Federal Sugar Subsidies: Not Sweet News For Texas

The following article was authored by Timothy Lee, Senior Vice President of Legal and Public Affairs at the Center for Individual Freedom:

It's bad enough any time the federal government needlessly intervenes into the U.S. economy.

After all, over the past year alone we've witnessed how reducing federal intervention turbocharges our economy and ignites markets to record high after record high, following years of malaise and the worst cyclical recovery in recorded U.S. history.  Intervention also increases the amount of crony capitalism and rent-seeking that have earned Washington, D.C., its "Swamp" moniker.

But it's even worse when the economic interference in question costs at least three times as many jobs as it claims to protect; results in American consumers and manufacturers paying double the cost for a product that consumers and industries in other countries pay; eliminates over 100,000 American manufacturing jobs; and costs Americans approximately $3 billion per year.

Yet that's precisely the reality of the federal government's sugar subsidy program, which artificially restricts imports and puts taxpayers in Texas and everywhere on the hook for wasteful subsidies.  

Fortunately, however, there's good news to report:  Bipartisan legislation currently before Congress can finally put an end to that indefensible scheme.

Current federal sugar policy offers a textbook illustration of Ronald Reagan's adage regarding government philosophy:  "If it moves, tax it; if it keeps moving, regulate it; if it stops moving, subsidize it."

At the "tax it" phase, government regulators set an arbitrary limit on the amount of sugar allowed into the U.S. each year from forty nations that exported sugar to our shores as of three decades ago.  Any excess imports purchased by food manufacturers or refiners within our borders are taxed through extremely punitive tariffs, which obviously increase those purchasers' cost of production.  In turn, those higher costs are passed on to American consumers of everyday goods containing sugar.  

At the "regulate it" stage, federal law imposes marketing allotments.  Those mandates aim to prevent surplus sugar supplies from entering the domestic market by imposing production and sale limits upon cane mills and beet processors.  Those artificial restrictions upon supply further raise prices for American consumers.

Finally, at the "subsidize it" stage, federal regulations maintain price supports in the form of minimum costs for domestic sugar purchases.  Naturally, that artificial floor also means unnecessarily higher sugar costs for American consumers compared to world market prices.  Additionally, the federal "Feedstock Flexibility Program" created in 2008 requires that when sugar surpluses occur, the government must buy the excess stocks and resell them to ethanol producers at a loss, which further punishes U.S. taxpayers.  

Combined, those four components create a prototypical spaghetti bowl of bureaucratic tangles and needless costs to taxpayers and consumers.

While the program's apologists would attempt to rationalize these regulations as some sort of protection of the domestic sugar industry and jobs, the simple fact is that the U.S. has never been self-sufficient in sugar production.  Imports have always been necessary to satisfy American food producers, refiners and consumers.  

So what can be done to put an end to this D.C. Swamp monstrosity?

The Sugar Policy Modernization Act of 2017, introduced in the Senate by Pat Toomey (R - Pennsylvania) and Jeanne Shaheen (D - New Hampshire), and in the House of Representatives by Virginia Foxx (R - North Carolina) and Danny Davis (D - Illinois), would gradually introduce market reforms into the federal sugar subsidy morass. We applaud Rep. Hensarling and Rep. Gohmert, who are cosponsors of this legislation. We would also praise Senators Cornyn and Cruz, who have previously supported sugar reform policy reforms in the past.    

This new version of sugar reform legislation would lift current limits upon domestic production and sale of refined sugar, require that domestic sugar demand is taken into consideration whenever the United States Department of Agriculture (USDCA) administers its regulations, reduce taxpayer liability in the event of loan delinquencies by sugar processors and finally allow market forces to govern sugar supply and pricing.  

Existing federal sugar policy constitutes one of the most egregious examples of government waste and regulatory abuse, one that protects large sugar interests at the expense of Texas taxpayers and Texas consumers.  

Over the past year, Congress and the Trump Administration have made great progress in reducing destructive federal regulations and unleashing the proverbial animal spirits of our economy.  By passing and signing the Sugar Policy Modernization Act of 2017 into law, they can continue that trend and finally bring relief to American manufacturers, consumers and employees.  

There's simply no justification for further delay in reforming this bureaucratic abomination.

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