[Congressional Record (Bound Edition), Volume 151 (2005), Part 21]
[Senate]
[Pages 27933-27934]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       MILK INCOME LOSS CONTRACT

  Mr. CRAIG. Mr. President, in speaking to conferees this afternoon in 
relation to the deficit reduction or the budget reconciliation process, 
this is an issue that, frankly, most Senators probably have not heard 
all that much about.
  Everyone agrees that the reconciliation act, or Deficit Reduction 
Act, is an attempt by Congress to rein in spending and to build the 
appropriate budget in this climate. This legislation makes tough cuts 
in important programs in all areas of Government.
  While nearly all programs are taking their lumps--if you will, 
sucking it up a bit--Congress is, ironically, considering increasing 
spending in a bill whose sole purpose is to decrease spending.
  The Senate's version of the Budget Reconciliation Act, or Deficit 
Reduction Act, includes a provision renewing the Milk Income Loss 
Contract Program, also known as the MILC Program, which currently 
expired in September of this year.
  The CBO has scored this renewal in costs to the taxpayers of $1 
billion over a 2-year period. In other words, half a billion a year. 
This deserves much more attention than it got in the Senate. The MILC 
Dairy Price Support Program was included in the 2000 farm bill to 
create a permanent direct payment program to the dairy producers. 
During the farm bill debate, USDA warned that the new program would run 
counter to the old dairy price support program in place since the 
1940s.
  Analysis by the USDA in August of 2002 concluded that the MILC 
Program would cause overproduction, thereby lowering farm prices to 
producers, forcing the government to purchase the excess until prices 
stabilized. However, Congress ignored the USDA warning and authorized 
the program to last until September of 2005, enough time to see dairy 
producers through the tough times back in 2002.
  Now, after over $2 billion in taxpayer-funded programs, some in the 
Congress have easily forgotten about the agreement to sunset a program. 
When we sunset a program it is the intent of Congress to conclude it.
  Let me give some examples of how distorted it has become if the 
program is in support and in relation to production in our country. 
Idaho dairy production is now 4th in the Nation and one of the top 
economic drivers in the economy of my State. During the 2003-2005 
period, Idaho received $39 million in MILC payments, enough to be 
ranked 12th in total payments received in the program, yet they are 
fourth in production in the Nation.
  In comparison, California received $149 million over the same time, 
is ranked fifth in total payments and, of course, California is the No. 
1 milk producer in the Nation.
  There seems to be no relationship. I guess some hands are just too 
sticky to let money pass just because the law is 3 years old and ready 
to expire.
  My point is this: It is important to understand just what this 
program does and what the $1 billion for one program means in the 
overall picture. It has become market distorted. It provides little to 
no parity to all producers. It encourages inefficient overproduction in 
milk and it sends the exact opposite signal to our trade negotiators 
trying to sell the rest of the world on the idea that the United States 
is willing to cut domestic subsidies and amber box payments.
  Regarding the WTO negotiations, our United States Trade 
Representative and USDA Secretary and many others are currently 
attempting to negotiate in the latest Doha Round getting started in 
Hong Kong as we speak. It is clearly important we send a message. It is 
also important when we sunset a program after having found out it is 
market distorting, we ought to do just that, instead of pump it up 
again while we are asking all other programs that are federally 
expended to reduce their overall expenditures, to reduce the budget 
deficit and to bring this budget under control.
  I hope our conferees, as they negotiate the budget deficit reduction 
act, or the budget resolution, would decide not to fund the MILC 
Program, adhere to the sunset provision provided and allow a program to 
die as this program effectively did by the sunset in September of this 
year.
  Mr. President, I ask unanimous consent to have printed for the Record 
articles in opposition to the MILC Program and also an article from the 
Wall Street Journal.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                 December 1, 2005.
       Dear Representative: On behalf of the hundreds of thousands 
     of senior citizens we support across America, I urge you to 
     make every effort to be sure that MILC, the now defunct dairy 
     farmer giveaway program is not resurrected through inclusion 
     in Reconciliation, or any other measure. Costing roughly $1 
     billion (actual outlays could again top $2 billion), a new 
     MILC program, once more propping up inefficient dairy 
     farmers, should have no place in a budget that cuts spending 
     on Medicare, Medicaid, and other key senior programs like 
     LIHEAP. Outdated dairy farmer welfare has no business in what 
     should be a free-market. MILC, and similar government 
     intrusions into the dairy marketplace, cause instability and 
     price spikes. If extended, MILC will once again (as the USDA 
     admits) work in conflict with the federal milk price support 
     system. Worst of all, the oldest and the poorest among us 
     will suffer mightily to pay for the MILC giveaway to a select 
     few dairy farmers.
       It would truly be outrageous to create a new MILC program, 
     or worse to have one included in reconciliation just to win 
     passage! Just look at what that nearly $1 billion in MILC 
     giveaway money will buy:
       Medicare--The House proposal would cut $5 billion in 
     Medicare funding over five years. The almost $1 billion being 
     proposed for the MILC boondoggle could restore Medicare 
     funding and help provide better health care to some 140,000 
     elderly Americans.
       Medicaid--The House proposal cuts Medicaid spending by 
     $11.4 billion, compared with $4.3 billion in Senate cuts. 
     That $1 billion MILC giveaway could be better used to give 
     over 248,000 of the poorest Americans access to health care 
     through Medicaid.
       Low Income Heating Assistance Program or LIHEAP--Through 
     LIHEAP, that wasted $1 billion in MILC money could help some 
     2,680,965 people cope with sky-rocketing heating bills. It 
     could be their only chance to stay warm this winter.
       Student Loans--At a time when student loan programs are 
     being slashed ($14.3 billion in the Senate and $8.8 billion 
     in the House), $1 billion in special interest MILC funding 
     could help our grandchildren attend college at a time when 
     college costs are rising faster than inflation. The House 
     cuts will cost each student up to $5,800 more in interest and 
     fees over the life of their loans.
       Food Stamps--Adding the $1 billion in MILC money to this 
     important program that helps feed needy seniors would fully 
     restore the $800 million in Food Stamp funding cut by the 
     House.
       We believe the wasteful, expensive MILC program should be 
     left to rest in peace, thus

[[Page 27934]]

     helping to keep needed senior health care and nutrition 
     programs fully funded. As one recent Wall Street Journal 
     Editorial, Milking the Taxpayer notes, the USDA identifies no 
     less than a half-dozen support programs for dairy farmers. We 
     urge you to oppose the same tired old politics of vote 
     trading and ever more pork barrel largesse for just a handful 
     of dairy farmers on the dole. Instead, we urge you to stand 
     up for all of the seniors, the poor, the needy, the students, 
     and the veterans who will have less, just to fund MILC. As 
     the Journal Editorial says so well, ``Taxpayers have been 
     MILCed enough by this particular boondoggle.''
       Please do the responsible thing for all Americans by 
     working to put an end to MILC once and for all. Rewarding 
     inefficiency should never be the function of any government 
     program, even when there are surplus funds to spend. Now, 
     when important health care and nutrition programs are being 
     cut or cancelled, MILC should not be allowed to rear its head 
     again.
           Sincerely,
     Michelle Plasari,
       President, RetireSafe.
     Jim Martin,
       President, 60 Plus Association.
                                  ____


             [From the Wall Street Journal, Nov. 14, 2005]

                          Milking the Taxpayer

       It is a sign of just how unmoored from fiscal 
     responsibility the current Congress has become that in the 
     midst of a loud struggle over mostly symbolic budget cuts, 
     the party in power is having trouble even letting dead 
     programs stay dead.
       One such program is the Milk Income Loss Contract program--
     MILC for short, cleverly enough--which passed its sell-by 
     date at the end of September and expired. The House budget 
     bill does not include its revival. But the Senate version 
     reauthorizes MILC, and in 2004 the President promised 
     Wisconsin voters that he would fight for its extension, so 
     its fate lies with the House-Senate conference that will 
     reconcile the two massive budget bills.
       MILC was one product of the 2002 farm-subsidy bill, and 
     even by farm-subsidy standards it is perverse. At the time 
     the program was voted into law, Congress asked the Department 
     of Agriculture to study the effects of the various 
     government-support programs on the dairy business. The USDA 
     duly issued its report in August, and for a technical 
     document the report was unequivocal that ``there is a basic 
     incompatibility'' between MILC and other pre-existing dairy 
     subsidy programs. (The USDA report identifies no fewer than a 
     half-dozen support programs for dairy farmers.)
       The conflict is this. One of the oldest programs is the 
     milk price-support program, which dates to the Depression-era 
     Agricultural Adjustment Act. Under that program, the 
     government steps in and buys milk when the price falls below 
     a certain level. If that support price is set low enough, it 
     provides some income security to farmers while allowing the 
     market to clear and production to fall to the point where 
     prices can rise again.
       Here's where MILC pours in and clouds the picture. MILC 
     makes direct payments to farmers based on their production 
     whenever the milk price falls below a certain level. What's 
     more, MILC kicks in at a much higher level than the price-
     support program. The effect of this is that production is 
     encouraged by MILC even as prices are falling, which drives 
     the price down toward the support level and prevents the 
     shakeout that the price-support program is intended to allow.
       The Agriculture Department found that MILC does in fact 
     artificially depress the price of milk by encouraging 
     overproduction, which is just what you'd expect. Then, 
     through the price-support mechanism, the government winds up 
     buying the milk that MILC encouraged the farmers to produce. 
     Thus, in the Ag Department's dry bureaucratese: ``The price 
     support program and the MILC program provide an example of 
     problems that can be caused by conflicting policy outcomes.''
       In short, MILC distorts the market and conflicts directly 
     with other pre-existing subsidy programs. It has also cost 
     close to $2 billion since its inception, nearly twice the $1 
     billion originally budgeted for it. Letting it expire should 
     have been a no-brainer, not least because dairy farmers still 
     enjoy numerous other forms of government handouts. It was 
     kept alive in the Senate through the exertions of Vermont 
     Democrat Pat Leahy, who isn't known for helping the GOP 
     agenda. With no GOP Senators in either Vermont or Wisconsin, 
     Republicans don't even have a political motive for keeping 
     this subsidy alive.
       Two billion dollars over three years may be a drop in the 
     fiscal milk-bucket, but Republican lawmakers used to insist 
     on sunsetting government programs for a reason. Taxpayers 
     have been MILCed enough by this particular boondoggle.

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