Sugarcane not so sweet

Writing from near Thibodeaux, Louisiana

Driving though the sugarcane fields of southern Louisiana during harvest, it is impossible not to dwell upon the politics behind it all. Those politics being the sugar subsidy and the benefits it brings to these farmers, and the cost of it to the rest of us.

Sugar in the United States costs from two to three times what it does elsewhere, even in Canada and Mexico. It is purely the government, through the sugar subsidy, that causes sugar to cost more in our country. There is no other explanation for this difference. The goal of the sugar subsidy is to keep the price of sugar in America high, for the benefit of the sugar farmer.

While helping farmers may seem like a noble goal, consider how that help is given. First, money is transferred from the American taxpayer to the sugarcane farmer. From a liberty-based frame of reference, this is intolerable.

Second, the effect of the subsidy is that Americans pay much more for sugar and sugar-containing foods than we would if the sugar subsidy was not in place. Sugar substitutes, such as corn sweeteners, are likely more expensive than they would be if not for high-priced sugar.

Then, consider the effect of expensive sugar in America. George Will reported in 2004 this about candy-making jobs in Chicago: “In 1970, employment by the city’s candy manufacturers was 15,000. Today it is under 8,000, and falling.” Brachs moved to Mexico. Lifesavers moved to Canada. There, sugar can be bought at the world price.

This is almost always the effect of subsidies: a small number of people benefit greatly, while the rest of us pay just a little more. We may not even notice that little bit, but these little bits do have large cumulative effects on the economy. Some people are devastated by these cumulative effects, like the American candy workers who lost their jobs due to expensive sugar.

The effect on our political system is corrosive. The subsidy payments (or equivalent tax breaks for special industries) are so valuable that the recipients will expend great effort to secure them. The result is scandal and corruption.

Here in Kansas we receive large farm subsidy payments each year. The first congressional district of Kansas, represented by Jerry Moran, for the years 1994 to 2004, received $6,225,124,802 in subsidy payments. That placed this district in second place amongst all congressional districts, trailing the at large district of North Dakota by about $3 million, and representing 4.3% of all farm subsidy payments. It is little wonder that Rep. Moran won re-election in 2006 with 79% of the vote.

For the same time period the fourth district on Kansas, represented by Todd Tiahrt, received $697,262,571 in farm subsidies, even though only 0.5% of the workers in his district work in agriculture. These subsidies represent large transfers of wealth from taxpayers at large to a relatively small number of farmers.

What would happen if farm subsidies were eliminated?

It is likely — in fact, almost certain — that farmers will have to change. The Louisiana sugarcane grower will have to become more efficient in order to match the world price for sugar, or change and grow something else. Same for subsidized farmers in Kansas. It is likely that the market prices for some farm products might increase. At the same time, tax payments to farmers will drop to zero, so we will save in taxes.

We would be much better off if we eliminated these payments and let markets decide the prices of farm commodities. Instead of government bureaucrats deciding how much of what will be grown, consumers will let farmers know what to grow through the prices they are willing to pay for farm products.

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