Hey, Why Isn’t the Government Cutting A Check to Help Prices In My Industry?

Michael Hausam
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Posted: Aug 31, 2016 12:01 AM
Hey, Why Isn’t the Government Cutting A Check to Help Prices In My Industry?

I just saw a series of headlines (that were not from The Onion or other mock news sites) that made my head explode: The U.S. Department of Agriculture just spent $31 million dollars to stabilize falling prices in the cheese industry.

Eleven million dollars were direct subsidies to dairy framers and another $20 went to buy “excess” cheese (which was then donated to food banks) to support market prices. That’s right – the federal government is in the business of jacking up prices of cheese and compensating farmers if their profit margins fall below predetermined levels.

Agriculture Department Secretary Tom Vilsack explained in a statement that “the nation’s dairy producers are experiencing challenges due to market conditions” as a justification for actions. He also described it as a “part of a robust, comprehensive safety net,” as well.

My simple question is this: How can I get my business in on a gig like this? Moderating profit fluctuations and maintaining a minimum price point, all on the Government’s dime, sounds like a fantastic deal.

I’ve had an insulation contracting company in Southern California for over 14 years and it has become an increasingly difficult racket. Back in 2002 there were only a handful of competitors and margins were fat. That has changed substantially in the last five or six years. There are now many companies doing the identical work and average job price (and average job profit margins) have fallen by well over 50 percent.

Using Secretary Vilsack’s words, my business is “experiencing challenges due to market conditions.” How about a little help?

Some would say that what has gone on in my industry is textbook capitalism, that outsized profits and limited market participants necessarily attract firms to an industry. As supply of a particular good increases, assuming relatively unchanged demand, the price will go down as a result.

That’s all fine and good, of course, if it occurs to someone else or in a college economics class. But if it happens to one’s own business and bank account, it’s a very different thing.

It’s been awful and I’ve had to adapt. But, inspired by what the genius dairy farmers have been able to accomplish, getting a government agency to cut a check when the going gets rough, I think something should be done!

The dairy subsidy program was initially set up by the Agriculture Act of 1935 and it has been regularly renewed and refreshed ever since. The particular mechanism used to directly pay dairy farmers is called the Margin Protection Program.

There’s even a USDA website set up to attract further participants in the program. It even has a nifty little graphic with a winning tagline that says “Tired of roller coaster milk margins? Sign up for the New Dairy Program to help smooth your income stream!”

I’m tired of roller coaster margins and would LOVE to smooth my income stream!

This isn’t even the only program of its kind, either. In 2009, the USDA spent $1.7 billion to buy surplus dairy, beef, eggs, pork, and poultry. Rather than let the marketplace sort out demand, supply, prices, and profits, the government intervenes big time to right perceived wrongs. The message is clear: We can help you make money even when you’re losing money.

Who would really care if they added one more industry to the list? I for one would surely appreciate it!