A Shabby Special Interest Story: The Dairy Compact

Very soon many Vermont dairy farmers will rejoice at the news that U.S. Agriculture Secretary Dan Glickman has signed an official paper declaring that there is a compelling national interest in creating a milk price fixing cartel for New England dairy farmers. At that point the Northeast Interstate Dairy Compact Commission will be born. Someday those who will be rejoicing in this special interest victory may well regret it.

The problem that led to the movement for creation of the Commission was, simply, milk prices too low to allow every New England farmer to finish each year in the black. Struggling farmers firmly believe in the proposition that they are absolutely entitled to a higher milk price. Many farmers who are not struggling also like the idea of a higher milk price. By 1989, several other schemes having failed, the dairy price hawks reached the unavoidable conclusion that the only way to get a milk price high enough to keep most of them in farming - and make some of them very prosperous indeed - was to create a regional dairy government.

Such a government - the Compact - could force dairies to pay over-order prices, and at the same time make it impossible for the dairies to bring in "cheap" milk from outside the region.

The chief promoter of this scheme in Vermont has been Rep. Bobby Starr (D-Troy), who is chairman of the House Agriculture Committee and for all practical purposes a wholly-owned subsidiary of the St. Albans Coop and other major dairy producers.

In 1989 Rep. Starr and then-Sen. Francis Howrigan, chairman of the Senate Agriculture Committee and brother of St. Albans Coop head Harold Howrigan, pushed through a bill approving creation of the Compact. The same year they secured passage of another little bill (Act 86) authorizing appointment of commission members and, in the fine print, loss of license and a $10,000 per day fine on anyone who dared to market a gallon of milk below the cartel-fixed price. This latter provision was perfectly logical and necessary, however, for the market will always undercut a cartel unless it is enforced by the threat of government penalties.

In 1992 the Vermont legislature passed a short-lived milk tax on producers and distributors. In an act of surpassing audacity, the conference committee on that bill snuck in a provision, never agreed to in either House or Senate, which assigned what turned out to be $61,823 of the proceeds of the milk tax to hire a lobbyist to lobby for Congressional approval of the dairy industry's cartel.

The current Congress did not hold a single hearing on the Compact, thus conveniently avoiding a forum at which outraged consumer groups could denounce it as a special interest rip-off. By a miracle of log rolling not yet fully explained, the conference committee on the 1996 Farm Bill included the required ratification, even though it had been voted down in the Senate (50-46) and was strongly opposed by a majority in the House.

There are still a couple of dark clouds ahead. If the Compact Commission fixes a higher price for milk, which is the sole reason for its existence, efficient producers will make more milk so they can make more money. Much of that extra milk will go into cheese and milk powder and drive down the national market for these commodities. When the price falls below a Federal floor price, the Federal government has to buy cheese and powder. That is a budget outlay, and the Congressional budgeteers insisted that the authorizing language require the Commission to "develop and implement a plan to ensure that the over-order price does not create an incentive for producers to generate additional supplies of milk."

Fine. And what will that program be? Nobody is talking, but the leading choices are a two-price system , or a Quebec-style supply management system which will enforce production quotas for every farm. Either way, farmers are likely to face an IRS-type dairy police tracking down contraband milk and levying Commission fines on uncooperative producers.

The success of this remarkable exercise in special interest political lobbying was made possible with your tax dollars. Unlike Phillip Morris, Budweiser, and WalMart, which at least use their own money for lobbying, the Dairy Compact lobby group was paid from tax dollars. In addition to the $61,823 from the state's failed milk tax experiment, the group pocketed $60,000 from the general fund. The industry stands to recover its lobby expenditure many times over. And the taxpayers? They'll get to pay more for their milk.

This shabby story of special interest politics and taxpayer looting is bad enough, but the final insult was committed on May 14 by Gov. Howard Dean. The Compact Commission includes several "fig-leaf" consumers so that the price-fixers can claim "consumers" at least have a voice in their own exploitation. After a long and conscientious search, Gov. Dean found and appointed the very model of a courageous, knowledgeable, champion of the Vermont consumer: Rep. Bobby Starr (D-Troy).

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May 1996