The Senate would add a “market stabilization program” to margin insurance. Basically, farmers who participate in the latter would agree to curtail production at times of low margins in return for full benefits. The goal, of course, is to reduce supply when farmers’ margins are low, drive up prices and help producers at less cost to the government. This is the provision Mr. Boehner decries as Soviet economics — though it might be more accurate to call it a federally sponsored cartel. Like most cartels, to the extent that it doesn’t punish consumers, it is vulnerable to cheaters and free-riders, especially since farmers can often use modern forecasting tools to calculate market prices and operating costs in advance, as economists John Newton and Cam Thraen of Ohio State University have noted.
Neither bill contains an explanation of why the dairy industry deserves government-guaranteed prosperity. The industry’s real problem is that it has become phenomenally efficient at producing huge quantities of a substance Americans no longer want as much as they used to: per-capita consumption of fluid milk is down 30 percent since 1975. The Agriculture Department expects that to continue. Congress can write all the farm bills it wants, but it can’t repeal the law of supply and demand.