In the depths of the Great Depression, two progressive congressmen added a little noticed amendment to the Agricultural Adjustment Act that over the next 80 plus years grew like an octopus with its tentacles touching every single American. At its inception, the Jones-Costigan Amendment was intended to help struggling U.S. sugar farmers ride out a few rough years by installing sugar import quotas and paying small subsidies to domestic producers. It was but a small part of the whole bigger New Deal. But it’s one that wouldn’t go away—even after it had far outlived its usefulness.
By the 1950s it was estimated that Americans were paying 50 percent more for sugar than the rest of the world because of Jone-Costigan. It was an attractive business protected by the most powerful government in the world. So attractive in fact that four brothers from Cuba, the Fanjuls, soon arrived along with their father and began a fledgling sugar cane business in south Florida. From those beginnings, protected by the quotas and supported by the subsidies, the Fanjul Corporation now is among the world’s largest sugarproducers and processors —an American success story. Sweet, eh?
Well, not exactly, because the Fanjuls’ success is costing every American money and jobs. In 2014, a study published in the Oxford Journal of Applied Economic Perspectives and Policies found that the artificially high U.S. sugar prices were costing Americans between $2.9 and $3.5 billion dollars every year in consumer welfare. This cost is born through higher prices paid for everything from bakery goods to candy bars and also through direct taxpayer payments to sugar producers. And 40 percent of those subsidies are paid to just 1 percent of all American sugar producers—about 80 people. Fifteen percent alone is paid just to the Fanjul brothers.
Over the years U.S. candy makers have left the United States for cheaper sugar, taking tens of thousands of jobs with them. Brachs moved to Mexico, Kraft’s Lifesaver brand to Canada, and three of Hersey’s largest operations went north of the border as well. With American sugar prices now hovering at almost triple the world market price, it is estimated candy makers alone have relocated over 20,000 U.S. jobs outside of the U.S.
How does an outdated and harmful program like this stay in existence?
Big Sugar’s reach is incredible. Monica Lewinsky testified that Bill Clinton interrupted one of their trysts in the Oval Office to take a phone call from one of the Fanjuls. The purpose of the call was ask Clinton to rein in his vice president, Al Gore, who had just proposed a one cent per pound tax on sugar to clean up the mess cane sugar production had made in the Everglades. The tax was never enacted and neither was a provision in the 1996 farm bill that would have phased out the then nearly $1.5 billion dollar subsidies paid each year to sugar growers.
But twenty years have passed since then and yet the sugar quotas and subsidies still exist. The Center for Responsive Politics, a non-partisan research group, reports that, “sugar is the only industry in the entire agribusiness sector that has consistently supported Democrats during the past two decades.” In addition to the Fanjuls’ annual million dollar individual and corporate support, industry trade groups donated over $5 million last year to candidates and super PACs. To be sure, some recipients of this largesse are Republicans with southern sugar based constituencies, like Marco Rubio. But it certainly hasn’t been a 50-50 split between the parties over the years.
The next time you take that extra slice of pie, or bite into a chewy Tootsie Roll (still made in America, at least for now), realize that a significant portion of your cost is hyper-inflated by only a few hundred domestic sugar producers protecting their quotas and subsidies. It’s been this way for more than 80 years and could well be this way long into the future.
Is it any surprise that during the past few years the Fanjuls have donated between $100,000 and $250,000 to the Clinton Foundation?
Kevin Cochrane teaches business and economics at Colorado Mesa University, and is also a Permanent Visiting Professor of Economics at the University of International Relations in Beijing.
