Milking the Consumer

Free-market advocates have long known that consumers pay through the nose for milk and milk products because of the federal government's dairy price supports. Lately, however, free marketeers have been joined by some unlikely allies in opposition to subsidizing dairy farmers.

In October, that pillar of the liberal establishment the New York Times published an editorial lambasting dairy price supports. "They are costing the taxpayers close to $3 billion a year, and Government warehouses are bulging with billions of pounds of surplus cheese, butter and powdered milk," the paper fumed.

The Times rarely supports measures as radical as immediately doing away with a bad program. In this case, the paper was in favor of a proposal to reduce the price support level gradually from $13.10 per hundred pounds to $11.60. "All dairy farmers would lose some money and some would be forced out of business," conceded the editorial. "But that has to happen if the Government is ever to get rid of these subsidies. As a group, dairy farmers are not more deserving of welfare payments than, say, architects or hardware store owners."

The same month as the Times editorial, the Atlantic published a detailed account of the dairy boondoggle, "The Political Economy of Milk," written by John Donahue, a doctoral fellow at Harvard University's John F. Kennedy School of Government. Donahue pointed out that the price-support program costs $2.4 billion this fiscal year alone-which averages out to about $10,000 for every dairy farmer in America-plus an estimated "couple of billion dollars a year" in higher supermarket prices.

A standard defense of price supports is that they provide consumers with stable prices. The trouble is, noted Donahue, that "farmers like prices stable and high while consumers like them stable and low. The present system resolves the issue by making consumers pay high prices all of the time in order to spare them from paying high prices some of the time."

Donahue might also have mentioned the absurdly large amounts of dairy products stored by the government solely to prop up dairy prices. REASON pointed out in "How to Get Out of the Food Stamp Trap" (Aug.) that the feds were hoarding 11.4 billion pounds of nonfat dry milk in early 1983 and 1.5 billion pounds of other dairy products.

Still, Donahue did conclude that dairy price-support policies are extremely inefficient ("marketing orders are pure Rube Goldberg economics"). They "shackle American efforts to liberalize world trade in farm goods." And they redistribute wealth "to benefit farmers who are able-bodied, competent, and often a good deal wealthier than the average American."

Meanwhile, three liberal citizens' organizations-a Hispanic veterans group called the American GI Forum, the Gray Panthers, and the League of Latin American Citizens-have also voiced strong opposition to the dairy boondoggle. Their representative, a San Francisco public-interest lawyer named Robert Gnaizda, testified before the President's Task Force on Food Assistance that American cheese sells for about twice the world market price because of the subsidies. He also noted that ending dairy price supports would reduce cheese prices to 83 cents per pound.

Gnaizda condemned agricultural subsidies as "America's largest welfare system." As for dairy price supports, "Ending the subsidy will finally make cheese affordable to the poor," he said to the task force. "This is the way to solve hunger consistent with free-market principles and dignity for all."

Taking Issue with Land Regulators

When landowners' rights are violated by a governmental body that imposes regulations restricting the use of the land, are the owners entitled to compensation by the government? The courts have answered in the negative in the recent past, but now a decision in a major federal court case may indicate a trend in the other direction.

Joseph Gughemetti, attorney for Bruno and Eugenia Martino, told Reason that the case began in 1975 when the Martinos applied to local authorities in Morgan Hill, California, to subdivide their commercial property there and lease one acre to a fast-food restaurant. They were told that the local water district required them to dedicate 21,000 square feet of land to the district for free and to reserve another 36,000 square feet that the district required for a planned flood-control project and would condemn and pay for under eminent domain.

The Martinos waited for the condemnation proceedings on the 36,000 square feet so that they could proceed with development-and waited some more. Then in 1980, when they asked the water district when the property would be condemned, they were informed that 108,000 square feet-two-thirds of the acre that the Martinos wanted to lease out, plus some adjacent property-had been slated for public acquisition since 1968. Moreover, they were told that they would have to wait at least six more years for the condemnation proceedings, and if they tried to develop their property before that time, they would have to dedicate the 108,000 square feet to the water district for free.

At this point, the Martinos had had enough. Their attorney brought a suit arguing that the city government and the water district had violated the Martinos' property rights under the 1964 Civil Rights Act and asking for compensation.

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