In the Planet Money podcast Big Government Cheese I was reminded of stories my dad told me of eating government cheese growing up poor in Georgia. So it was interesting to listen to an in depth program examining how this program came to exist. Like many bad things this idea came from the desire to support American farmers financially. Jimmy Carter was interested in supporting American farmers and as a campaign pledge wanted to raise the price of milk as a way of giving farmers more money. To increase the price of a product in such a way the government had two options lowering the supply or increasing the demand. Canada is an example of a country that maintains the price of milk by lowering the supply, after a certain quota of milk is produced the farmers are ordered to stop producing. America chooses not to take this route and instead tries to increase the demand. The easiest way for the government to do this is by buying the product and storing it, it had done this before with corn and other grains. However the properties of milk make this impossible milk spoils quickly and is harder to store. It is here that cheese comes into the picture, USDA looks at what dairy products can be storeable one of the best of these dairy products for storage was cheddar cheese. So the government decided to buy as much cheese as the cheese producers would sell them at a fixed price. By buying as much cheese at an artificially high price as the cheese makers could make, the cheese makers would buy more milk thus increasing the price of milk and accomplishing the goal of the Carter administration. This artificial demand would raise the price of milk but the government would have to keep buying all the cheese the makers were willing to sell to keep milk prices at the level they wanted. Buying this large amount of cheese created a storage problem, eventually the government had to resort to renting out large cave spaces in Kansas to store the cheese. It was this silly situation that brought attention to the massive amounts of money that the government was spending on buying cheese only for it to have to be stored and rot. So the government started looking for ways to get rid of the cheese without harming the very market they wanted to support. If the government sold the cheese on the open market there would have been commercial displacement destroying the cheese market and thus milk market with a flood of cheap cheese. Instead the government decides to give the cheese away to consumers who would not have otherwise bought the cheese. The cheese was processed and made into 2 and 5 pound bricks and given away as food aid to the poor of America. It was this spectacle of millions of pounds of expensive cheese being processed and given away that created a popular cultural icon and an example of bad government spending. The government eventually tired of being involved in this business and eventually extracted itself from buying cheese slowly by increasing milk ads and giving farmers direct subsidies instead.

There are a lot of “Big Ideas” to discuss in this podcast but the obvious one is one which the podcast points out itself, the problem of unintended consequence. The goal of the government was to support American farmers by price controls but this led to the government buying billions of dollars of cheese every year that they had to inspect, store and eventually give away. Another would be how business, state and society interact the various pressures and values that guided the way government cheese came about, For instance unlike Canada we did not impose a production limit on milk largely because that seemed un-American to have limits on production. The way the farmers as an interest group gets the government to engage in the market also reminded me of the case of Nixon subsidizing corn production and increasing the use of high fructose corn syrup as a way to lower the cost of food to the average household for political gain. I don’t think these unintended consequences will ever go away and we live with some greater and more unknown than government cheese.