The fiscal cliff has grabbed headlines for over a year and there has still been no tangible progress on dealing with the issue. The fiscal cliff, or the end of the tax breaks and spending cuts mostly initiated by president George W. Bush scheduled to end at the end of 2012.
Many do not understand what the ‘fiscal cliff’ all entails or if it is as intimidating as it has been made out to be. Investors are bailing on dividend-paying stocks and companies are issuing special dividends in an effort to avoid tax increases resulting from the end of cuts.
Amidst all the brouhaha surrounding the ‘fiscal cliff’, it is easy to miss some finer points of the possible crisis. One such point is a 1949 bill that became law known as the Agricultural Act of 1949.
The Agricultural Act of 1949 contains an interesting provision that most have forgotten due to the age of the act. It contains a provision for pricing milk. It has been superseded by other farm bills again and again, but somehow, this time around, it was missed.
The reason allowing the 1949 act to take force would be problematic is that the provision for pricing milk includes a minimum price for sellers; that is, those producers of milk will be able to sell for a minimum price.
Currently, that price would likely make milk spike to over $6 a gallon. The government would be forced to provide the necessary funding to meet the shortfall created by the market, as per the bill.
The provision has a dual-pronged negative impact; not only would the price of milk effectively double, but the reason the cost would double is due to government subsidy, which the American populace must pay. Farmers and consumers alike fear the repercussions such a failure to act could take.
In the domestic market, such a rise in milk prices would resonate throughout the country as farmers would undoubtedly boost their production of milk and consumers would drop their consumption of it. This also has doubly-bad effect of increased supply and decreased demand, except a fixed seller price. This means that the quantity consumed will be far and wide below the quantity produced, and there will be gallons upon gallons of milk that sours and goes to waste because of a failure to act on this provision.
This is a clear illustration of a government that is not looking out for the poor and needy. It is structured to meet the bickering of those who are not poor yet are not content with what they have. Laws such as the Agriculture Act of 1949 need to be repealed in favor of a more sensible government policy toward helping producers.