This One Lobby Group Is Forcing You To Pay Double The Price For Sugar

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Guy Bentley Research Associate, Reason Foundation
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Americans are paying twice as much as they should be for sugar thanks to the concentrated interests of a handful of wealthy sugar growers.

The U.S. government has developed an elaborate system of price supports and import quotas that keep the price of sugar artificially high. This hurts both the industries that use sugar, like candy manufacturers, and ordinary consumers in the form of higher prices in grocery stores.

But the Coalition for Sugar Reform (CSR), an alliance of consumers, manufacturers and taxpayer watchdog organizations, is working to abolish the system which it argues has led to Americans paying double the world market price for sugar and massive substitution among soda makers to products like high fructose corn syrup.

At a congressional briefing held Tuesday leading representatives of CSR, including President of Americans for Tax Reform Grover Norquist, made the case for ending handouts to the sugar industry.

Norquist said the supporters of the sugar program are using it to “get rich on other people’s money.” He added that the sugar program is a clear example of cronyism and classified it as “the new Ex-Im.”

The veteran campaigner fired a warning shot to members of Congress, saying “those politicians who vote to maintain the status quo with the Sugar Program are really opening themselves up to more scrutiny than they’ve had in the past.”

The sugar program has been in effect for 75 years but has hammered American workers over the past decade and a half. According to the Department of Commerce, 127,000 jobs were lost from 1997 to 2011 because companies were forced to pay an artificially high price for sugar.

There are around 18,000 people employed in the farming, production, and processing of sugar. The Department of Commerce estimates that for every one sugar growing job saved thanks to the high sugar prices three manufacturing jobs are lost.

Since 2008, the burden to manufacturers and consumers of propping up sugar growers has risen to $3.5 billion per year. There are four components to the sugar program that increase the price of sugar – price supports, marketing allotments, import quotas and the Feedstock Flexibility Program.

Government price supports ensure there is a minimum price for American-made sugar that’s substantially higher than the global market price.

Marketing allotments restrict the amount of sugar the industry’s processors are allowed to sell each year so as to prevent an excess amount of sugar entering the market and lowering the price.

But if the U.S. does end up with a surplus of sugar the Feedstock Flexibility Program, established in 2008, kicks in. This program mandates that surplus sugar will be bought by the federal government and sold at a loss to ethanol plants, with taxpayers making up the difference.

In the fiscal year 2013, the direct cost to taxpayers of the sugar program soared to $300 million because the Department of Agriculture was forced to buy up surplus sugar and remove it from the market to prop up sugar prices.

If the domestic sugar market isn’t bad enough, the federal government also prevents Americans from getting cheap sugar from overseas thanks to import quotas. These quotas set limits on how much sugar can be brought in each year from the 40 countries that have been exporting sugar to the U.S. for the last 30-35 years. Imports exceeding this level are penalized with heavy tariffs.

The cost to the American people of Congress indulging sugar farmers is about to get a lot worse, says CSR, with the Congressional Budget Office estimating the sugar program will cost an extra $115 million over the next decade.

But the drawbacks go far beyond the immediate cost to consumers and extend all the way America’s ability to trade with other nations. “This disrupts all of our efforts to get free trade and damages every American exporter and consumer not just in this zone, but because in order to do this stupid thing to our consumers we have to give way on other stuff that also does damage to our consumers and our producers,” said Norquist.

He added that the program is in “the middle of the fights we’ve had with Mexico, with Australia. We’ve got this rotten corpse in the middle of the table and we’ve got to work around it.”

One of the reasons the program is allowed to survive, according to Norquist, is that “votes are traded in a completely non-transparent way.” Legislators try to gain the support of their peers for programs that benefit special interests in their constituencies by supporting bills that do the same for their colleagues. “Corporate welfare is never big enough to stand on its own it has to be cobbled together with other sorts of cronyism,” Norquist added.

Bill O’Conner, an agriculture policy expert with Sweetener Users Association said there could be an opportunity to reform the program in an appropriations bill or during the budget process. Supporters of sugar subsidies in Congress could face powerful enemies in the form of not just Norquist and Americans for Tax Reform but also the Koch brothers and their extensive network who have been vocal in their criticism of crony capitalism.

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