How are the special-interest groups surviving this season of budget cutting? In many cases, not well. Consider, for example, the plight of America's dairy industry.
Despite generous campaign contributions last year, clever and intense lobbying and a lot of well-placed friends in both the House and Senate, the dairy industry faces the prospect of a sharp reduction in federal price supports. At the moment, such a reduction seems unavoidable.
That this could happen to a special interest with such an impressive track record reflects the basic fact of Washington politics this summer: the congressional budget act is working, and, as a result, domestic spending programs will be cut.
For the dairy lobby, this means that no matter how cleverly it tries to protect its interests in a new farm bill due to be enacted in this session, the money likely to be available will finance only a significantly reduced dairy program.
In recent years the dairy lobby has been wildly successful. No other group of farmers has done so well, either in the prices or the level of federal support it has received. But this may have been too much of a good thing. Because the prices have been so attractive, production has boomed. As a result, the government is sitting on mountains of surplus butter, cheese and dry milk, the equivalent of 13.7 billion pounds of milk.
This year the dairy price-support program will cost the Treasury perhaps $2 billion, and that makes it an irresistible target for the Reagan administration and its supporters in Congress. Lobbyists for the dairy industry have realized this for many months, and have long been operating in a damage-limitation mode.
The first round went to the budget-cutters when Congress voted to skip a scheduled increase in the dairy price support due to take effect April 1. That meant, in effect, that dairy farmers who had been selling their products for a price equal to 80 percent of parity (a concept reflecting the purchasing power of farm products based on the agricultural boom years before World war I) are now getting 75 percent of parity. In dollar terms, the price support did not change, but because of inflation the percent of parity fell.
Now the price is likely to fall to 70 percent of parity, and possibly lower.
This would by unprecedented in the history of the dairy price-support program, though its real impact on the industry is difficult to know, because the concept of parity is confusing.
If the price support were based on the cost of production of milk (as are federal price supports for other commodities), it would be easier to determine just how painful this cut would be to dairy farmers. But it is certainly deep enough to ensure that some marginal dairy-farming operations will go out of business and some dairy farmers will cut back their herds, necessary developments to slow down the growth of the government's surplus stocks. (Under the program, the government must buy all the dry milk, butter and cheese produced in this country if it cannot be sold on the open market.)
The dairy lobby is not fatalistic about the developing situation. It is fighting to preserve the best deal it can. But the chief lobbyist in Washington, Patrick B. Healy of the National Milk Producers Federation, has volunteered a plan that would allow the price support to fall to 70 percent of parity for one year only (1982).
This move has divided the milk industry, which is primarily organized around large cooperatives of dairy farmers. Some of them feel that Healy is too ready to yield to the budget-cutting mood in Congress.
But there is little option except to yield, because of the way the budget act operates. Assuming there is no dramatic change of heart in Congress, and thus no significant increase in the amount of money allocated for commodity program in the already-approved first budget resolution, the dairy industry is caught in a political vise.
In the first budget resolution $2.176 billion was earmarked for the activities of the Commodity Credit Corp., which pays the bills for all the price-support programs.
Non-dairy CCC programs next year will cost about $1.5 billion, according to Congressional Budget Office estimates, and most of that is locked in, because it was authorized by the farm bill that expires this year. (This happens because wheat farmers, for example, are entitled to take out loans during 1982 on the wheat they grew in 1981.)
That leaves barely $700 million for the dairy price-support program next year. The program most favored by the industry, a price support at 75 percent of parity and adjusted twice a year for inflation, would cost about $1.5 billion, according to the CBO. Even a support at 70 percent of parity would cost $890 million, or $991 million if the support were adjusted twice a year.
The House Agriculture Committee, marking up a farm bill for the next four years, has recommended the 75 percent plan. The Senate committee has endorses the $991 million version of the 70 percent plan. But under the budget act, both of them would be subject to "points of order" on the Senate floor for violating the limits in the budget resolution, assuming that the legally binding second resolution is about the same size as the nonbinding first resolution Congress has already approved.
This truth hasn't quite sunk in with the industry or its friends on Capitol Hill. They are still maneuvering to try to save a bigger subsidy for the dairy farmers. But in the end, they will have to persuade both houses to increase the budget resolution's spending figures, force down the subsidies for other farm groups (an unlikely prospect), or accept the fact that the dairy industry will have to live with a lot fewer federal dollars.