Today’s Washington Post has another excellent article this morning exposing the ways in which the farm welfare system has been utilized in ways that have nothing to do with providing relief to distressed farmers.
When a drought left pastures in a handful of Plains states parched in 2003, ranchers turned to the federal government for help. Officials at the U.S. Department of Agriculture quickly responded with what they considered an innovative plan.
They decided to dip into massive stockpiles of powdered milk that the agency had stored in warehouses nationwide as part of its milk price-support program. Livestock owners could get the protein-rich commodity free and feed it to their cattle and calves. The milk would help ranchers weather the drought while the government reduced its growing stockpile.
But within months, the program spawned a lucrative secondary market in which ranchers, feed dealers and brokers began trading the powdered milk in a daisy chain of transactions, generating millions of dollars in profits. Tens of millions of pounds of powdered milk intended solely for livestock owners in drought-stricken states went to states with no drought or were sold to middlemen in Mexico and other countries, a Washington Post investigation found.
Taxpayers paid at least $400 million for the emergency milk program, one of an array of costly relief plans crafted by Congress and the USDA to insulate farmers and ranchers from risk. In some cases, ownership of the powdered milk changed hands half a dozen times or more in a matter of days, with the price increasing each time. A commodity that started out being sold for almost nothing was soon trading for hundreds of dollars a ton.
All of this happened right under the noses of the government officials who were supposed to be administering a disaster relief program. The whole mess, started, of course, thanks to another program designed to “help” farmers:
For years, the government has periodically purchased powdered milk — as well as butter and cheese, the other byproducts of raw milk — as part of a congressionally mandated price-support program for milk producers. By 2003, the Agriculture Department had accumulated a record 1.4 billion pounds of powdered milk in warehouses and in a huge limestone cave in the Kansas City area.
When you read “congressionally mandated price-support program”, remember that what it actually means is that Congress passed a law allowing the Agriculture Department to stockpile powdered milk in order to keep the price of milk and related dairy products artificially high, helping dairy farmers but, of course, harming the consumers who buy the milk.
The bulging stores coincided with a drought that left livestock pastures burned in about a dozen states. Some livestock owners were faced with selling their herds, Farrish said. Giving them the powdered milk as an emergency source of feed seemed like a good way to help out. “We did stop the wholesale liquidation” of breeding herds, Farrish said
In other words, they wanted to shield inefficient cattle ranchers from the effect of market forces. In the process, they created a powdered-milk trading system that ranchers and middle men were able to use to sell something allegedly being given to them to alleviate adverse economic conditions as a secondary source of revenue.
You can blame the people involved in this all you want, but the fact of the matter is that they were only responding to the incentives that the program itself created. And that, in the end, is the problem with all government wefare. It shields people from making decisions that might actually do them some good in the long run, and gives them the incentive to engage in activity that amounts to little more than taking advantage of the largesse of the American taxpayer.
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