Statement of Administration Policy: H.R. 2837 - Dairy Production Stabilization Act of 1991

(Amendment in the Nature of a Substitute to H.R. 2837 as reported by the House Agriculture Committee)
(SENT 11/13/91)
(House Rules)
(Stenholm (D) Texas)

The Administration strongly opposes enactment of the proposed substitute for H.R. 2837. The bill would introduce inefficiencies and inequities in dairy and other affected industries, adversely affect dairy product consumers, particularly low-income consumers, and impose unnecessary burdens on taxpayers for food assistance programs.

H.R. 2837 would raise the milk price support level, then impose an inequitable and complex scheme that only partially deals with the budgetary and other problems that would arise from a price support increase. Furthermore, the bill is unnecessary. Milk prices received by farmers are continuing to rise as producers respond to (1) market signals and (2) Administration actions to enhance dairy market conditions.

If H.R. 2837 were presented to the President, his senior advisers would recommend a veto.

H.R. 2837 would create counterproductive, inefficient programs by providing incentives to expand surplus production and then paving producers to reduce production. The proposed price support increase in the bill is particularly unacceptable. Increased price support levels would require larger and more expensive supply control programs than would otherwise be necessary. The adverse effects of the bill, exacerbated by higher price support levels, would include:

—   Higher cost of dairy products for consumers, over the next five years, consumers would incur additional expenses averaging about $2 billion a year.

—   Reduced purchasing power of the Nation's poor and increased costs for food assistance programs in FY 1993 and beyond. In FY 1992, food stamp recipients and school cafeterias would have to spend at least an additional $100 million to maintain their purchases of dairy products. In FY 1993 and subsequent years, excess milk price inflation would cause an increase in Federal spending of several hundred million dollars per year to restore the purchasing power of schools and the poor.

—   Permanently reduced purchasing power of the Women, Infants and Children (WIC) program. In FY 1993 alone, nearly 100,000 at-risk pregnant women, infants and children would be forced off the WIC rolls.

—   Permission for dairy diversion program participants to receive payments even if they violated requirements to conserve highly erodible land and wetlands, current law requires recipients of price support and related payments to comply with certain conservation requirements in order to be eligible for payment. The bill unfairly exempts dairy diversion payment recipients from this requirement, removing an incentive for sound conservation practices.

—   Supply controls that unfairly penalize efficient, market-oriented producers seeking to enter the market or expand production. Producers would be subject to an excessively high diversion program assessment of up to 50 cents or more per hundredweight (cwt.). Such excessive assessments must be borne by all dairy producers, including those who elect to participate in the diversion program.

—   Excessively high culling of dairy cows, estimated at over 200,000 additional head in 1992. This would undermine prices received by other livestock producers, and/or increase the cost of meat purchases and other efforts funded by the Government and dairy producers to ameliorate the effects on livestock prices. The cost for meat purchases would be at least $100 million in FY 1992 and up to $100 million in FY 1993.

—   Restricted choice for consumers. The bill would legislate new standards for the solids contents of fluid milk. Under these new standards, which outlaw the sale of unfortified fluid milk products, milk produced by some cows could no longer be labeled as milk. There is no valid scientific, medical or food safety reason for this prohibition. Nor is there evidence that consumers prefer the fortified products required by the bill. The legislative adjustment of such standards outside the normal FDA process is objectionable because the legislated standards reduce consumer choice without an opportunity for consumer input.

Scoring for the Purpose of Paygo and Discretionary Caps

H.R. 2837 is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act (OBRA) of 1990. OMB's current estimate is that enactment of this resolution would be revenue neutral. Final scoring of this proposal may deviate from this estimate. If H.R, 2837 is enacted, final OMB scoring estimates would be published within five days of enactment, as required by OBRA. The cumulative effects of all legislation on direct spending and revenue will be issued in monthly reports transmitted to Congress.