As Congress begins to review the Farm Bill, which guides federal agriculture programs, members of the House Agriculture Committee are looking to replace failed, market distorting dairy programs that substantially raise consumer prices with equally distortionary ones. Worse, the newly introduced Dairy Security Act of 2011 (H.R. 3062) would enact what is for all intents and purposes a new tax on dairy farmers. Below is ATR's recent letter to the committee strongly opposing the measure and calling for ag programs to move in a free-market direction.

Dear Members of the House Agriculture Committee,

I write strongly opposed to the recently introduced Dairy Security Act of 2011. The bill takes money directly out of farmers’ pockets and establishes new, market distorting spending programs with the intent of manipulating supply and setting prices for dairy products.

According to a preliminary CBO score, the proposed Dairy Market Stabilization Program (DMSP) would take $493 million out of farmer paychecks. As profit margins for producers decline and production rises above a quota, farmers would have to pay into a government fund. The producers and cooperatives that oversee this fund could then spend the money to purchase their own dairy products off the market.

ATR relies upon CBO and JCT scoring to determine a tax increase. However, we believe CBO has incorrectly scored this bill and a better review would show H.R. 3062 as a tax increase, as much of the money painted as an offsetting receipt should be described as a tax. ATR advises you to regard this CBO score with deep reservations.

In addition, the Dairy Security Act creates a second government spending program that provides subsidies to farmers totaling over $550 million. The Dairy Producer Margin Protection Program (DPMPP) differs from today’s failed MILC payment program in that payouts are not capped and are based on farmers’ profit margins, not prices.

Finally, any reform of federal dairy policies should involve the elimination of the antiquated Federal Milk Marketing Order (FMMO) system, which arbitrarily prices milk based on region and class of use. Unfortunately, instead of Congress reforming FMMOs, this bill gives farmers a vested stake in perpetuating the system and little ability for companies regulated by the law to make improvements.

While we strongly oppose the creation of DMSP and DPMPP, we support the bill’s termination of the current Milk Income Loss Contract program and the Dairy Product Price Support Program. These programs already severely distort the dairy market, work at cross-purposes, and substantially increase consumer prices. However, the termination of current market distorting programs should not come with the creation of equally distortionary ones.

American dairy policies require reform, not a tweaked continuation of the government’s intrusive role in the market that increases consumer costs, sets prices, spends millions in taxpayer dollars, and enacts what is effectively a new tax on farmers. I urge you to reject H.R. 3062 and other proposals that fail to reform America’s dairy policies in a free-market direction. If you have any questions, please contact Kelly William Cobb at 202-785-0266.

Grover Norquist