Torn up

Stories like this make my blood boil. Basically it's a tale about the "price support" system for milk in the United States and how the system makes sure customers pay too much for milk. What makes this story different is that one enterprising guy, Hein Hettinga, found a way to get around the system and he ended up selling his milk 20 cents cheaper (per gallon) than those in the system. So customers got cheaper milk, who could be offended by that? Dairy farmers, of course, and their political allies. It's a long story, but it's well worth the read. It really exposes the despicable underside of political lobbying and the value of connections. Here are a couple of my favorite parts, with commentary.

First, the dairy lobby got its legislative pal (John Kyl, R-AZ) to sponsor a bill that would have forced Hettinga to join their club and play by their rules. Hettinga, though, fought back with his own legislative pal (Lewis, R-CA) and things appeared to be at an impasse. Then Kyl recruited Harry Reid (D-NV) to join his side. How did Kyl convince Reid to join an effort that would punish consumers and make sure they paid more for their milk? By promising Reid that Nevada would be exempt from the "consumer-gouging rules" he was trying to force on Hettinga!!!

Reid and Kyl saw they could make a deal. Kyl agreed to back removing all of Nevada from federal milk regulation, and Reid agreed to support legislation cracking down on Hettinga and protecting Arizona dairies from competition from low-priced Nevada milk. In 2003, the senators co-sponsored an amendment with both provisions. In effect, Nevada bottlers would get some of the same rights that were being taken away from Hettinga.

Of course the combined efforts of Kyl and Reid were successful. Oh, another player was Devin Nunes (R-CA) whose family just happens to have started, and still own, a California dairy that participates in "the system". Here's his take:

In an interview later, Nunes called the milk legislation a victory for "every dairy farmer in America except those who were gaming the system." He added, "People out there were making millions of dollars a year off the backs of America's dairy farmers . . . that was a wrong that was finally righted."

Gaming they system? I guess so, if gaming the system means finding a way to produce and deliver a quality product at a lower price than your competitors. Making millions of dollars a year off the backs of America's dairy farmers? Of course Nunes fails to note the dairy industry is making millions of dollars a year off the backs of American consumers who pay more than they have to for milk.

An alternative interpretation was offered up by Joel Benoliel, Costco Wholesale Corp.'s [a former customer of Hettinga] senior vice president. In an email to Kyl, Benoliel pointed out how the dairy industry had been gouging Southern CA consumers by 20 cents a gallon (compared to Northern CA) for years and they (producers) had been totally unresponsive to calls for lower (equal) prices:

It was a brazen case of price gouging and profiteering by the strongest, largest market suppliers simply because they could.

Couldn't have said it better myself. And to think, these are the folks the politicians are protecting from "unfair" competition! It really burns me up.

Oh, final exams this week so blogging will be light (nigh nonexistent, most likely).