Politics & Policy

The Milkman Cometh

Dairy-industry protection and subsidies set the pattern for modern big government.

The milk industry is in trouble, as Americans have shifted to vitamin waters and energy drinks, and as the number of milk-consuming children is declining. Part of the industry’s recovery plan, the Wall Street Journal reports, is to “deride fast-growing alternatives like soy and almond milk as ‘imitation milk.’”

This is true to form. Dairy farmers were pioneers in interest-group politics. They have long been adept at using the power of government, as Adam Smith put it, to launch “conspiracies against the public” and “contrivances to raise prices.” And their efforts have had far-reaching constitutional implications.

The dairy lobby’s first target was margarine — “oleomargarine,” as it was called in the 19th century. In the 1860s a French chemist, Hippolyte Mège-Mouriès, devised a method to mimic the cow’s production of milk from her own fat. Some American manufacturers copied his process and were able to produce an oleo made from suet that was chemically indistinguishable from butter, for about half of butter’s price.

Dairy farmers organized to drive oleo from the market. They claimed that oleo was harmful — manufactured, they charged, from “dead horses, dead hogs, dead dogs, mad dogs, and drowned sheep.” They alleged that an “oleo trust” was not only driving dairy farmers to the wall, but also impairing the marriage market, because “women are no longer a necessary adjunct to the farmer lads to help them create wealth, owing to the oleo-cotton-oil-soap-fat combine.”

Failing here, they accused oleo manufacturers of coloring their product and selling it fraudulently as butter. Never mind that dairymen had long colored winter butter yellow to resemble the best “June butter.” They also routinely “renovated” rancid butter and brought it to market. The dairymen finally got Congress to enact a two-cent-per-pound excise tax on oleo in 1886.

This was the first time that Congress had used its internal taxing power for regulatory purposes, rather than to raise revenue. But oleo would not stay down, and dairy interests tried other methods to eliminate it. Some states completely prohibited its manufacture and sale. New Hampshire required that oleo be colored pink. (The Supreme Court disallowed this.) In 1902 Congress enacted a prohibitive ten-cent-per-pound tax on artificially colored oleo, but reduced the tax on uncolored oleo to one-quarter of a cent. The Supreme Court upheld this tax two years later, a milestone in the expansion of federal regulatory power.

The Supreme Court’s recent decision that Congress can impose a tax to compel us to purchase health insurance traces back to the dairy industry’s effort to use the taxing power to compel us to eat butter.

Organized dairy’s next target was “filled milk.” This was skim milk to which vegetable oil was added to give the texture of whole milk. Although it provided all of the protein and most of the vitamins of whole milk at a much lower price (and with fewer cardiovascular hazards), the dairy lobby claimed that it was unhealthful. They even resorted to racism, noting that cow’s milk was a pillar of Western civilization, superior to the “oriental” menace of coconut oil.

Congress prohibited the shipment of filled milk in interstate commerce in 1923. This was the sort of special-interest legislation that the Supreme Court would probably have struck down before President Franklin D. Roosevelt threatened to “pack” the Court in 1937.  In 1938 the Court sustained the filled-milk prohibition act. After that, Congress’s power to regulate the economy under the guise of the commerce clause was virtually unlimited. Moreover, the Court said that economic rights were less worthy of judicial protection than “personal” rights and the rights of “discrete and insular minorities.” The dairy lobby provided the occasion for our double standard of judicial review.

Perhaps the most egregious exercise of dairy power was a New York State law of 1933 that declared that milk was a business “affected with a public interest” and allowed the state to set dairy prices. The New York board set 9 cents per quart as the minimum retail price of milk. A Rochester grocer, Leo Nebbia, was prosecuted for selling two quarts of milk and a loaf of bread for 18 cents. Why, in the midst of the distress and privation of the early 1930s, did New York want to raise the price of milk? The idea was that this would raise the income of dairy farmers, who would then purchase more industrial goods, thus stimulating the economy. The Supreme Court accepted this reasoning, giving state governments virtually unlimited power to enact economic regulations. Such counterintuitive trickle-up economic theory helped to turn the 1929 recession into the prolonged Great Depression. Ever since, the federal government has been trying to keep small dairy farmers in business through an elaborate price-support system.

The efforts of the dairy lobby helped to produce an unlimited federal taxing and commerce power, and an unlimited state regulatory power. If Congress does not enact a new farm bill before the end of its current session, we will return to the terms of a 1949 act, which could double the retail price of milk, further reducing sales. The system is a microcosm of the dysfunctional welfare state, harming first consumers and eventually its supposed beneficiaries.

— Paul Moreno is the director of academic programs at Hillsdale College’s Kirby Center for Constitutional Studies and Citizenship.

Paul Moreno holds the William and Berniece Grewcock Chair in Constitutional History at Hillsdale College, where he is a professor of history and dean of social sciences.


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