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Wednesday, June 13, 2012

Ashamed of the GM Bailout?

That ain't nothin' compared to this ongoing travesty:
A Sugar Showdown
A vote to protect 5,000 farmers—or the general welfare.
Wall Street Journal editorial

One reason industry handouts flourish in Washington is that they provide concentrated benefits to a few producers, while the cost is spread widely to all Americans. A case study is the sugar program, which the Senate will vote on as early as today. For the first time in memory, there is a real chance of reining in this agribusiness welfare, which imposes a complicated system of domestic price supports coupled with domestic and import quotas that restrict the supply of lower-priced sugar.

The program provides about $1.4 billion each year to fewer than 5,000 large and mostly prosperous beet and sugar cane producers. But according to a 2011 American Enterprise Institute study by North Carolina State economist Michael Wohlgenant, it costs consumers about twice that amount, mostly in higher food prices. It's a conveniently hidden tax and a regressive one too. When Big Sugar says the program imposes "no net cost" on the budget, they're not talking about the family budget. Americans pay about 50% more than the world price of sugar.

This giveaway survives because sugar cane producers in Florida, Louisiana, Texas, and Hawaii have formed an alliance with sugar beet producers in about a dozen states, from Michigan and Minnesota through North Dakota and Wyoming in the Great Plains. Corn producers also like the import restrictions because the higher the price of sugar, the more demand for cheaper corn-based sweeteners. That's a lot of Senators.

As with every trade barrier—for steel, cars, planes, microchips—sugar quota defenders make a flag-waving appeal to save domestic jobs by keeping out low-priced, and in some cases subsidized, imports from places like the Caribbean islands and Central America. Except that sugar quotas that are designed to keep prices artificially high cause a net loss of jobs.

A Commerce Department study in 2006 found that for every agriculture job that is saved by the program, the U.S. loses as many as three jobs, mostly in the food industry, which has higher costs due to the sugar quota. A 2011 Iowa State study found that eliminating price supports and quotas would create 20,000 jobs for food processors, bakeries and candy makers. [link]
Rule to live by: When the government picks winners and losers, we all lose.

In the case of sugar, one might wonder how supporting the price of the commodity produced by 5,000 lucky recipients of government largesse can kill jobs. Ask Hershey and Brach's and the tens of thousands of former employees of each.

Congress (Republicans!) needs to act now. Kill the price supports and import quotas. And grow jobs.