The Costly Benefits of the US Sugar Program
Michael K. Wohlgenant
US families pay nearly twice the world price for sugar and other sweeteners because of federal government policies intended to protect domestic beet and cane sugar producers from cheaper foreign competitors. This paper examines the economic effects of these policies and proposes a dramatic reversal of course. The highlights include:
1) The US price for sugar has been double that in the rest of the world for over thirty years: Between 1975 and 2008, sugar consumers in the United States paid about twice the world price.
2) The sugar program costs US consumers about $2.4 billion per year: Since the current sugar program was started in 1977, production of HFCS has skyrocketed. As a result, the average American now eats nearly 120 pounds of sugar and HFCS per year, about 20 percent more than in 1975. During this time, the rate of obesity has also skyrocketed. Many doctors believe HFCS is more likely to contribute to obesity and insulin resistance than sugar.
3) The sugar program’s cost has created the high-fructose corn syrup (HFCS) industry: In fact, crop support prices are based on a historical period arbitrarily judged to have offered fair pricing. Much of the recent price volatility can be attributed to ethanol and renewable fuel policies.
4) The sugar program should be repealed: Alternatives to the sugar program, such as a Canadian-style supply-management program, would still artificially boost sugar prices. Buying out sugar producers, as was done to end tobacco production controls in the 1990s, would be expensive, costing taxpayers between $1 billion and $1.6 billion. The only reasonable policy is no policy: the sugar program should be repealed.