WIN Failed, But Government Cheese Won

Losing WIN, and Feeding the Poor:
Ford, Carter & Reagan have important lessons to teach us.

Remember Gerald Ford, and his WIN — “Whip Inflation Now” — campaign?

 

It was a failure.

The two premises of that effort — encouraging increased individual savings, and reducing personal spending — were not merely ineffectual, they were also justifiably ridiculed because they did absolutely nothing to lower prices.

 

In a TRULY free market economy, not only is government allowed to compete, but prices, as others and I have continually said, are controlled by the seller, NOT the buyer. The SELLER is the one setting prices. 

 

For example, if Exxon Mobil, British Petroleum, Chevron, Royal Dutch Shell, Marathon, Valero, and Phillips 66 (in the TOP 10 largest oil companies globally by revenue) were to reduce by 25% their consumer prices of gasoline & diesel fuel (and, they could), that would significantly change, at least on some level, the volume of sales/consumption. 

 

Yet the study of economics also tells us that merely lowering prices will not always increase consumption to a certain price level. Consider bananas; if more folks ate more bananas, their prices ~might~ decline, but only modestly, and certainly not by 25%.

 

Though agricultural production has some similarities to industrial production, it fundamentally relies upon a renewable resource to satisfy demand (including an often-fickle, and increasingly angry and uncooperative Mother Nature), where as oil does not, because petroleum is a finite resource.

 

And THAT is PRECISELY WHY others and I maintain that establishing a windfall profits tax (WPT) could be used to help consumers -and- companies that rely upon petroleum for their existence, because it would return TO THE PEOPLE a ~fraction~ of the excessive portion of the rapacious profit made by Big Oil companies which are paid to their executives, overlords, and Wall Street wheeler-dealer shareholders.

 

• Congress first enacted a WPT in 1917 which ranged from 20-60% of a company’s profits earned in peacetime. 

 

• In ’33 & ’35, Congress enacted 2 modest excess profits taxes as supplements to a capital stock tax. 

 

• During WWII, from ’40-’43, Congress enacted 4 excess profits taxes on corporations with rates ranging from 25-50%.

 

• During the Korean War, Congress passed a WPT effective effective 5/50–12/53 with a rate of 30% of excess profits. At the time, the top corporate income tax rate had increased only 2% from 45 to 47%.

 

Now, an even more BEAUTIFUL and EXEMPLARY model of government participation and influence in the open market which helped people –and– farmers –and– others, is provided by the Carter & Reagan administrations with the commodity food assistance program for dairy colloquially known as “government cheese.”

 

Though it actually began during the Great Depression with the Commodity Credit Corporation, which was created to stabilize prices & farm incomes, Carter utilized it to purchase $2B of milk from America’s dairy farmers over 4 years. At that time, during the ’70’s, fuel prices were also high, due to Saudi embargoes, because Congress mistakenly thought that because America was the single largest customer of the Saudi-government-owned oil company Saudi Aramco, the Saudi king wouldn’t dare consider raising prices; boy, were they ever wrong! But, that’s another story. And economic conditions then were untenable, and by ’73, dairy & other food prices had increased 30%.

 

So, instead of destroying the milk, and slaughtering their herds, American dairy farmers produced LIKE CRAZY, and the U.S. government purchased the excess which farmers couldn’t sell, and converted it to dehydrated milk, butter, and… “government cheese.” 

 

NOTE: The government had to also pay for the milk’s conversion to dehydrated milk, butter, and cheese, because there are NO government-owned factories in America. (Never have been, never will be.) So, money also went to numerous additional private enterprises throughout the production chain to process the milk –and– to transport –and– store it. So, consequently, spending in one area was actually distributed broadly throughout the economy. “No man is an island,” wrote the poet John Donne in 1624.

 

Subsequently, the U.S. government-owned surplus stockpiles expanded significantly, which meant refrigerated warehouses were necessary, in addition to traditional warehouse facilities. Again, money also went to transportation and warehouse companies, and their employees, and shareholders, as links in the entire production chain… including feed companies, whose customers included dairy farmers. All totaled, there was well over 500 million pounds (250,000 tons) stored in hundreds of warehouses distributed throughout 35 states.

 

Right, wrong, or indifferent, the voting public wearied of Carter’s administration, and after 4 years, elected Reagan. 

 

Having inherited the unresolved problems of the previous administration as every President does, Reagan was quickly criticized for not having a plan for the government-owned food, which was costing, on average, about $1M/day for storage.

 

The quinquennial farm bill had stalled in Congress, and public exasperation was palpable at their untenably passive aggressive behavior.

 

After Reagan met with the farm lobby to curry their patience, and support for the bill, Secretary of Agriculture John R. Block expressed frustration by announcing at the press conference that followed — as he held aloft a 5-pound block of molding cheese — and said, “We’ve got 60 million of these that the government owns. It’s moldy, it’s deteriorating … we can’t find a market for it, we can’t sell it, and we’re looking to try to give some of it away. It is illustrative of what we are up against as we accumulate these dairy products.” And an unnamed USDA official only multiplied public anger over the matter by saying, “We’ve looked and looked at ways to deal with this, but the distribution problems are incredible. And you cannot permit a disruption of sales. Probably the cheapest and most practical thing would be to dump it in the ocean.” 

 

Robert Anderson, then-Executive Director of the National Cheese Institute in Chicago, suggested distributing it to the public through food assistance programs, and said that “The cheese is there, and we recognize that it must be kept in storage. And we feel that it should be used, but not to disrupt the commercial market. Our recommendation is that it would be eminently practical to distribute it to food-stamp recipients. That is how the food-stamp program began, with surplus food distribution. This is a food that should be used and we think they could set up a system of reasonably easy distribution.” 

 

Reagan had been elected, in part, on the success of his unfounded straw-man campaign rhetoric railing against non-existent “welfare queens,” and promise to significantly reduce the USDA’s food assistance program, then known as food stamps.

 

By December 1981, Reagan recanted, established the Temporary Emergency Food Assistance Program (TEFAP), and promised to initially distribute 30 million pounds of stockpiled cheese, butter, and dehydrated milk to the elderly, low income families and individuals, and to the agencies and groups that served them. And not wanting to be seen as a Scrooge, or Grinch that Stole Christmas, as an early Christmas gift, on December 22, 1981, he issued a public statement on the matter, and stated:

 

“The Dairy Price Support program in this country has resulted in the stockpiling of millions upon millions of pounds of cheese by the Commodity Credit Corporation. At a time when American families are under increasing financial pressure, their government cannot sit by and watch millions of pounds of food turn to waste.

I am authorizing today the immediate release of 30 million pounds from the CCC inventory. The cheese will be delivered to the States that request it and will be distributed free to the needy by nonprofit organizations.

The 1981 farm bill I signed today will slow the rise in price support levels, but even under this bill, surpluses will continue to pile up. A total of more than 560 million pounds of cheese has already been consigned to warehouses, so more distributions may be necessary as we continue our drive to root out waste in government and make the best possible use of our nation’s resources.”

By the 1990s, dairy prices had returned to normal, and the subsidy program was no longer necessary, though TEFAP, via the USDA subsidiary agency Food and Nutrition Service, remains and still purchases and distributes nutritious food at no cost to the needy through public and private state distribution agencies.

 

And, in a similarly related manner, why did the government not purchase pork, beef, and eggs during the height of the COVID pandemic, and similarly distribute the food to citizens?

 

It very well could have gone a long way toward preventing the inflated prices of foodstuffs now occurring throughout the nation, and significantly assisted our nation’s economy at numerous levels.