United States Dairy Policies are “Milk Madness”

Regulations drive up prices and stifle innovation

July 11, 2007

Media Contact: (202) 789-5200

WASHINGTON – As part of this year’s farm bill, Congress will consider reauthorizing dairy programs that are expected to cost taxpayers at least $600 million over the next decade. According to a new Budget Bulletin from the Cato Institute, these expensive programs are ripe for repeal.

In “Milk Madness,” Chris Edwards, director of tax policy studies at the Cato Institute, documents the many ways U.S. dairy programs transfer money from consumers and taxpayers to the dairy industry. Edwards finds that marketing order regulations raise prices, income supports encourage overproduction, tariffs keep out lower-cost imports, and export subsidies shift our glut of dairy products onto other markets.

The net effect of these policies is that consumers end up paying more for dairy products than they would in a free market. Edwards reports that milk products carry a 26 percent implicit tax because of these interventions. Furthermore, Edwards notes that innovators who try to operate outside the system and sell milk for a lower price are quickly stymied by federal lawmakers.

“U.S. dairy programs are Byzantine in their complexity and create the most rigidly controlled of all agricultural markets,” Edwards concludes. “In this year’s farm bill, the Democrats have a chance to repeal the special interest giveaways of prior Republican farm bills, including the regressive ‘milk tax.’”

Tax and Budget Bulletin no. 47: http://www.cato.org/pubs/tbb/tbb_0707_47.pdf

For more information or to schedule an interview with Edwards, please contact:

Jacob Grier, manager of media relations, 202-789-5200; jgrier [at] cato [dot] org