The federal sugar program is the poster child for central planning in agriculture. While other farm subsidy programs are also in dire need of major reforms, Congress has generally moved these programs away from outdated attempts to directly control the supply of commodities. However, the federal sugar program is an outlier by maintaining this type of excessive government intervention. In fact, the federal sugar program is literally designed to reduce supply. As explained by the Congressional Research Service, “sugar marketing allotments limit the amount of domestically produced sugar that processors can sell each year.” Those command and control policies raise the cost of sugar-based products for American consumers.
The Sugar Policy Modernization Act of 2017 (H.R. 4265 and S. 2086), introduced by Rep. Virginia Foxx (R-V.A.) and Sen. Jeanne Shaheen (D-N.H.), phases in market reforms to the federal sugar program which was last reauthorized in the Agricultural Act of 2014 (farm bill). The bill seeks to address some of the most egregious aspects of the sugar program. According to the bill’s sponsors, this legislation ensures the program “operates at no net cost to taxpayers, repeals government micromanagement of private industry and special-interest influence on the market; and makes sugar policy work for all Americans, not just large sugar processors.”
Daren Bakst, research fellow in Agricultural Policy, Roe Institute for Economic Policy Studies at The Heritage Foundation, examines agricultural subsidies and risk in his 2016 report Farms and Free Enterprise: A Blueprint for Agricultural Policy:
“The sugar program artificially inflates the price of sugar, and therefore the income of sugar producers, by providing both a price floor and numerous programs that decrease the supply of sugar. Some of these programs include annual marketing allotments limiting the amount of sugar each domestic processor is allowed to sell and restrictions on imports. As a result, U.S. sugar costs about double the world price.”
This program benefits a small number of well-connected sugar growers and harvesters at the expense of taxpayers, consumers, and sugar-using industries. An International Trade Administration report found: “For each sugar-growing and harvesting job saved through high U.S. sugar prices, nearly three confectionery manufacturing jobs are lost.”
The program is also a hidden tax on consumers. Recent studies have found that the program costs consumers as much as $3.7 billion a year. Such a program disproportionately hurts the poor because a greater share of their income goes to food purchases than for individuals at higher income levels.
The Sugar Policy Modernization Act would help address each of these issues by phasing in important reforms, including: lifting restrictions on the domestic production and sale of refined sugar; reducing taxpayer liability to loan forfeitures when sugar processors decide not to pay back their USDA loans; ensuring that the domestic demand for sugar is considered when the USDA administers the sugar program; and bringing market forces into the U.S. sugar market and phase out supply-management policies.
Agricultural commodity programs are a legacy of the government’s attempt to raise farm income during the Great Depression—programs that continue today despite the fact that farm household income greatly exceeds that of non-farm households. The reforms proposed in the Sugar Policy Modernization Act are long overdue and have received strong bipartisan support in this and past Congresses.
While Congress should ultimately eliminate the federal sugar program entirely, the proposed legislation is a strong step in the right direction.
***Heritage Action supports the legislation, encourages Representatives and Senators to support it, and reserves the right to key vote in the future.***