Tag: usda

When Government Gets to Say What’s ‘Natural’

When the federal government regulates food quality, consumers lose. Unfortunately, a Washington Post article on a recent increase in class-action lawsuits by consumers against food manufacturers over the use of “natural” labels shows how consumer groups are missing this point. In suing food companies, plaintiffs are arguing that these manufacturers (of cheese, in one particular case) are misleadingly labeling their food as “natural” while using milk from cows that use a growth hormone and eat animal feed made from genetically modified grain.

Though the plaintiffs and food companies disagree over what should be labeled as “natural,” one thing they do agree on is that the U.S. Food & Drug Administration, which has so far stayed silent on the issue, needs to provide guidance on what “natural” actually means. Manufacturers argue that clear rules would help them avoid legal battles, while consumer groups believe that government regulation would reduce what they view as deceptive marketing.

The “natural” label fight is a repeat of last decade’s fight over labeling food “organic.” In that case, the federal government did step in, with the U.S. Department of Agriculture creating the “USDA Organic” label and establishing rules on when the label can be used. However, that hardly ended the controversy over the use of the term “organic.”

As I discussed in a previous post, traditional organic farmers are now fighting with new hydroponic farmers over the latter’s use of the “USDA Organic” label. Hydroponic farming seems consistent with organic farming goals: producing environmentally friendly and healthy foods. However, traditional organic farmers don’t want competition from the upstart hydroponics industry because that competition will likely cut into the price premium that organic foods now fetch. An FDA defined “natural” label would compel the same type of jockeying by producers to hurt rivals.

The “organic” label also illustrates that there is no reason to believe regulations actually provide any assurances about health and environmental benefits. I highlighted in another post that the “USDA Organic” label, far from indicating increased health, safety, and quality, is instead a taxpayer-funded marketing tool with dubious benefit to human health or the environment.

My chapter on health and safety policy in the most recent Cato Handbook for Policymakers explains why manufacturers call for these types of regulations. FDA regulation of “natural” foods would create what’s known as a “pooled market”—one in which anonymous producers provide a good without any branding and consumers are reassured about the good’s quality by government inspection and regulation. To appreciate this, think of the supermarket shelf of “normal” bananas that sits next to the shelf of “organic” bananas; can consumers really tell the difference between the two goods that warrants the difference in price? The “USDA Organic” label is supposed to assure consumers of that difference, but there are good reasons to question the value of that government assurance. 

A separated market—a market with different levels of price and quality conveyed to consumers through marketing and branding—would provide more choices for consumers. For example, in the past several years both Whole Foods and Perdue have used concerns about genetically modified foods and antibiotics as opportunities to market the safety and quality of their foods. Consumers who are motivated to pay more for healthy foods incentivize transparency and increased quality from producers.

And while consumer groups are claiming that manufacturers are misleadingly marketing their foods as “natural,” pooling the market through FDA regulation would protect the producers without effectively addressing the groups’ complaints. A pooled market allows manufacturers to hide behind the false assurances regulations offer, but in a competitive, separated market other food companies will step in to offer truly “natural” foods and reap the benefits.

As the “USDA Organic” label has demonstrated, FDA intervention into “natural” foods would stifle competition and limit manufacturer transparency. Consumers concerned with the health and safety of the food they buy should instead push for the choices and accountability that markets provide.

Written with research assistant David Kemp.

Should Taxpayers Back the ‘Organic’ Label?

Why are consumers willing to pay almost double for food labeled organic?  The average consumer probably believes that the “USDA Organic” label issued by the U.S. Department of Agriculture implies the food comes from small local farms that use production techniques that are environmentally friendly and result in food that is better for human health.  The Washington Post published an article recently about an organic farm that does not seem to be consistent with such perceptions.  The High Plains dairy complex in Colorado, the main facility of Aurora Organic Dairy, has over 15,000 cows. In the organic dairy industry 87 percent of farms have less than 100 cows, but farms with 100 or more cows produce almost half of organic dairy products.

The Post article argues that these large dairy operations may be violating the USDA’s regulations for organic milk. Though Aurora officials maintain that they meet all the requirements for the USDA Organic label, the article contends that satellite images, visual inspections by Post reporters, and tests of milk from High Plains all indicate that the company may not be complying with the natural grazing standards of the organic regulations.

But the Post article misses the important point that even if Aurora were in technical compliance with the grazing regulation, the label does not convey any information about health and environmental benefits. As then-secretary of agriculture Dan Glickman stated at the release of the final standards for organic foods in 2002:

Let me be clear about one thing: the organic label is a marketing tool. It is not a statement about food safety. Nor is ‘organic’ a value judgment about nutrition or quality.

The Hyperactive Federal Government

The problem with the federal government is not just its vast size but its increasing scope. It has expanded into many areas that should be left to state and local governments, businesses, charities, and individuals. The federal expansion is sucking the life out of the private sector and creating a top-down bureaucratic society.

Many people in Washington seem to think that nothing would ever get done without the help of Uncle Sam. They seem to have no idea that businesses invest, towns and cities grow, people help people, and problems are solved every day in billions of ways across our nation without guidance from central government experts.

Take a look at the new “Rural Development Progress Report” from the U.S. Department of Agriculture (USDA). Rural programs are just $6 billion out of the $150 billion USDA budget, which in turn is just a small sliver of the $4 trillion federal budget. Yet this relatively small USDA division has its subsidy tentacles into everything, as the following giveaways from the 2015 Progress Report show:

Food Labeling Regulations Are Bad for Your Health

Besides offering unrealistic tax reform plans, most of the presidential candidates this year made some nod to regulatory reform in their 2016 campaigns. For the most part these involve some sort of wholesale examination of the rules currently in place to determine which can be safely jettisoned to save consumers and businesses billions of dollars. 

Such regulatory reform is counterproductive, though: As Sam Batkins and I point out in a forthcoming piece in Regulation magazine, once companies have spent what is necessary to comply with the new regulations-regardless of whether or not it is cost effective–there’s little to be gained from repealing it. 

However there is one regulation which, if repealed, would enormously improve the well-being of consumers at very little cost to business: the current food labeling rules. 

USDA/HHS Removes Consideration of “Sustainability” from Dietary Guidelines

The U.S. Departments of Agriculture and Health and Human Services made headlines last winter when they released the draft form of their updated dietary guidelines and revealed that they were considering “sustainability” as a factor in their recommended diet—and by “sustainable” they meant foods that had “lower greenhouse gases” associated with their production. This favors plant-based foods over animal- based ones.

President Obama’s Climate Action Plan now even had its far-reaching fingers in our food. We found this somewhat rude.

Under the wildly-crazy assumption that all Americans, now and forever, were to convert to vegetarianism, we calculated that the net impact on future global warming as a result of reduced greenhouse gas emissions was two ten-thousandths of a degree Celsius (0.0002°C) per year. Not surprisingly, we concluded if one were worried about future climate change, “ridding your table of steak shouldn’t be high on the list.”

We’re from the Government and We’re Here to Help: School Lunch Edition

How much does a “free” school lunch cost?

In the last few years, First Lady Michelle Obama has worked with the U.S. Department of Agriculture to make school lunches healthier. In 2011, Neal McCluskey argued that, though well-intentioned, the changes would result in more wasted food, higher costs, and major implementation challenges. The General Accounting Office has now issued a report that confirms these concerns:

According to the GAO report, local and state authorities told researchers the new standards have resulted in more waste, higher food costs, challenges with menu planning and difficulties in sourcing products that meet the federal portion and calorie requirements.

When such decisions are made at the local level, schools can solicit and respond to feedback from parents and students. However, when the proverbial faceless bureaucrat in some distant Washington office decides, the rules tend to be uniform and inflexible, leading to all sorts of unintended consequences:

The federal government’s changes to school lunch menus have been disastrous, causing problems for cafeterias trying to comply with the rules and leaving the menu so expensive or unpalatable that more than 1 million students have stopped buying lunch, according to a government audit…

One school district told federal investigators that it had to add unhealthy pudding and potato chips to its menu to meet the government’s minimum calorie requirements. Other school districts removed peanut butter and jelly sandwiches from their elementary school menus.

Five of the eight school districts surveyed by the Government Accountability Office, the official watchdog for Congress, said they believed students were going hungry because of smaller entree portions demanded by the rules.

In other words, the so-called “Healthy, Hunger-Free Kids Act” actually resulted in some kids being served less healthy food while other kids went hungry.

Two-thirds of states reported on the GAO survey that implementation in 2012-13 was a “very great challenge” or an “extreme challenge.” The report noted that much of the difficulty was related to the sheer volume of regulations. In just 18 months, the USDA issued 1,800 pages of “guidance” for following the new rules. Moreover, the “guidance” was “provided too late in the 2012-2013 school year to be helpful” because schools “had already planned menus and trained food service staff” on what they thought the new rules required. However, some guidance memos “either substantively changed or contradicted aspects of previously issued memos.” When state officials contacted the USDA’s regional offices for guidance on understanding the “guidance,” the USDA staff were “sometimes unable to answer state questions on the guidance.” 

Let’s hope this serves as a cautionary tale for those who want the federal government to play a larger role in education policy in general.

Raisin-Taking Claim Now Ripe for Consideration on the Merits

As Ilya noted, the Supreme Court yesterday cleared the procedural roadblocks for the Horne family, which grows and processes raisins in California, to challenge the operations of the USDA’s marketing order system as an unlawful taking of their property without compensation. The Hornes say that under the USDA’s California Raisin Marketing Order, the Raisin Administrative Committee demanded that they hand over 47 percent of their raisins to be disposed of in ways that do not compete with sales in the domestic retail raisin market, such as export programs and school lunches. 

47 percent! Back in January that figure reminded me of an earlier scale of government extraction: 

Max Boot, who has written a new book on the history of guerrilla movements, tells how Shamil, firebrand leader of a celebrated 19th-century Muslim insurgency in Chechnya and Dagestan, began to lose the allegiance of “many ordinary villagers who balked at his demands for annual tax payments amounting to 12 percent of their harvest.” Instead, they switched their allegiance instead to the rival Russian czar, whose demands were more modest.

If only Washington were content with the czar’s less-than-12 percent. For more on regulatory takings, check out this testimony from way back in 1995 by Cato’s own Roger Pilon before the House Judiciary Committee.