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Chart of the Week: Crony Capitalism Leads to Higher Sugar Prices
Posted By Alison Meyer On April 22, 2012 @ 8:25 am In Enterprise and Free Markets,Scribe | 5 Comments
Sugar producers contribute only a small percentage of value to overall U.S. crop production, yet the industry continues to reap the rewards from government thanks to a significant lobbying presence  and sizable campaign donations .
This week’s chart depicts sugar’s sweet deal. When the federal government hands out favors to sugar producers, they turn around and fund lobbyists and political action committees, leading to yet another case of crony capitalism.
“Sugar accounts for just 1.9 percent of the value of total U.S. crop production, but sugar producers fund 55 percent of crop-related political action committee (PAC) donations and 34.2 percent of crop-related lobbying expenses,” writes Bryan Riley, the Jay Van Andel senior policy analyst in trade policy at Heritage. “This behavior can result in ‘crony capitalism’—a system in which business success depends on a close relationship with the government.”
Trade barriers artificially inflate prices by implementing quotas that limit the amount that food manufacturers and consumers can buy from other countries. Riley explains: “If a bakery or a candy company wants to import more sugar than is allowed under the government’s quota, it must pay a prohibitive tariff of 15.36 cents per pound for raw sugar. At current prices, that works out to a whopping 62 percent tariff rate.”
The U.S. sugar policy also costs taxpayers more every time they choose to buy their favorite candy, cereal or any other sugar-containing product. Studies by the American Enterprise Institute  and Sweetener Users Association  peg the cost to consumers between $2.4 billion and $3.5 billion per year.
Riley suggests eliminating the sugar program by giving Americans the choice to remove caps on sugar imports. And don’t just take his word for it. The late Milton Friedman once said : “There are so many stupid things that government is doing that, clearly, it would be in the self-interest of the public at large to have repealed. Who would—who can really on logical grounds defend sugar quotas? There’s no way of defending sugar quotas.”
Article printed from The Foundry: Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2012/04/22/chart-of-the-week-crony-capitalism-leads-to-higher-sugar-prices/
URLs in this post:
 Image: http://blog.heritage.org/wp-content/uploads/ib3569_chart2.gif
 significant lobbying presence: http://www.opensecrets.org/lobby/indusclient.php?id=A01&year=2011
 sizable campaign donations: http://www.opensecrets.org/pacs/industry.php?txt=A01&cycle=2012
 government interference in the sugar market: http://www.heritage.org/research/reports/2012/04/us-sugar-program-bad-for-consumers-agriculture-and-america
 dates to the 1930s Depression: http://edis.ifas.ufl.edu/sc019
 American Enterprise Institute: http://www.aei.org/paper/economics/fiscal-policy/federal-budget/sweets-for-the-sweet-the-costly-benefits-of-the-us-sugar-program/
 Sweetener Users Association: http://sugarreform.org/wp-content/uploads/2011/11/The-Impact-of-the-U.S.-Sugar-Program-Beghin-Elobeid-Report-11.17.11.pdf
 Milton Friedman once said: http://www.econlib.org/library/Columns/y2006/Friedmantranscript.html
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