Newsday [also syndicated nationally]

HEADLINE: The U.S. Sugar Program Mugs Grocery Shoppers

Newsday, June 22, 1990

BYLINE: By James Bovard. James Bovard is the author of "The Farm Fiasco" (ICS Press) and a policy analyst for the Competitive Enterprise Institute.


BODY: CONGRESS IS debating a plan for five more years of subsidies for sugar farmers. For almost 200 years, the U.S. government has driven American sugar prices to double or triple world sugar prices. In the 1820s, sugar farmers said they needed high tariff protection because they were "warring with nature," trying to grow sugar. (The U.S. climate is comparatively unsuited for sugar production.) And, for generations, Uncle Sam has helped sugar farmers "fight nature" by forcing consumers to pay unnatural prices for sugar.

The U.S. Commerce Department estimated in 1988 that the federal sugar program costs American consumers $ 3 billion a year. The sugar program is a great inflationary success: Sugar sells for 24 cents a pound in the United States, compared with 13to l4 cents on the world markets. Since 1980, the sugar program has cost consumers and taxpayers roughly $ 2 million for each of America's 12,000 sugar growers.

Yet, farm-state members of Congress loudly brag that the sugar program is a "no net cost" program. This claim is made because, while the sugar program mugs Americans at the grocery checkout, members of Congress crafted the program so that it leaves almost no fingerprints on the federal budget. The subsidy stems from a quota system that keeps out cheap foreign sugar and creates an artificial sugar shortage in the United States, combined with high federal sugar price supports.

American sugar production set a record in 1988. This is tragic, because sugar is the crop in which American farmers are the least competitive. Yet federal guarantees of high prices have persuaded American farmers to grow more sugarcane and sugar beets. As a consequence, sugar imports have been cut by 80 percent since 1975 - thereby pulverizing Central America and the Philippines, the main sources of U.S. sugar imports. The State Department estimates that slashing U.S. sugar imports costs friendly Third World governments almost a billion dollars a year.

The easy solution to the sugar problem would be to end the price supports and import controls that guarantee American farmers obscenely high prices. Naturally, farm-state members of Congress favor a more creative solution.

Rather than reducing or abolishing subsidies to sugar farmers, the House Agriculture Committee proposes to set up two licensing schemes and to have the Agriculture Department hire a legion of sugar police who would check if farmers have licences for growing sugar. And the House Agriculture Committee also wants to impose quotas on the sale of crystalline fructose, a corn syrup derivative used as a less expensive substitute for sugar. Because some members of Congress want to covertly pad the pockets of sugar growers, the government may nullify the freedom of food manufacturers.

Sugar is America's least efficient welfare program. In 1987, sugar farmers had a net income from sugar sales of roughly $ 300 million. Since the program costs consumers $ 3 billion a year, this means that our sugar policy costs

Newsday, June 22, 1990

consumers $ 10 far each $ 1 of income sugar farmers receive. This is a poor batting average, even for Washington.

The sugar program is actually quite simple. Sugar producers have 17 political action committees. Since 1984, these PACs have funneled $ 3 million to members of Congress, who express their gratitude by funneling billions of dollars into sugar producers' pockets. Everybody is better off, except for 250 million consumers.

The number of American jobs destroyed by sugar quotas exceeds the total number of sugar farmers in the United States. The Commerce Department estimates that the high price of sugar has destroyed almost 9,000 U.S. jobs in food manufacturing. Last month, Brach Candy Company announced it would probably close its Chicago factory and move 3,500 jobs to Canada because it could not afford the high price of American sugar. Thanks to the cutback in sugar imports, 10 sugar refineries have also closed since 1981 and 7,000 jobs have been lost.

Sugar subsidies are decreasing American exports. In the Red River Valley of Minnesota, heavily subsidized sugar growers have bid up the rents on farmland by over 50 percent. As a result, relatively unsubsidized soybean farmers can no longer find sufficient land to grow soybeans, America's premier export crop. This is the perfect illustration of the old economic truism that restrictions on imports become restrictions on exports.

Federal generosity to sugar farmers is devastating the environment in some areas. Many people are concerned that the Florida Everglades are dying, and the pesticides and fertilizers used in cane sugar production are one of the largest sources of pollution.

A bipartisan group of congressmen, led by Rep. Tom Downey (D-Amityville) and Rep. Willis Gradison (R-Ohio), are trying to sharply reduce sugar subsidies. The Downey-Gradison effort will be a good economic sobriety test for our representatives.

We do not need massive government intervention to protect consumers against the tyranny of low prices. Encouraging sugar production means encouraging American farmers to do what they do worst. Sugar is our oldest infant industry - and it is time to cut off the federal life-support system.