End the Sugar Subsidies

Wednesday, April 25th, 2012 and is filed under Blog, Economy

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The Senate Agriculture Committee was supposed to mark up the 5-year farm bill today, but it was delayed due to infighting over regional subsidies.  There are many concerns with the bill, but there is one subsidy in particular that we must call out; the one for sugar farmers.

Nothing illustrates the destructive synergy of government-sponsored market distortions and crony capitalism than farm subsidies.  We already know how much ethanol subsidies have distorted the food and fuel markets, engendering regressive price hikes on the poor and middle class – those people who liberals purport to endear.  But there is nothing worse than the last 30 years of sugar subsidies.

Here’s an analysis from the American Enterprise Institute:

For decades, sugar beet and sugar cane farmers and processors have been the beneficiaries of a sugar program that stealthily drives up sugar costs—and, consequently, the cost of that heart-shaped box of chocolates. Over the past 30 years, the annual burden on U.S. consumers has averaged over $3 billion in higher food prices.

Over the 30-year period from 1980 through 2009, the sugar program effectively doubled the price U.S. consumers paid for sugar and increased annual food costs by about $9 per person. That may not sound like a big price tag, but it resulted in a $1.3 billion deadweight loss for the U.S. economy (think of all the extra money that could’ve been spent on red roses and high-end confectionary!). And how did the sugar farmers, who are fewer than 20,000 in number and relatively wealthy, fare? They received a $1.7 billion net gain.

This is a classic example of how the government blows up the free-market with regressive interventions, thereby creating a need for welfare.  They have driven up the price on some of the most basic food staples over the year.  Then, when people can’t afford them, they parachute in with food stamps and other handouts.  Food prices are at a record high.  Food Stamp usage is also at a record high.  What a coincidence.  How about we stay out of the food industry and stop food welfare for both consumers and producers.

But as always, there is a crony capitalist angle.  While sugar makes up less than 2% of the value of all crops grown in the country, the sugar lobbyists account for more campaign donations than all other crop PACs combined.  Take a look at this chart from the Heritage Foundation: