NCPA - National Center for Policy Analysis

Milk Compact Could Spawn Other Cartels

August 2, 2001

The Northeast Interstate Dairy Compact -- a regional cartel which fixes milk prices -- will lose its authorization on September 30, 2001, unless Congress renews it. The compact has become a model for other such milk cartels in other parts of the country. What's more, that model could serve to establish cartels of other products.

"If we approve an expanded compact for dairy, what is to stop us from approving price-fixing cartels anywhere else in our economy?" asks Sen. Herbert Kohl (D-Wis.), a leading critic of the compact.

Critics want to let the compact die -- arguing that it keeps milk prices artificially high and is a hidden regressive tax.

  • But a pending Senate bill would not only rescue the compact -- it would add six more states to the deal and authorize three more regional dairy compacts.
  • The four compacts would then control milk prices in 35 states.
  • Since 1996, the Northeast compact has given farmers in six New England states $140 million in premiums.
  • Experts say the compact adds 6 cents to the price of a gallon of milk -- as well as 18.5 cents per gallon to ice cream, cheese and other products.

The Senate bill, sponsored by Sen. Arlen Specter (R-Pa.), would let Delaware, Maryland, New Jersey, New York, Ohio and Pennsylvania join the compact. It would also authorize similar compacts in the South, the Pacific Northwest and the Mountain states.

Grover Norquist, president of Americans for Tax Reform, calls the compact "absolutely perfect in its wretchedness."

Source: Sean Higgins "Got Milk? Congress Ponders Plan to Cartelize Your Glass of Moo," Investor's Business Daily, August 2, 2001.

 

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