The collapse of communism brought an end to many of the world’s command-and-control economic systems and central planning by government bureaucrats. But a notable exception is the United States government’s sugar program. A complicated system of marketing allotments, price supports, purchase guarantees, quotas and tariffs that only a Soviet apparatchik could love, the U.S. sugar program has actually lasted longer than the Soviet Union itself.
It imposes a hidden tax of billions of dollars annually on consumers and businesses and has destroyed thousands of U.S. manufacturing jobs. It substitutes the federal government for the private sector in basic decisions about buying and selling, supply and price.
I first voted against this job-killing, market-distorting monstrosity in 1977. I have made repeated efforts since to abolish it. Today, given our fragile national recovery and the clear need to roll back government overreach, I believe the new members of Congress will help us prevail, and I am introducing legislation to end the sugar system once and for all.
The beneficiaries of this Depression-era relic are sugar beet farms in some Northern states and sugar cane farms in Gulf states and elsewhere. But the biggest winners are a handful of huge industrial operations that cover thousands of acres.
In sugar land, as in communist countries, prices are set by the government, not the market. Agriculture Department central planners determine “marketing allotments” to assure domestic producers at least 85 percent of the market. They limit imports to keep prices inflated far above world levels. The planners set the split between cane and beet sugar and mandate a sales limit for each processor and mill.
If prices fall below the official level, a price-support system of “loans” to processors ensures that Big Sugar gets its federal share. The recipients get their loans in taxpayer dollars, but can repay them in (what else?) sugar.
The U.S. historically is not self-sufficient in sugar and there’s usually plenty available on world markets. But American buyers can’t take advantage of lower-priced sugar thanks to strict import quotas, set individually for 40 different countries.
Lately, this bad system got worse. In 2008, Mexican sugar gained unrestricted access to the U.S. under the North American Free Trade Agreement. Big Sugar won even tighter controls on other imports and a new rule - so far, unneeded - that in times of surplus, the government must buy up sugar and sell it at a loss. Another problem: The Agriculture Department hasn’t used its emergency authority to raise imports when markets are tight, as they are now, resulting in near-record high U.S. sugar prices.
This sweet deal for sugar producers is a sour one for consumers. Food and candy manufacturers are prominent victims, but also hurt are hundreds of thousands of small businesses, including bakeries, confectioners and restaurants. It makes no sense to place extra costs on small businesses, the main engines of job growth.
Sugar producers argue that it’s “no cost” because they don’t receive direct payments. Instead, businesses and shoppers bear the burden for this welfare system - as much as$4 billion a year in higher costs, according to a recent estimate.
They also say it supports farm jobs. As a farmer, I understand the challenges. But in 2006, the Commerce Department calculated that for every sugar-growing job saved by artificially high prices, three manufacturing jobs in the confectionery industry are lost. Overall, from 1997 to 2009, more than 111,000 jobs were lost in the sugar-using food sector, according to Commerce data.
The 2006 Commerce analysis said “allowing sugar to enter the United States duty free would result in … increased domestic food manufacturing production and U.S. exports, gains for consumers, taxpayer savings, and a net positive effect on U.S. employment.”
When I was a boy, my father, Marvin Lugar, a farmer, refused to accept Roosevelt dimes to protest the heavy-handed New Deal farm policies. As a former Senate Agriculture Committee chairman, I have worked to eliminate Roosevelt-era controls and bring fiscal responsibility to our farm program, resulting in unprecedented reforms in the 1995 farm bill. Sugar reform is an essential next step in letting farmers and markets work without government diktat.
Sen. Dick Lugar of Indiana is the most senior Republican on the Senate Agriculture Committee.