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  • Unsweetening Cronyism

    Newscom

    The law of supply and demand cannot be revoked. But it is being amended slightly, and we’re all paying the price. In this case, for sugar.

    Last year produced a bumper crop of sugar beets, which are refined (as their name would suggest) into sugar. Meanwhile, Americans have been using less sugar over the years. Supply up, demand down, sugar prices for users should be falling.

    Not so fast.

    The Wall Street Journal reports that the Agriculture Department may buy some 400,000 tons of sugar to prevent processors from defaulting on $862 million in loans. These loan guarantees keep prices artificially high for consumers, who are already paying far more than they need to for sugar.

    This isn’t simply bad fiscal policy; it’s costing Americans jobs. “For each one sugar growing and harvesting job saved through high U.S. sugar prices, nearly three confectionery manufacturing jobs are lost,” the Commerce Department reports.

    And the federal loan guarantees are just one leg of the stool. There are two other government policies aimed at propping up prices: subsidies and tariffs aimed at protecting domestic sugar producers. Because of federal policy, in many years Americans paid more than twice as much for sugar as people in the rest of the world.

    And the problem is only getting worse. Heritage’s Diane Katz writes that “the 2008 farm bill authorized the government to purchase ‘excess’ sugar imports that otherwise would dilute the market share of domestic suppliers. The ‘excess’ imports are sold—at a loss—to ethanol producers.”

    Sugar users are suffering the most. The National Confectioners Association says sugar subsidies cost consumers $3.5 billion last year alone.

    It’s a well-refined form of cronyism: a handful of companies using the power of the federal government to limit competition and drive up profits. A sweet deal for them, perhaps, but an expensive problem for the rest of us.

    Posted in First Principles [slideshow_deploy]

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