FMMO’s had not been in existence in fiscal year (FY) 2009, savings would have been more than $400 million. Taxpayers would have spent less on overhead administering the nutrition programs and the purchasing power of the programs would also have been “significantly enhanced.” Rosenfeld estimates that for FYs 2012 to 2021, the total cost savings for the federal nutrition programs alone if FMMOs were eliminated would reach almost $5 billion. Taxpayers would benefit because federal programs could stretch their dollars and realize additional efficiencies.

Enrolment in the SNAP program, for example, has gone from 26 million in 2007 to 44 million; costs have more than doubled, from $33 billion to $77 billion. SNAP has a storied history of fraud, so it comes as no surprise that with that explosive growth came record levels of waste, fraud and abuse. There is no doubt that the program is overdue for a crackdown on its rampant abuses, as well as the enactment of significant long-term reforms, but the elimination of the FMMOs makes practical sense on multiple levels today as the Joint Select Committee searches for multiple ways to cut trillions.

The FMMO is an anachronistic program which was designed in the 1930s to ensure a healthy supply of fresh milk to everyone in the country. In 1988, the Government Accountability Office (GAO) said “GAO believes that the premises for milk pricing under federal orders are outdated. A need no longer exists to encourage and maintain a locally produced supply of milk. Milk is produced in all regions of the country and technologies are available to transfer it, either as fluid or in a form to be later reconstituted as fluid, should local shortages develop.”

When it comes to America’s tortured agriculture policies, the nutrition lobby and the farm lobby are increasingly at odds. Nutrition advocates have begun to recognize that the array of programs in place to prop up the incomes of various commodity farmers in the sugar, dairy, and corn industry, among others, have negative ripple effects on the price of food domestically and abroad, and that the programs themselves distort consumption. Taxpayers are victimized as well, through the cost of administering these behemoths, consumers pay higher prices for any food that uses these commodities, and jobs both here and abroad are lost as a result of these anti-competitive policies.

In the current fiscal climate, FMMOs should be an easy target for budget cutters in Congress. Unfortunately, several members of Congress are pushing the Joint Select Committee in the wrong direction on dairy policy. Rep. Collin Petersen (D-Minn.) is actively involved in behind-the-scenes machinations to persuade the committee to institute a series of dairy reforms that would keep milk prices high, cost taxpayers and consumers more money, not less, and will not eliminate the FMMOs or reform them in any way.

The Joint Select Committee should reject this pressure and focus exclusively on cutting wasteful and outdated programs. The federal milk marketing order system is a great place to start.

  -- PJ Austin

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