Forgive me if this isn’t totally coherent – I just finished banging my head against the desk after reading a news item about rising milk prices, and my head is spinning just a little bit.
The fact that the price is going up doesn’t surprise me. It is the rationale of those in Congress who continue to grant subsidies that drives me bonkers. Consider the following from an AP story posted this morning:
…Costs have surged for fuel and petroleum-based products and for the corn used to feed dairy cows, a side effect of increases in the production of ethanol.
Bower said he now pays about $180 a ton to feed his 500 dairy cows, up from $115 a ton a year ago, an increase of more than 50 percent.
…
“The result is that domestic supplies of these milk protein products are limited and global market prices are rising,” he said. “That feeds back to the farm price of milk.”
Federal legislators recently have drawn up bills seeking relief.
Sen. Bob Casey, D-Pa., earlier this week introduced an amendment that would pay Pennsylvania dairy farmers a subsidy for milk produced over the past six months.
Casey said the amendment would provide about $125 million in aid to help dairy farmers deal with higher energy, feed and other production costs.
“Without relief, more dairy farms may join the 250 to 350 dairy farms that go out of business every year in Pennsylvania,” he said in a statement.
Here’s a thought – why don’t we focus on keeping the costs lower instead of covering for the increases? How, you ask? Here’s a starter. Stop the subsidies.
Huh?
See, here’s how it works. Give me a dollar and let me spend it. I will spend it; I’m horrible at saving, as are the vast majority of my countrymen. I spend my dollar and it keeps the wheels of the economy greased and rolling cleanly.
Now start taking away pennies at a time from that dollar for taxes. Those taxes do some valid things – roads and military – and a lot of pet projects (a.k.a. pork) that are more questionable. But every penny I don’t get to spend is a little less grease on the wheels of the economy. And every penny that goes to subsidies means I have a penny less to spend as I see fit.
Pretty soon, as a person who offers services or goods to the rest of the good consumers around me, I have to raise what I charge my customers or employer in order to maintain the lifestyle my pennies used to support – and nobody likes a lifestyle reduction.
When I raise my prices, those who buy from me also have to start charging their customers more. Eventually, the prices that somebody is charging that farmer will go up.
And there the cycle starts all over, and it only gets worse over time. Don’t believe me? Take a look at the economies (and tax rates) of most of Europe.
You can argue emotionally about the effects of cutting taxes, but you can’t argue with the facts. Any way you measure it, the tax cuts given by Kennedy, Reagan, and Bush all had a tremendously positive effect on the economy. And the new Congress has just proposed a budget that is by far the most expensive in our country’s history – $2.9 trillion. In five years, the life of the proposed budget, that means my family will never get to see an additional $2,500 of my earnings which will go directly to others who didn’t earn it.
That adds up to a lot of pennies.


