Inertia Wins!

In a recent blog post, I describe the Agricultural Marketing Service’s (AMS) Beef Promotion and Research “checkoff” program as corporate welfare. The agency’s Public Affairs Director disagrees. In an email, he asked me to issue a correction. I would, but the facts won’t allow it. Still, some clarification would be helpful.

He claims that “Zero appropriations are used” in AMS’s research and promotion activities. Note the use of the word “appropriations” instead of “taxes.” This is a sneaky use of language. It doesn’t matter if Congress appropriates AMS money or not. The relevant question is whether AMS uses tax dollars to advertise for private businesses. It does.

Under federal law, farmers producing certain foods (beef, pork, milk, honey, various crops, etc.) are assessed fees. The AMS uses the revenue to promote those products. Those “Got Milk?” and “The other white meat” ads are prime examples.

The “Certified Angus Beef,” program, on the other hand, is a wholly private, voluntary marketing program supported by qualified producers of that particular cattle breed. But AMS’s beef checkoff assessment is mandatory (that is, a tax).

AMS argues that the entire industry benefits from collaborative promotion, though the Congressional Research Service explains that it’s not clear whether or to what extent this is true. What IS clear is that not all producers benefit to the same extent — those Certified Angus producers and others who sell branded products have to pay the tax to support advertising for their un-branded competitors.

And, though many beef producers love the program, many others would prefer not to participate at all. What’s more, farmers pass at least part of those fees on to consumers in the form of higher prices. We all get to share in the burden.

AMS’s rationale is that it’s difficult for farmers to advertise individually. Of course, trade associations already exist for beef, dairy, and other agricultural products. If farmers wish to advertise collectively, they can easily do so through their trade associations.

Checkoff program supporters will inevitably argue that purely voluntary collective action allows free riders to benefit from the efforts of others. But it’s pretty clear that the Certified Angus folks have found a way to prevent defection. There is no need for Washington to get involved. (Perhaps the AMS should rebrand itself as the Department of Redundancy Department?)

In the end, Washington is spending tax money on ads for private businesses in a way that benefits some at the expense of others. This is corporate welfare.

(Hat tip to my colleague Greg Conko for his helpful comments.)