Milk for $7 a gallon? Farm bill impasse could send US off 'dairy cliff.'

Congress is at another impasse. This time, America is facing a countdown to the “dairy cliff.”

The farm bill, which since the Depression has offered risk-taking farmers price supports and guarantees while helping the poor by providing free basic foods, has become the latest victim of a divided Washington desperate to put the brakes on spending while tweaking social welfare policies.

“This is a historic breakdown,” writes the editorial board of The Des Moines (Iowa) Register newspaper.

While the main issue is the extent of cuts to food stamps, now called SNAP (or Supplemental Nutrition Assistance Program), the stakes are high enough to potentially touch just about every American family – namely by doubling milk prices to as much as $7 a gallon.

If the $80 billion farm bill isn’t hammered out by next week, it will revert to the original 1930s “farm law” on New Year’s Day.

House Republicans put things in motion this summer by demanding a $4 billion cut from SNAP payments, while allowing states to attach work requirements to the benefit. Senate Democrats, backed by President Obama, have offered a far more modest $400 million cut, with no new work requirements.

Also on the table are direct payments paid to farmers regardless of actual prices or yields. The two sides actually agree that something needs to be done about this $5 billion subsidy, since it offers an incentive to some farmers not to farm at all. But just what to do is unresolved.

Just as tricky, Republican lawmakers have added an amendment that would ban states from setting farming standards that would affect goods grown or produced outside a particular state’s borders. The amendment targets a new California law that demands that all eggs sold in the Golden State come from chickens housed in larger-than-standard coops.

“We cannot start trade wars between the states and have a patchwork quilt,” said Rep. Steve King (R) of Iowa, who sponsored that amendment.

Another sticking point: In a backdoor benefit strategy, some states have been paying low-income Americans $1 a year for utility assistance to make them eligible for a larger chunk of food-stamp benefits.

In the same vein, Republicans want to end a farm bill benefit that grants indefinite food stamps to adults who are perfectly able to work.

On the breadbasket side, negotiations are also focusing on massive agribusiness subsidies provided by the farm bill. Critics, Democrats and taxpayer groups among them, have long contended that farm-bill entitlements, including generous crop insurance programs supported largely by taxpayers, constitute a sort of corporate welfare that puts little onus on large-scale producers to see beyond their own profit-and-loss statements.

Farmers “must demonstrate that they are willing to accept mandatory conservation rules and participation as a tradeoff for asking American taxpayers to subsidize their business,” The Des Moines Register’s editorial board writes. “That has not happened. Instead, powerful farm organizations and state leaders in Iowa send the opposite message that they expect government handouts without any strings being attached.”

On the Hill Wednesday, negotiators emerged smiling from a closed-door session, although House Speaker John Boehner (R) of Ohio suggested Thursday he hasn’t “seen any real progress.”

One potential band-aid fix is for Congress to extend the current bill by a month. But Sen. Harry Reid (D) of Nevada, who leads the Senate majority, has said he might balk at such a move, given that the bill has already been extended several times.

If Congress indeed fails to come to an agreement, the US Department of Agriculture is ready to quickly rewrite the current rules to comply with the original Depression-era law, Secretary Tom Vilsack has said.

Among other things, that would raise the prices that the government pays for milk, the upshot of which would crimp the flow of milk from America’s dairies to the grocery store, thus raising prices.

Whether Americans are ready to live with higher milk prices in order to tackle deeper fiscal and philosophical conundrums is the open question for farm-bill negotiators as they head into the weekend.