Big Sugar’s Subsidy: How Sweet It Is
Cut by cut, the forced budget reductions known as the sequester are beginning to affect millions of Americans.
Head Start education programs for low-income students are being slashed. So are medical services for two million American Indians living on reservations and in Alaska.
The Army is suspending tuition assistance for soldiers hoping to enroll in classes, while scholarship funds have been curtailed for children of troops who were killed in combat.
Cutbacks at U.S. Customs and Border Protection are causing long waits and security concerns at Miami International Airport. And the U.S. Department of Agriculture will furlough 6,200 food inspectors for 11 days this summer, which the agency says will create an $8 billion delay in meat exports.
Still, not everyone who depends on the federal government is suffering in these austere times.
According to TheWall Street Journal, the USDA is on the verge of purchasing 400,000 tons of sugar in a massive bailout of domestic sugar processors. The move would cost taxpayers about $80 million.
It’s the sweetest of deals for the big companies that grow cane and beets. For years the government has guaranteed an artificially high price for American sugar, undercutting foreign competitors and inflating consumer prices for everything from soft drinks to breakfast cereal.
Last year, sugar processors under the price-support program borrowed $862 million from the USDA. The loans were secured with about two million tons of sugar that was expected to be harvested.
And the harvest was very good. Too good, apparently. The market got flooded.
Between February, 2012 and February, 2013, the price of beet sugar fell from 51 cents a pound to about 28.50 cents. Raw cane dropped from 33.57 cents to 20.72 cents.
Consequently, the government’s loans to processors are in danger of default. To avoid that, the USDA would take all the sugar and sell it at a discount rate to producers of ethanol, who’d mix it with the corn from which that fuel is distilled.
The transaction would result in Uncle Sam losing 10 cents on every pound of sugar sold, which adds up to an $80 million hit on 400,000 tons of product.
What a brilliant system.
The major beneficiaries of this bailout would be cane growers in Florida and beet operations in Minnesota, Michigan and North Dakota. Big Sugar has outsized political clout in Washington, as evidenced by the silence of so-called fiscal conservatives.
Heavy campaign contributions are spread among Democrats and Republicans alike. Barack Obama took money from the sugar industry, as did Mitt Romney. Hefty donations went to both of Florida’s senators, Bill Nelson and Marco Rubio.
Every time somebody in Congress tries to kill the sugar subsidy, the measure gets voted down — by some of the same lawmakers who love to rail against public spending on welfare benefits, health care and education.
In Florida, the bitter taste of the sugar subsidy goes back decades. The program helped to make multimillionaires out of people who prolifically polluted the Everglades, and who for years fought all efforts to make them clean up their waste water.
(One of the state’s largest cane producers, U.S. Sugar, said earlier this month that it has no outstanding USDA loans. The government hasn’t provided a list of the sugar companies that would gain from the bailout.)
Those who defend Big Sugar say price supports don’t really cost taxpayers anything — except, of course, when the price of sugar dives.
And, not that Americans need an incentive to buy more Snickers bars or guzzle more Mountain Dew, but subsidies jack up consumer costs by about $3.5 billion annually, according to a study by Iowa State University.
Remember all the feigned outrage on conservative talk radio when the government bailed out the auto industry? At least we taxpayers weren’t forced to buy up all those acres of unsold Hummers.
Incidentally, American car makers don’t have the advantage of being shielded from foreign manufacturers like Toyota or Honda.
If you’re in the sugar business in this country, you can depend on politicians to restrict imports and guarantee a set price for your crop — the antithesis of free-market competition.
It’s not a one-time shot, either. It’s an ongoing gush of entitlement.
While we’re cutting scholarships for the children of dead war heroes.
(Carl Hiaasen is a columnist for the Miami Herald. Readers may write to him at: 1 Herald Plaza, Miami, Fla., 33132.)
Photo: P.K. Niyogi/Wikimedia Commons