We're all familiar with the concept of a loss leader -- a store will deliberately price key products to a price below cost, often way below cost. This is to get people into the store to buy stuff that is overpriced. A good example are razor handles and blades -- the sample pack is cheap, but the replacement refills are extortionist, even at club pack warehouses. The same with food staples like milk and sugar. We get upset when milk goes up even ten cents a 4 litre bag or jug but
the price has been more or less steady the last seven or eight years and
growth well below inflation. But the price stores pay is still less than the real price of production.
But there's another a part to the problem. Whether by marketing boards that set a cartel price (and guaranteed profit for producers) or by any of a number of farm subsidies (one kind of "corporate welfare") stores actually pay less than they otherwise would. If they paid the true price of production, in other words break even for the farmers, food would get way more expensive than it otherwise could be.
We often think of the EU's Common Agricultural Policy for making food prices more than they should be. But for some foods it could be way more and put many less well off consumers into greater hardship were the subsidies were not there.
But that could all change in the States as early as next Tuesday. Among the many line items that will be affected if the US President and Congress can't agree on a fiscal plan by a week today are farm subsidies. And if dairy producers in particular have their subsidies cut off, they'll have to either sell the milk on their own or go into a Canadian style marketing board to fix prices like OPEC does for oil, then stores will have to pay the full price. Since stores buying the milk at the reset price would become so expensive that a loss leader price strategy would be fiscal suicide, they'll have no choice but to charge full price just to break even.
The average retail price of milk in the United States is $3.65 per US gallon (3.785 litres). If the subsidies go, that price will skyrocket ... to eight bucks. In other words, the real price. (If the same applies to Canada, we're also paying only 40% of the true cost.) To ensure a "stable" market, the Department of Agriculture would have to get into the business of buying milk -- by law, and this is a "poison pill" of sorts that was introduced in 1949 and never intended to be used -- just to try to backstop the carnage. To stay afloat yoghurt, cheese and butter producers would have to import milk from other countries. Including, say ... Canada?
As Yakov Smirnoff says, "What a country!!!" The teabags -- or at least the true libertarians among them, not the fascists who want things to go back to the pre-civil rights era) are all about limiting government to the lowest level necessary. But they don't have a problem with subsidizing the national forests, which are actually owned by the Department of Agriculture (not Interior as with National Parks or Fish and Wildlife areas, or other recreation areas owned by either Energy or Defense). They don't have a problem with spending tons of money subsidizing the construction of toll roads that are privately owned and/or operated. They also don't mind giving tax breaks to people who buy $100k + cars, but not to small businesses who want the ability to compete with the big guys.
So why do the TBs (yeah, really bad abbreviation) who backstop forest companies for cutting federal timber lands -- feel just fine with pissing off a major part of their base?
Actions, or the lack thereof, have consequences. I've said it before and I'll say it again, America needs major austerity big time. But if little people, upstream and downstream, are the victims -- then the GOP will rue the day they let the NRA buy them off because the gun nuts will get really and sorely tempted to turn their anger on the legislative, not the executive.
Fasten your seat belts. If DC goes off the cliff next week, then the real fun begins.
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