Government Cheese: Well-Intentioned Program Goes Off The Rails With talk of new agricultural subsidies, our Planet Money podcast team looks back at the tale of government cheese for lessons on the unintended consequences of government subsidies.
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Government Cheese: Well-Intentioned Program Goes Off The Rails

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Government Cheese: Well-Intentioned Program Goes Off The Rails

Government Cheese: Well-Intentioned Program Goes Off The Rails

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STEVE INSKEEP, HOST:

When the Trump administration decided to pay subsidies to farmers hurt by trade, it reminded NPR's Planet Money podcast team about the time another president tried to help farmers. Kenny Malone has the epic tale of government cheese.

KENNY MALONE, BYLINE: The year was 1977. President Jimmy Carter wanted to help the dairy farmers. Along with Congress, Carter wanted to raise the price of milk 6 cents per gallon and keep raising it with inflation. The government would buy as much milk as it took to move that price. But milk doesn't store well, so the government bought other dairy products.

BOB ASCHEBROCK: Yes. I was hired as a cheese grader.

MALONE: You were hired as someone to show up with a metal...

ASCHEBROCK: No, no, no, no.

MALONE: ...Thing?

ASCHEBROCK: A grader...

MALONE: (Laughter).

ASCHEBROCK: ...Where you do quality checks on it.

MALONE: Bob Aschebrock spent 30 years as a USDA cheese inspector. He says the government was buying powdered milk, butter and cheddar cheese - only grade-A cheddar, though.

ASCHEBROCK: You betcha (ph).

MALONE: As the government bought more and more cheese, sure, the price of milk went up.

ASCHEBROCK: But then we had the issue with storing the stuff. I mean...

MALONE: (Laughter).

ASCHEBROCK: ...We had cheese in every cold storage in the United States, including the caves in Kansas that were full of that stuff.

MALONE: The caves in Kansas?

ASCHEBROCK: Yeah, the underground caves.

MALONE: (Shouting) Hello?

I am in an old, converted limestone mine.

(Shouting) Government cheese. That was pretty good. You don't do that, huh?

DAN CALLAHAN: No, I've never thought about it.

MALONE: Dan Callahan worked here in the 1970s and says one day, the U.S. government rented a ton of cave space, and a ton of cheddar cheese started to show up. Callahan says it took up about a half an acre of space.

So just wall-to-wall, floor-to-ceiling...

CALLAHAN: Floor to ceiling, and then as you kept filling it, you just worked your way right back out.

MALONE: Until there was no more room for you to be in this room?

CALLAHAN: Right.

MALONE: Within five years, the government was storing two pounds of cheese for every single American citizen. Andy Novakovic is a dairy economist at Cornell University. And he says getting rid of caves full of grade-A government cheese was an economically tricky issue.

ANDY NOVAKOVIC: Exactly. So the thing that the government was concerned about is what's called commercial displacement.

MALONE: Releasing a tsunami of surplus cheddar the wrong way would push the price of cheese and milk way down.

NOVAKOVIC: You can imagine the cheese company that's in the business of selling cheese is going to say, hey, what's the deal here?

MALONE: Novakovic says the government could have destroyed the cheese. That doesn't look great. It also could have tried to send it overseas as foreign aid, like we do with other surplus commodities. But cheese doesn't travel well, so the government landed on a third option.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED REPORTER: The great cheese giveaway began today in California. San Francisco is 1 of 3 cities in which needy people lined up to get the surplus cheese.

MALONE: The theory was that if you give cheese away to people who can't afford it, then you're not stealing business from real cheese sellers.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED REPORTER: A state official estimated 300,000 people will get a taste of today's cheese.

MALONE: The story of government cheese has become a kind of parable of how government intervention in markets can have this, like, butterfly effect.

NOVAKOVIC: Well, I think there's two basic lessons.

MALONE: Again, economist Andy Novakovic.

NOVAKOVIC: It's really hard to balance what you want to do socially or politically with what you can get away with economically. The second lesson is you got to pay attention to the unintended consequences because they can come back and bite you and bite you hard.

MALONE: Even if that bite just looks like some delicious cheese?

NOVAKOVIC: (Laughter) That was the unintended consequence that was fun. But the bite came in terms of how much it cost for that opportunity.

MALONE: Right - very, very expensive cheese.

NOVAKOVIC: Indeed.

MALONE: Kenny Malone, NPR News.

(SOUNDBITE OF KAZAM'S "ROMANTIQUE")

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