Conservatism and free enterprise are supposed to stand for something besides advancing the interests of profit-seeking powerful businessmen. Liberals in government and the media often don’t understand the distinction between pro-business and pro-market. This month, we’ll learn whether Republicans actually see the difference.
The farm bill, packed with handouts for farmers and agribusiness, will come to the House floor this month. All the subsidies in this farm bill deserve to be tossed aside like so much chaff, but they are entrenched enough that it would take a herculean effort to destroy them all.
There is, however, one particularly grievous and egregious boondoggle of cronyism in the farm bill that Republicans ought to torch this year without any remorse: the sugar program.
Our federal sugar program is designed to drive up the price of sugar in the U.S. in order to profit a small handful of politically connected sugar moguls in Florida. It is perhaps the least defensible corporate welfare boondoggle on the federal books.
The sugar program has two main parts: import quotas and non-recourse loans.
First, the U.S. Department of Agriculture decides how much sugar Americans will need in a given year. (If that sounds a bit Soviet to you, then you’re paying attention.) Then, with the total tonnage of raw sugar set for a given year, USDA parcels out quotas to each country for imports. They are only allowed to sell so much sugar into the U.S. in a given year.
Curtailing supply, of course, increases prices, which is the whole point. Without artificially inflated prices, the sugar cane businesses in Florida might not be able turn a profit, because it is so much more expensive to grow and harvest cane in Florida than it is in the Dominican Republic.
There’s a second big-government program involved here, though. USDA loans sugar processors 18.75 cents per pound of raw sugar. The collateral on this loan is the raw sugar itself. The purpose of this program: If sugar prices somehow fall below 18.75 cents a pound, the sugar processors simply forfeit their sugar and keep the taxpayer cash.
On top of these provisions are marketing allotments, bailout programs, and more. The result is a U.S. sugar price much higher than the world sugar price — sometimes twice or three times as high. American food manufacturers suffer from this artificially inflated price. Many U.S. candymakers have moved to Canada or Mexico where they can buy sugar in a free market, thus costing Americans potential jobs.
Rep. Virginia Foxx, R-N.C., has introduced the “Sugar Policy Modernization Act,” which scraps much of the command-and-control dimension of the sugar program. It would allow market forces, rather than the USDA, to play more of a role in setting sugar prices, and it would reduce taxpayer liability.
When you consider that lower sugar prices would increase U.S. employment (the sugar program kills more jobs in food manufacturing than it creates in sugar growing and processing), it’s hard to find an argument against this reform.
Why would a Republican Congress not pass a provision that shrinks the government, boosts employment, lowers prices, and reduces taxpayer exposure to corporate bailouts? The only answer is that the special interests who profit from the sugar program have either fooled Republicans or bought them off.
So Republicans have a choice:
Do they want to make excuses for Soviet-style central planning and corporate welfare because they can come up with some story that justifies the government intervention in this case? Or do they want to lend some credibility to the idea that Republicans stand for markets and limited government, not merely for the interests of their donor class?
Of course, there are other fights Republicans should fight against corporate welfare this summer and fall. They should abolish or permanently shackle the Export-Import Bank. They should repeal the Jones Act and pass a bill winding down the ethanol mandate.
But the sugar program is on the table because the farm bill on the table. Conservatives plan to introduce Foxx’s bill on the House floor as an amendment to the farm bill. Agriculture Committee Chairman Mike Conaway fiercely defends the boondoggle. Whether the party follows him and protects the sugar program, or throws it out and re-establishes a free market in sugar, they’ll show what they’re really made of.
