While Congress works to approve the 2012 Farm Bill before the current one expires in September, lobbyists for the domestic sugar production industry have been pouring into Washington, fighting any attempts to cut or dramatically alter the federal government’s sugar program.
It should come as no surprise that U.S. sugar producers are fighting hard to keep subsidies intact. The sugar program, which comprises a complex web of import and domestic production quotas, price supports, loan guarantees, and marketing controls, has been artificially inflating the profit margins of American sugar beet growers and cane farmers for decades. Unfortunately for the majority of taxpayers who do not benefit from the sugar program, this profit has come with a price.
As a May 3, 2011 Cato Institute article points out, the price of sugar in America’s domestic market currently exceeds the global market price by more than fifty percent. In the past the program has forced American consumers to pay two or three times the spot world price for sugar, according to a Cato article from October 8, 2009. By driving up the price of sugar dramatically, the program forces Americans to pay artificially high prices not only for granulated sugar, but for other products that contain sugar as an ingredient, such as candy, breakfast cereal, cookies, crackers, bread, peanut butter, fruit preserves, frozen entrees, baking mixes, condiments, and juice.
According to a December 6, 2010 article released by the Heritage Foundation, the Federal Reserve Bank of Dallas’ 2002 annual report found that for every job the sugar program saves in the domestic sugar producing industry, U.S. consumers dole out approximately $826,000 annually in the form of artificially high prices. Meanwhile, according to a June 8, 2012 U.S. News & World Report article Congress could save consumers an estimated $3.5 billion annually on average by eliminating the sugar program. This savings would especially benefit poor consumers, who spend a large percentage of their disposable incomes on basic necessities such as food. In other words, removing the sugar program would have the same effect as removing a flat (and therefore regressive) sales tax, which is, for all intents and purposes, what the sugar program implicitly imposes on consumers.
Eliminating the sugar program would also benefit American business owners and workers. By artificially raising the price of one of the food manufacturing industry’s most important inputs, the program has incentivized many companies to shift manufacturing plants (and jobs) abroad. For example, according to the Heritage Foundation, high sugar prices caused Hershey Foods to relocate several of its domestic plants to Canada. These plant relocations ended up costing a thousand American jobs.
Similarly, a 2005 Department of Commerce study found that between 1997 and 2002, domestic employment in food manufacturing industries that use sugar as an input decreased by more than 10,000 jobs, while employment in food manufacturing industries that do not use sugar as an input increased by more than 31,000 jobs. The study noted that the sugar program has had a particularly severe adverse impact on the confectionary industry, which has lost nearly three jobs for every sugar production job that the program has saved. Meanwhile, U.S. News & World Report claims that repealing the sugar program could lead to the creation of 20,000 additional jobs per year in the food industry.
According to an article released by The Daily Caller on April 19, 2012, the Farm Bill’s sugar program benefits roughly 4,700 domestic farms. The article points out that these consist of mostly large commercial farms, averaging over 1,000 acres in size. Perhaps this helps explain how the sugar industry managed to spend upwards of $2.1 million on government affairs in 2012. According to U.S. News & World Report, American Crystal Sugar alone spent more than $950,000 on lobbying over the past year. Meanwhile, the sugar beet producer spent approximately $1.8 million on campaign contributions during the 2008 election cycle, according to Open Secrets data from December 2010.
The sugar production industry clearly has much at stake as our legislators attempt to pass the Farm Bill before the end of September. While domestic sugar growers have only their political clout and artificially inflated profit margins to lose, American consumers, workers, and business owners have tens of thousands of jobs and billions in increased purchasing power to gain. Perhaps it is only my penchant for Reese’s peanut butter cups speaking, but eliminating the sugar program sounds like a pretty sweet deal to me.