The Italian Cheese Wheel Bailout

The Wall Street Journal reports there is a bull market in at least one commodity: bailouts.  I, for one, thought the NASCAR bailout would be impossible to top, but I stand corrected.

The world is bailing out banks and car companies. Italy is coming to the rescue of parmigiano cheese.

In an effort to help producers of the cheese commonly grated over spaghetti, fettuccine and other pastas, the Italian government is buying 100,000 wheels of Parmigiano Reggiano and donating them to charity.

Though demand for parmigiano is strong in Italy and abroad, producers have been struggling for years to make money, putting the future of Italy’s favorite cheese at risk.

Marco Iemmi, cheese rotator

“It’s a tragic situation,” said Marco Iemmi, who has been making parmigiano for 30 years in Salsomaggiore Terme, a small town in Italy’s fertile northern Emilia-Romagna region. “I’ll have to close up shop unless things improve.”

Last year, Mr. Iemmi sold 15,000 parmigiano wheels — the cheese is produced in rounds of about 35 kilograms (77 pounds) each — for a total of €4 million ($5.2 million), or about €7.4 a kilogram. It costs Mr. Iemmi €8 a kilo to produce the cheese, he says, so he is losing money.

Italian consumers seem to support the cheese bailout, which also includes a purchase of 100,000 wheels of another grating variety, Grana Padano. The operation will cost €50 million.

But this is not sitting well with rival mozzarella producers.

Now that the government has stepped in to help parmigiano makers, however, others are making a stink. “We’ve never received a single dime in state aid,” complains Vincenzo Oliviero, who heads the association of buffalo mozzarella producers.

Mr. Oliviero says makers of the juicy white cheese eaten alone or on pizza have been suffering since Naples faced a trash crisis last year. Because most buffalo mozzarella is made near there, consumers stopped buying the cheese for fear that mounds of garbage in the area might have infected the water used to irrigate farms. Sales of buffalo mozzarella have fallen 18% over the past year. “We’ve asked for help, too,” says Mr. Oliviero. Italy so far hasn’t said no.

Trash crisis, economic crisis — they’re not so different.  And “Italy so far hasn’t said no” might just be the funniest line in the whole article, packing deep commentary on Italian economic policy into just six words. 

“If you spend money on parmigiano, then on cabbage, then on Alitalia…, you’re using state resources to help those that are inefficient,” says Carlo Stagnaro, head of research at Italian think tank Istituto Bruno Leoni.

The government dismisses the criticism. “There was a need for market intervention [for parmigiano], just as there was for banks,” Luca Zaia, minister of agriculture in the center-right Berlusconi government, said.

Cheese evidently is some kind of a gateway bailout, potentially leading to other, more pernicious bailouts, like cabbage (I’ve asked our crack research staff to investigate any cabbage bailouts, which would absolutely make the rapidly expanding Platformonomics list of cheesiestfunniest bailouts).

This is either a Pulitzer Prize-winning piece of journalism or an elaborate satirical concoction by the Wall Street Journal editorial page to illustrate bailouts gone wild, but either way read the whole article and don’t miss accompanying the slide show.  This kind of quality content must be why the Journal has maintained its revenues while its newspaper peers have been imploding left and right.

The NASCAR Bailout

It only took on the order of $110 billion in additional “sweeteners” to get enough votes to pass the $700 billion bailout bill (a bill almost certain to be a disaster, we just don’t yet know what the unintended consequences will be).

The “sweeteners” took the form of new or extended tax breaks.  One can only assume the legislators believed the use of tax exemptions (reducing revenue) as opposed to earmarks (increasing spending) was a significant concession to our fiscal plight and further evidence of their wise and decisive leadership.

And the “sweeteners” got larded out despite vows not to do so:

“We will not Christmas-tree this bill,” [New York Senator Charles] Schumer said. “The times are too urgent. Everyone has their own desires and needs. It’s going to have to wait.”

“We don’t need 535 members of Congress adding their best idea to this bill,” [House Minority Leader John]Boehner said. “We need to keep it clean, simple, move it through the House and Senate, and get it on the president’s desk.”

This historical piece of legislation promises to get the credit markets moving again through such targeted measures as:

  • Relief for manufacturers of children’s wooden practice arrows from the Federal excise tax on wooden arrows.  Who knew we had an excise tax of 39 cents per wooden arrow?  I can only assume this tax is a forgotten anachronism dating back to previous bold Congressional action in the wake of Custer’s Last Stand.
  • NASCAR’s accelerated depreciation schedule for racetracks is extended by a year.  The $100 million cost to taxpayers is a small price to pay in the name of rectifying the present injustice of amusement park owners having a more favorable depreciation schedule.
  • “Increase in the limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands”.  I don’t even know what this means, but I assume it helps distraught and financially strapped taxpayers, homeowners and mortgage bankers drown their sorrows in rum.

I can’t find a list anywhere that links the “sweeteners” with their Congressional champions/beneficiaries, but I hope someone compiles it so they can be named and shamed.  If the politicians are already worried about their vote on the main bill affecting reelection in November, anyone who adorned this bill with pork should spend the next month justifying their inability to get their noses out of the trough, even briefly.

Silver Lining?

In what is otherwise the least humorous piece ever by Andy Kessler, he suggests a possible upside to the Wall Street bailout:

My analysis suggests that Treasury Secretary Henry Paulson (a former investment banker, no less, not a trader) may pull off the mother of all trades, which could net a trillion dollars and maybe as much as $2.2 trillion — yes, with a “t” — for the United States Treasury.