Cows, Freedom, & the Economy

I read an interesting article today. Apparently the banking and auto industries are not the only ones who are in desperate need of a bailout. The dairy industry is struggling as a result of falling milk prices and congress needs to do something to save the embattled dairy farmers. Apparently, according to some, stimulus money must be put towards artificially inflating the price of milk. I want to say that this idea would be more attractive to me if I wasn’t struggling already to pay close to $4 dollars a gallon to keep my kids drinking the stuff, but that would be a lie. This idea sounds stupid no matter how you look at it.

According to the article, the first proposal being considered is to pay dairy farmers to take cows out of production. This is necessary, it asserts, because, “This time, falling milk prices come as the economy is in a tailspin and farmers have a harder time finding credit to buy equipment, expand their farms or otherwise improve their businesses.” Wait a minute…it seems to me that if there is an excess supply of milk, then farmers don’t need extra money to “buy equipment, expand their farms or otherwise improve their businesses.” In fact, those things seem to be things which would tend to improve efficiency and increase the milk supply. So, if we put money into buying cows to artificially inflate the cost of milk so farmers could have more money to use to help increase milk production, then we would end up in the same pickle again.

Is my logic flawed? Nope! The article actually explains… “Taking milk cows out of production as a way to control milk prices is a controversial approach. The federal government tried that in the 1980s through the whole herd buyout program, and while the policy worked for a time, milk production eventually bounced back and farmers were once again grappling with low milk prices.

“The buyout also sent beef prices crashing, as slaughtered cows entered the meat supply.

“Economists say the problem for the dairy industry is that when milk supplies fall, and prices climb, farmers generally push their cows to produce more to cash in. Then milk prices tumble again.”

Now, I’m no economist, but from the college classes I took on the subject, it seems to me that the way it’s supposed to work is this…When there is an excess supply of a product (and steady demand) the price of the product drops. Should the price drop far enough that making the product becomes unprofitable, then some of the suppliers are forced out of the industry. This causes the supply to decrease and the price to rise, making the production, once again profitable.

I suppose I’m a thoughtless, horrible person for being willing to let some of the nation’s dairy farmers be forced to seek a new industry. But, I believe in freedom. I also believe that the evidence seems to show the same thing happening in my scenario as in the one congress is considering. The only real difference is that my solution does not involve millions of tax payer dollars or the problem yo-yoing back into existence and requiring another set of millions of taxpayer dollars.

Say it with me people: “FREEDOM!” God bless America.

If you would like to read the article without my babbling commentary, you can find it here.