Debt-Limit Package Shouldn't Contain New Ag Spending Programs

Posted by Kelly William Cobb on Thursday, July 21st, 2011, 5:00 PM PERMALINK

As the debt-limit debate continues, Agriculture Committee Ranking Member Collin Peterson has floated the inclusion of a new agriculture spending program that would raise some revenue for the U.S. Treasury through what appears to be a new tax on farmers.

The Dairy Market Stabilization Program would take money directly from the pockets of farmers when their profit margins decline, then put half the revenue in the U.S. Treasury for deficit reduction.  The other half would go toward a new market-distorting spending program that buys dairy products off the market to artificially inflate consumer prices.

Needless to say, while negotiators are looking for new revenue as part of the debt limit agreement, it should never come in the form of a new tax and spending program.  See below for a letter from ATR to Speaker John Boehner and Majority Leader Eric Cantor urging them to reject this new agriculture program in the debt limit package.

Dear Speaker Boehner and Leader Cantor,

As you work to craft a debt-limit package that reduces spending and keeps tax increases off the table, I encourage you to reject including the Dairy Market Stabilization Program (DMSP), as proposed by Agriculture Committee Ranking Member Collin Peterson.

The DMSP appears to constitute a new tax on farmers coupled with a government spending program, though the CBO’s score of the measure is being withheld. As profit margins for producers drop, the program takes money directly out of the pocket of producers and diverts it to a government fund.  The U.S. Department of Agriculture would then spend half the money on purchasing dairy products off the market – artificially driving up prices – and direct the remaining half to the U.S. Treasury.

While new revenue for the Treasury may be an attractive addition to a debt-limit package, it should never come in the form of an apparent tax on farmers and a new market-distorting spending program.

Termination of the Milk Income Loss Contract Program and the Dairy Product Price Support Program, which together severely distort markets, work at cross-purposes, and increase consumer prices, is a noble goal. These programs artificially put upward pressure on prices and subsidize farmers, with the aim of government generally setting producer prices for dairy products.

However, the proposed DMSP is no different, only this time the program would not be based on prices, but profit margins.  DMSP would continue government’s intrusive role in the dairy market, inflate consumer prices, constitute a new spending program, and – worst of all – act as an effective tax on farmers.  I urge you to reject the DMSP’s inclusion in a debt limit package.

Thank you for your continued leadership on behalf of American taxpayers to rein in overspending and reject higher taxes.

Grover Norquist
President, Americans for Tax Reform