Sugar Subsidies – More Meddling That Harms Citizens
You would think the sugar market works something like this: A farmer grows a crop that produces sugar – sugar cane or sugar beets, for instance – and sells it to someone who processes the crop into a usable sugar, which in turn is sold to someone that either sells the sugar directly or uses the sugar as an ingredient to make something else (like Twinkies, perhaps).
This process allows for market prices to dictate how much sugar is produced based on how much sugar you and I consume. That’s pretty straightforward. It’s also nowhere near what actually happens.
We have a long history of inserting bureaucracy into the sugar industry. The U.S. government has been subsidizing sugar production in some form since before the Constitution was even ratified. What started out as an import tax to help raise money for an indebted, nascent United States has grown into a serpentine maze of taxes, price floors, transfer payments and government loans being paid back with sugar.
Here’s how these subsidies work: The government gives low-interest loans to sugar farmers, but if the price of sugar falls below a certain point, then farmers can repay those loans with actual sugar. This subversion of the market means farmers produce more sugar than you and I really want, and our government is taxing us to pay sugar farmers to do it. To make matters worse, since sugar prices are fixed at a certain level, the stuff you and I buy that has sugar in it is more expensive than it otherwise would be. How expensive? Iowa State economists studied the matter and figured abolishing the subsidy would save consumers about $3 billion.
But surely we have to keep these subsidies in place in order to save jobs? Not exactly. Because our sugar is more expensive than other countries’, companies that use sugar to make stuff are moving their production overseas, costing 20,000 jobs in the process. Even the guys that process the sugar from the farmers and refine it into something usable would increase the number of workers they employ by more than 20 percent once the subsidy is removed.
There is no credible reason why the government should be subsidizing sugar in this manner. It hurts taxpayers, harms consumers and costs jobs.
Policy Brief: Sugar Subsidies Are Bitter Deal For American Consumers
Article: History of the Sugar Program