Monday, November 19, 2012

Milking us

There are few subjects that more clearly evoke cronyism and "regulatory capture" than the various methods for regulating the price of milk around the country. California's seems to produce its own painful consequences:

In California, cheese makers pay nearly $2 less for 100 pounds of milk than the rest of the country. As a result, The Wall Street Journal reports, nearly 100 dairy farms are shutting their doors this year. Who said regulation doesn’t destroy jobs? Ironically, the cheese industry argues that they need the pricing deal because all the other regulations in California are killing them.

To be fair, not even Californians could come up with the silliness that passes for American dairy regulations all on their own. The federal program dates to the 1930s and has only grown more complex through the years.

Today, there are four different classes of milk and 10 separate pricing regions — 11 if one counts California. Regulators calculate prices for fluid milk nationally, but prices for the other three classes, including milk for cheese and butter, are set within each region. Processors pay for the milk based on how it is used, but farmers receive a single, blended price for what they sell. Get that?

Suffice it to say, prosperity has nothing to do with it, and politics has everything to do with it. Oh, and we absolutely agree with Barney Frank on this one.

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