Marco Rubio is a conservative senator with a record of opposing corporate welfare in all corners of the economy, except one. That would be in the swampy fields of South Florida, where they grow sugar cane.
Rubio supports the federal sugar program, with its special cheap loans and its blatant protectionism. This is to the detriment of U.S. consumers and foodmakers, and to the benefit of a handful of sugar magnates, including some of his earliest fundraisers.
Amidst the jungle of crony capitalism, corporate welfare, and federal boondoggles that Congress has created, the sugar program may be the least defensible. Here’s what it does:
First, through prohibitive tariffs, our government effectively limits the amount of foreign-grown sugar allowed to enter the United States. By throttling imports, government reduces the supply of sugar, thus increasing the price. In the U.S., raw sugar sold for 24.46 cents per pound in the third quarter of this year, according to U.S.D.A. figures. In the rest of the world, the price was 11.29 cents per pound.
So Americans pay more than twice the world price. Sometimes the difference is bigger. Sometimes it’s smaller, as happened in 2013, when U.S. sugar prices fell below 20 cents and world prices climbed to around 18 cents. When that happens, the second part of the sugar program kicks in: taxpayers bail out the sugar growers.
After every annual harvest, the USDA loans sugar processors 18 cents per pound of raw sugar they store. The collateral on the loan is the sugar itself, and it is a non-recourse loan —meaning that sugar growers can simply forfeit their sugar and keep the money if prices get any lower. This sets an effective price-floor of 18 cents per pound of sugar.
These policies harm families (who must pay more for food) and U.S. food producers, who use sugar as an input. Many candymakers have been driven out of business or overseas by our sugar policy. The program, however, does have major benefits for some, which brings us back to South Florida and the sugar industry.
Two companies — U.S. Sugar and Flo-Sun (which owns Domino)—dominate the sugar market. Flo-Sun is owned by the Fanjul family.
Pepe Fanjul is a Rubio donor, but he is far more than that: he’s one of Rubio’s earliest backers. Rubio, in his 2010 U.S. Senate race, was barely polling in double digits in March 2009 against a sitting governor. That’s when Fanjul and his son Jose gave Rubio the maximum donation.
In June, the Fanjuls co-hosted a fundraiser in Coral Gables for Rubio. It wasn’t their last. When nobody believed in Marco Rubio, the Fanjuls did, and that may have made him more amenable to their arguments about sugar policy.
But the arguments are odd.
“I’m ready to get rid of” the sugar program, Rubio said at a Heritage Action summit this year, “as long as Brazil does as well, because they’re trying to destroy our agricultural system. They are deliberately undercutting the price … because if they can wipe out American farmers, they know that land will be developed. Once they’ve built condos on this land, you can never get it back into agriculture … Then they can charge us anything they want.”
Rubio’s economics here has a few holes.
Brazil, despite being the No. 1 sugar grower, certainly does not control the world market in sugar and could never just set the price. India sells nearly as much sugar as Brazil. If we dropped our protectionist policies and this killed the U.S. sugar cane industry as Rubio assumes it would, Americans would pay the world price of sugar (which would go slightly higher than it is now), and so the price of sugar for U.S. consumers would fall. That’s not a bad thing.
There’s also no reason to believe sugar cane fields in Florida — where land, irrigation, regulation, and labor are far more expensive than in other parts of the world — could survive if it was forced to compete against Brazil and India on a level, unsubsidized playing field.
Rubio’s argument — we must subsidize our industry because other countries are doing it — is the same argument he rejects when it comes to other subsidies, including the Export-Import Bank.
“The difference is,” Rubio explained at the Heritage Action event, “we actually have other banks … The Export-Import Bank is not the only thing out there that gives loans. … There are no other alternatives when it comes to agriculture. Once the land is gone you’re never getting it back.”
Again, Rubio’s argument is hard to follow. First, it’s grounded in the fear that Brazil, India, and Thailand will get together and cut off Americans from buying their sugar. Rubio has yet to substantiate this fear.
Second, U.S. industry hasn’t had trouble finding substitutes for cane sugar — beet sugar, corn syrup, Splenda, honey, agave, just to name a few.
The economics, it is safe to say, are not on Rubio’s side. Sugar subsidies may have made some sense when Rubio was a state lawmaker or even a U.S. senator representing Florida. Now that he’s seeking to lead the nation, he has a chance to reconsider his support for a big government policy that enriches the insiders, and to adopt the free-enterprise policy that helps everyone else.
Timothy P. Carney, The Washington Examiner’s senior political columnist, can be contacted at [email protected]. His column appears Tuesday and Thursday nights on washingtonexaminer.com.
