Imagine this scene: The U.S. Congress is about to pass a bill that will offer cheap loans to American oil companies. The government will loan them $150 for every barrel of oil they produce, with the oil itself serving as collateral. This guarantees that oil will always sell for at least $150 per barrel, because the companies can surrender their oil to Uncle Sam at that price instead of selling it for less. Meanwhile, a system of tariffs will prevent foreign companies from selling oil at prices that can compete with $150 per barrel.
Sounds like a bad idea, doesn’t it? This would force taxpayers to put billions at risk for a program that makes their gasoline more expensive. It would also drive up prices for other goods and services that contain or require the use of oil or gasoline. Oil companies would be the only beneficiaries — at our expense, they would be rolling in dough.
So if this is a bad idea for oil, why is it a good idea for sugar? This is precisely the program currently in place, and Congress is poised to reauthorize it before it expires March 15.
Why? A November report in the Washington Post gives a clue: In less than a year, “nine sugar farm or refinery groups have made more than 900 separate contributions totaling nearly $1.5 million to candidates, parties and political funds.”
Under the rival House and Senate versions of the farm bill, the sugar loans will either remain the same or increase by half a penny per pound. (Current loans: 18 cents per pound for processed sugar cane and 23 cents for sugar beets, double the average world-market price over the last seven years.) The sugar program is a recent addition to an insane agricultural policy that dates back to the Depression. In subsidizing sugar, cotton and several cereal crops, the House bill would spend to $60,000 for each farmer in the United States per year, or $286 billion.
The sugar subsidy is particularly destructive. A domestic quota system regulates the amount of sugar grown in the United States, guaranteeing scarcity and propping up prices. An international quota and tariff system prevents foreign competition from undercutting these prices.
The results have been horrific. A 2006 Commerce Department study found that three confectionary manufacturing jobs are lost for every sugar-growing job the program preserves. Ten thousand such manufacturing jobs were lost between 1997 and 2002. The artificially high price of sugar in the U.S. has driven Hershey, Fannie May, and Kraft to shutter domestic candy factories and move them to Mexico and Canada this decade. At the time of the report, sugar in Mexico cost two-thirds of the U.S. price; in Canada, it cost less than half. The price of sugar in the U.S. has also driven some candy and soda makers to use high-fructose corn syrup instead, pushing up prices for corn, for the crops that compete with it for farmland, and for the farmland itself.
In addition to wasting tax money, increasing prices, and sending jobs abroad, the program perpetuates global poverty. Thanks to the quotas and tariffs, poor countries that produce sugar more cheaply than we can — including Brazil, Guatemala, and nine African countries — can’t sell it to us.
Shamefully, there is not nearly enough support in Congress to reform this obsolete system. This year’s attempts by Sen. Richard Lugar (R., Ind.), and Reps. Jeff Flake (R., Ariz.) and Ron Kind (D., Wisc.) to abolish the sugar program went nowhere. Even the weaker alternative they offered, which continued the sugar program but ended direct payments to farm owners, failed 37-58 in the Senate and 117-309 in the House last year.
Rep. Frank Lucas (R., Okla.), a nominal conservative who serves as a high-ranking member of the Agriculture Committee, mounted a surprisingly spirited defense of keeping the farm bill as it is and preserving what most conservatives consider one of the federal government’s biggest mistakes.
“It’s about providing the American consumer with the highest quality, the safest supply of food and fiber in the history of the world,” he said on the House floor. “[W]e have created sound agricultural policy over the last 75 years. We have had ten good years of agriculture policy in particular. We need to continue to build on that. ”
With conservatives like this, who needs liberals? Rest easy, Big Sugar.
– David Freddoso is an NRO staff reporter.