Economics, Pethokoukis

Big Sugar subsidies are a sour taste of crony capitalism

Americans should really sour on Big Sugar subsidies where, as Ike Brannon points out, high tariffs keep out competitors, crop allotments prop up prices, and risk is reduced through government-guaranteed loans.

The sugar program, says the Department of Agriculture, supports U.S. sugar prices above comparable levels in the world market. That’s an understatement. Last year, our government spent $259 million directly to keep sugar prices high, and U.S. consumers paid an even higher tax. Between 1982 and 2012, the average price for U.S. sugar was 29 cents per pound while the price of sugar on the world market was 14 cents.

U.S. sugar producers like to talk about the 142,000 jobs at stake, but they neglect to mention the candy-making jobs that have fled the U.S. to countries where the world sugar price prevails. Atkinson Candy Co. of Lufkin, Texas, recently moved most of its peppermint candy production to Guatemala. Jelly Belly Candy Co. has expanded its factory in Thailand, and Kraft and Hershey’s have both moved production from the U.S. to Canada. Other food manufacturers have turned to corn syrup as a substitute.

Granted, this is nowhere as bad as “too big to fail.” Beyond direct government spending, artificially high prices probably cost consumers about $3 billion a year, according to my colleague Mark Perry. But that is real money. And this sort of minor-league corruption not only costs economically viable jobs, but also helps perpetuate “business as usual” cronyism on Capitol Hill. Here is US Senator Mike Lee in a recent speech:

Or look at the federal sugar program, where an array of taxes, mandates, and subsidies conspire to jack up the prices Americans pay on sugar – by as much as $3 billion every year. The program hurts economic growth, and redistributes wealth from the American people to a handful of corporations who effectively control regulation over their industry.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

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