But if you were desperate and your only other option was to feed you kids crappy unhealthy stuff.......
I'm not desperate and actually children will do just fine on water if that's all there is and I know mine would prefer it over powdered milk. The key is to stay hydrated--milk is not needed to accomplish that end. In fact, when you talk to a pediatrician and they tell you the recommended amount of milk for children age 3 and up, it really should not hurt anyone's budget, if their children are drinking milk in the amount they should, to buy regular milk even at 4 bucks a gallon.
That said, the only milk I've seen for that price here(central Ohio) is either brand name milk like Reiter at the most expensive stores or organic milk, milk substitutes like soy, or Lactaid. I just bought milk at 2.50 a gallon at kroger last week. Milk can be frozen if one is so inclined. Before the hike the lowest I ever got it for was 2 bucks a gallon on sale so 50 cents difference really is not a burden, especially since it accompanied my children getting older and not needing so much milk.
I'm with free, that taste sticks with me to this day when its mentioned. It is vile and if I had the choice between it or no milk, I'd choose no milk. I also know that there is enough wiggle room in the grocery budget with some of the 'extras' we buy food wise that we wont have to resort to that option unless the US spins into a depression of some kind. If that happens, we got more to worry about as a country, family, and individuals then powdered milk versus traditional.