Exploring the Nether World of Politics 
By John McClaughry

Well under the radar during the current battle over the state budget, a small bill moved through the legislative process to passage. A review of how this bill (S.89) made it through to the governor’s desk reveals some of the nether world of politics.

Ever since arriving in the legislature in 1979, Bobby Starr has had one great legislative passion: to get dairy farmers more money. In 1988 he pushed through a provision that simply handed $7.5 million of the (then) surplus to all dairy farmers.  The purpose of this handout was to buy dairy district House votes for Gov. Kunin’s land use planning bill, Act 200.

A year later the surplus was spent. Starr needed a new scheme. This was the Northeast Interstate Dairy Compact, largely designed by Starr’s legislative counsel, Dan Smith. The Compact was a multistate government cartel to force dairy handlers to pay farmers above-market prices for their milk (and pass the cost on to consumers).

It took until 1996 for Compact supporters to win Congressional approval of this regional government for milk. But the Compact expired in 2001, and Congress declined to reauthorize it. In its place a taxpayer-financed price support program called MILC put a floor under fluid milk prices, but not at a high enough level to satisfy Starr.

By 2008, after a year of record high market prices for dairy farmers, it became apparent that changing global market conditions would drive milk prices down in 2009. So Starr and his leading co-conspirator, Senate leader Peter Shumlin, engineered an appropriation to support a new scheme, to be imposed by the then-inactive Vermont Milk Commission. The appropriation provided funds for the Commission to hire as counsel Starr’s favorite staff member, Dan Smith.

In September 2008 Smith presented to the Commission a draft order levying a 38-50 cents per gallon tax on milk handlers. The tax would of course increase the cost of milk to supermarkets, general stores and convenience stores. The proceeds – like Starr’s Act 200 bonus of 1988 – would be handed out to every dairy farm in Vermont. Sweet!

The majority of the nine-member Commission, including Agriculture Secretary Roger Allbee, was decidedly cool to the proposal, as were the dairy coops and Farm Bureau.

Then Smith came with a solution to a major problem: the passthrough of higher milk prices to consumers. Let’s couple the milk tax with price controls on the grocers! That way the government would confiscate the "surplus profit premium" enjoyed by the handlers, consumers wouldn’t pay more, and farmers would enjoy big handouts. Brilliant!

Unfortunately for Starr and Smith, the Commission concluded its business without approving Smith’s handiwork.

In response, on February 11 Starr and Shumlin introduced a bill that – strangely - offered no benefit to farmers at all. It authorized the legislature to impose milk price controls on the retailers. This bill, Shumlin said, "takes a step toward addressing the economic pain that Vermonters are facing."

On April 15 the Starr/Shumlin price control bill emerged onto the Senate floor. Gone were all of its price control provisions. Instead, the bill now mandated the Milk Commission to reconsider Smith’s failed milk tax and subsidy scheme (that would increase the economic pain of consumers).

But by this time the $50,000 contract to pay Dan Smith as "special counsel" was used up. So Starr and Smith came up with the idea of making the bill authorize the Commission to levy a milk tax on handlers, not to subsidize farmers, but to employ (presumably, at least by Starr) Dan Smith to devise more Marxist theories, milk taxes, price controls, and subsidies.

The Senate passed the amended bill on a voice vote. The House Agriculture Committee, however, stripped out all of Starr’s milk tax language, leaving only a dairy antitrust study by the Attorney General plus some miscellaneous handler bonding provisions. The bill then went to conference.

Apparently under strong pressure from the House leadership, the House conferees agreed to reinstate the substance of the Senate-passed language, with the significant amendment that the Milk Commission "may" – instead of "shall"- tax the handlers up to $35,000 to finance the Commission’s further consideration of Smith’s rejected handiwork.

The Milk Commission may choose not to levy the milk tax to finance its ongoing deliberations. It may choose not to hire Dan Smith again to promote Starr’s grand idea, a decision that would certainly send Starr into orbit.

But this misbegotten scheme – a hidden milk tax on families with young children, to be levied by an unaccountable commission, the proceeds distributed to members of Bobby Starr’s special interest group, and a special tax provision intended to finance Dan Smith’s continued employment – richly deserved termination by veto.

On May 22 Gov. Douglas signed S.89 without comment.
 

John McClaughry is President of the Ethan Allen Institute.